Mali's gold exports are falling, and new discoveries aren't enough to make up for
the loss of its giant legacy mines, where production is already dead or winding
down, and the fate of one of the biggest of them all—Sadiola—now hangs in the
The world-class Sadiola gold mine needs an investment of $380 million to keep
it open for another 10 years, accessing 3.4 million ounces in reserves.
But there are signals that negotiations over the deal to extend the productive life of
Sadiola by at least another decade have stalled within the government, putting
the investment at risk.
The reason for the stalled negotiations remain unclear, but what's at stake for
Mali is as visible as ever: Sadiola is crucial for Mali's reputation as one of
Africa's top three gold producers. Next to this, it is a crucial lifeline for
new jobs and much-needed state revenues.
How the stalled negotiations over Sadiola are resolved could be a litmus test
for a government heading into elections next year—and a government that
relies heavily on foreign aid, while working hard to create an attractive
The investment climate in theory has improved immensely in recent years, but
putting this into practice has proved to be challenging in this terrain.
So far, it's been moving in the right direction. But many industry eyes will be
on the Sadiola deal ahead of the Invest in Mali Forum 2017, which will be held in Bamako in early December and supported by the World
Legacy with a Lot More Gold to Give
The Sadiola mine is a joint venture between Canadian miner
IAMGOLD (NYSE:IAG) (TSX:IMG) with 41 percent, operator AngloGold Ashanti
(NYSE:AU) with 41 percent, and the Government of Mali with 18 percent.
Located in southwest Mali near the border with Senegal in a remote part of the
Kayes region, the giant Sadiola permit covers 302 square kilometers.
The existing plant was built to process soft rock, or oxides, and the soft rock
is now running out. But Sadiola has much more to give with the massive
hard-rock, or sulphides, deposit that lies beneath the depleted oxides. This is
now a ‘hard rock' story, and IAMGOLD and AngloGold Ashanti are keen to invest
in a major plant modification that would enable hard-rock processing.
The Sadiola mine has had a major, positive economic impact on Mali since it
opened in 1997, following liberalization of the sector. That same year, gold
had already become the primary source of Mali's foreign currency. By 1999, it
had become its biggest export. By 2001, Mali had risen to become the third top
gold producer in Africa.
It wouldn't have happened without Sadiola—one of three key mines behind Mali's
preeminence as an African gold giant. The other two mines are Morila and
The Morila mine, owned by Randgold Resources, AngloGold Ashanti and the
government, is scheduled to be closed down in 2019, after producing over 200 tonnes of
gold since it opened in 2000.
Yatela—a joint venture between IAMGOLD with 40 percent, operator AngloGold
Ashanti with 40 percent and the Government of Mali with 20 percent—has already
reached the end of its productive life, and closure activities continue.
Originally, Yatela's planned mine life would have seen it closed in 2007. But
the exploration efforts of IAMGOLD and AngloGold Ashanti extended the life of
the mine by an exceptional seven years. The partners continually opened up
additional economically exploitable deposits at Yatela, pushing the closure
If negotiations fail over the terms necessary to invest in Sadiola's ‘hard
rock' gold, much could be lost.
What's at Stake
Mali's industrial gold production rose negligibly from 2015 to 2016, with 2015 coming
in at 46.5 tonnes and 2016 just squeaking past at 46.9 tonnes, according to Reuters. But total gold exports fared even
worse, falling from 70 tonnes to 67 tonnes during that same period.
With Morila winding down, Yatela closed, and Sadiola stuck in apparent
bureaucratic purgatory, the next couple of years will be an uphill struggle to
maintain production—even with new discoveries.
Mali's state revenues from mining companies rose only 1 percent last year—but
it wasn't due to an uptick in exports; rather, gold prices saw a bit of a bump.
Indeed, industrial gold production will fall this year to 45 tonnes, with no
new mines slated to come online until 2018—if all goes well.
With gold representing about 25-30 percent of government revenues, getting more
out of a giant legacy mine like Sadiola is critical.
So, what's at stake? Nearly 56,000 tonnes of ore containing 3.4 million ounces of gold.
And these are proven and probable reserves, which already have a demonstrated
Though the ‘soft rock' is nearing depletion, the ‘hard rock' is bursting at the
seams, and Sadiola is ready to fast-track its expansive development. But
getting past the politics in Mali is no easy task—even when you have a track
record of extending the life of another legacy mine—Yatela—for seven years.
Sadiola has been operating for 20 years. Because the soft rock is being
depleted, production has dropped from 600,000 ounces in 2000 to less than
200,000 ounces today.
But it could go for another ten years if IAMGOLD and AngloGold Ashanti are
given the green light to invest some $380 million to process the hard rock.
Not only government revenues would increase, the investment would create
additional jobs for Malians.
Sadiola, with soft-rock production slowing, is now employing around 1,000
people, 93 percent of whom are Malian nationals. If Sadiola's hard-rock
expansion plans are green-lighted, it would not just protect, but expand those
jobs for a country that is struggling to keep its growing numbers of young
people gainfully employed.
And for Mali, this means much more than putting food on the table. For the
government, it means security. With over half of the Malian population under the age of 35, and that figure expected to
double by 2030, there is a direct link between unemployment and crime or terrorism.
And when criminal-terrorist groups offer money for new recruits, security is
The Sadiola mine is surrounded by some 46 villages and a few hamlets, as well
as a mining village created specifically for Sadiola employees, with housing, a
medical clinic, recreation facilities, a supermarket, a sewage treatment
facility and recreation facilities, among other things.
Water comes from a 55-kilometer pipeline from the Senegal River, providing the
villages with drinking water and the mine with water for operations. The site
and its surrounding villages are powered using diesel-fueled generators.
Sadiola's expansion project will use existing infrastructure, but also build
new infrastructure. The plan is to connect the mine to the Malian power grid,
which may also facilitate distribution of electricity to local villages.
But 2018 is an election year, and in Mali, this means uncertainty, especially
for the fate of mining deals, but also for the investment climate as a whole.
IAMGOLD, for one, is closely watching the developments, and what they might
mean for the investment environment.
In an interview with Oilprice.com, IAMGOLD CEO Stephen J.J. Letwin noted that
the “Sadiola mine has been a remarkable success for all stakeholders in Mali
for two decades.”
The Canadian giant has operating mines in Burkina Faso, Suriname, Mali and Canada,
and exploration projects in Senegal, Brazil, Mali, Canada and Nicaragua.
While Essakane, in Burkina Faso, is IAMGOLD's biggest mine and its most prolific,
Mali was “the birthplace of our company,” Letwin said. “And we will always be
committed to exploring opportunities in Mali, and West Africa more generally.”
IAMGOLD did not comment on rumors of a possible deadlock over the Sadiola deal.
To make Sadiola work for Mali and its people, the energy-intensive expansion to
access the deep sulphides requires a world-class miner and the right economics.
The gold is there, the economics are there from a mining perspective, and the
miner has been there successfully for 20 years and is particularly known for an
intense focus on mine optimization—but the government, whose representatives
are struggling for political capital ahead of crucial elections, is hamstrung.
In the meantime, 3.4 million ounces of gold remain stuck in the hard-rock at