West Africa can't be ignored for investors looking to play the gold boom
And if you can handle the risk, the rewards remain rich according to SCP Resource Finance
Many Peaks among the smallest stocks to catch SCP's eye
Despite a higher sovereign risk profile, the West African gold space punches well above its weight in terms of discovery and corporate activity.
ASX 200 producers Perseus Mining (ASX:PRU) and West African Resources (ASX:WAF) have established themselves among the lowest cost and most consistent gold miners on the ASX, paving the way for others to follow.
A new report from SCP Resource Finance analyst Justin Chan described West Africa as the most dynamic region over the past 15 years for gold discoveries, new mine builds, M&A and the emergence of new mid-tier miners.
'What makes West Africa special is the combination of geology, year-round exploration/construction, fast permitting, and 'low-hanging fruit' that enables companies to find and build a mine within one gold price cycle, enabling investors to avoid the 'washing machine cycle' of projects stalling in bad markets or waiting for permits,' he said.
'Moreover, while Africa has its challenges, the silver lining is we think the executives and operators in Africa are serious and driven to achieve a discovery, build a mine, or transact quickly; Africa is no place for 'lifestyle' companies.'
Punching above its discovery weight
Unlike more mature jurisdictions, Chan pointed out that it was still possible for explorers to find open-pittable deposits with attractive grades, metallurgy and low capital intensity in West Africa.
'The numbers speak for themselves: more than 70 million ounces have been discovered in West Africa from 2010-2024 versus 37Moz in Canada, 30Moz in Australia and 30Moz in the USA over the same period per S&P Market Intelligence,' he said.
That's despite West Africa attracting a third of the spend of those other jurisdictions.
Major discoveries in recent years include Predictive Discovery's (ASX:PDI) 5.5Moz Bankan in Guinea and Montage Gold's 6Moz Koné project in Côte d'Ivoire, the latter of which is in construction.
Last year, Turaco Gold (ASX:TCG) reported an initial resource of 2.5Moz for its Afema project in Côte d'Ivoire just five months after completing the acquisition. The resource has since increased to 3.6Moz.
Rapid builds
SCP said despite the high rate of discoveries, mine builds had outpaced them over the past 10 years.
New builds in the past five years have included West African's Sanbrado in Burkina Faso, Perseus' Yaoure in Côte d'Ivoire, Orezone's Bomboré in Burkina Faso, Tietto Minerals' Abujar in Côte d'Ivoire, Fortuna Mining Corp's Séguéla in Côte d'Ivoire, and Endeavour Mining's Lafigué in Côte d'Ivoire and Sabodala-Massawa in Senegal.
Just over two weeks ago, West African confirmed it had poured first gold at its Kiaka mine in Burkina Faso, ahead of schedule and under budget and just 3.5 years after acquiring the project from B2Gold.
SCP said the builds had cleared 'two generations' of projects from the development pipeline.
'We think projects that can start building in the 2026-2028 window are in the sweet spot: we think nearly all the Africa focused producers will be or are actively looking for projects within this window, and nearly all of them have built mines recently, thus are not afraid of a buy and build,' Chan said.
Deals flowing
M&A has also progressed at a frenetic rate.
In the past five years, Perseus Mining acquired Orca Gold and Orecorp, Cardinal Resources was swallowed by Shandong Gold, Azumah Minerals was consumed by Ibaera Capital, Oklo Resources was picked up by B2Gold, Chesser Resources annexed by Fortuna and Tietto mopper up by Zhaojin Capital.
And that's just on the ASX. In Toronto, SEMAFO merged with Endeavour, Fortuna collected Roxgold, Chifeng Jilong took over Golden Star Resources and AngloGold Ashanti made away with Centamin.
SCP expects Perseus to be an active acquirer with its 17.8% stake in Predictive Discovery in focus.
Chan also sees West African as a natural acquirer that would benefit from jurisdictional diversification now that its second mine build is done.
SCP's other top candidates to be potential predators were Allied Gold Corporation, Robex Resources Inc (ASX:RXR) and Montage, but considered Resolute Mining (ASX:RSG), Orezone, Galiano Gold, Fortuna and the Chinese miners as other potentially active players.
Montage, backed by Lundin and Zijin, has recently been busy building stakes in Côte d'Ivoire explorers Aurum Resources (ASX:AUE), African Gold (ASX:A1G) and Sanu Gold.
Robex recently listed on the ASX and Orezone last week lodged a prospectus for a $75 million ASX listing, which would loosen its paper to pick up Aussie companies.
The next generation
'We think the window is wide open for West African gold explorers, with the gold price consolidating above US$3000/oz, risk capital available for high quality management teams, and a competitive M&A environment for build-ready projects,' Chan said.
In the report, Chan initiated coverage on Turaco, with a buy rating and $1.20 price target, and already covers Canada's Newcore Gold, which is advancing the Enchi project in Ghana.
SCP expects that Turaco could become one of the next 150,000-200,000oz per annum producers in the region with a resource of 4-5Moz and permits and a final investment decision in hand by the end of next year.
'We also highlight our top picks of the explorers – Sanu in Guinea; Aurum, Awalé and Many Peaks in northern Côte d'Ivoire; and African Gold and Kobo in central Côte d'Ivoire,' Chan said.
'We think these companies have the right combination of ground, quality management and attractive locations to potentially make a discovery and move to production this cycle.'
No resource? No worries
Many Peaks Minerals (ASX:MPK) has the smallest market cap of the ASX-listed companies mentioned in the report and is the only one yet to report a resource.
However, the company has been making rapid progress since acquiring the Ferké gold project from Turaco last year, which has caught the attention of SCP.
Chan said the mineralisation at Many Peaks' Ouarigue target is hosted in a tonalite intrusive unit, which is a similar host setting to the multimillion-ounce Bankan and Fekola deposits.
'We like what we've seen so far for two reasons,' he said, pointing to the consistency of the tonalite mineralisation and the high-grade zone.
On Tuesday, Many Peaks reported that drilling had extended mineralisation along strike and at depth, with increasing widths of the mineralised zones intersected reinforcing the potential for a bulk tonnage target.
New results included 87m at 1.67g/t gold from 221m, including 29m at 3.46g/t gold; and 84m at 1.53g/t gold from 58m, including 2m at 18.1g/t gold and 8m at 2.11g/t gold, including 2m at 7.43g/t gold.
On Wednesday, Many Peaks raised $13.5 million in a heavily supported private placement at 72c per share, a 5% premium to the company's 15-day volume-weighted average price.
The funds will be used to complete drilling and studies for the preparation of an initial resource estimate.
SCP forecasts an initial resource of 300,000-700,000oz of gold at 1-2g/t gold.
'That doesn't include the higher-grade zone – thus we think circa 500,000oz is a good target for an initial MRE at Ouarigue South with potential to expand along strike to the north and south.'
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