Senegal: The Birimian’s last outpost

2020-01-30T12:11:15+00:00 January 30th, 2020|Country in Focus|

With security in other West African states a growing concern, it might be a good idea for exploration geologists to have a closer look at Senegal, writes Leon Louw.

President Macky Sall won the February presidential election quite comfortably in the first round, earning 58.26% of the vote and is firmly in control. Credit: Britannica

President Macky Sall won the February presidential election quite comfortably in the first round, earning 58.26% of the vote and is firmly in control. Credit: Britannica

At one of his annual midday lunch briefings almost a decade ago, Mark Bristow, then CEO of Randgold Resources, told a group of journalists that one of Africa’s highest-grade open pit gold deposits would be discovered in Senegal. He knew then, of course, that Randgold’s exceptional team of geologists had already stumbled upon Massawa in the east of Senegal.

Bristow never took Massawa all the way into production, as he has done with each one of the other remote African discoveries he made. Instead, he gave TSX listed Teranga Gold the opportunity to do that 10 years later when he was appointed president and CEO of the second largest gold company in the world, Canadian-headquartered Barrick Gold.

Barrick merged with Randgold in January 2019 and gained access to an impressive list of high-grade gold assets in West Africa, including Massawa. At the end of 2019, Bristow announced that Teranga had acquired 90% of Massawa, with the government of Senegal holding the remaining 10%. Bristow, who knows a good gold deposit when he sees one, did not lose complete interest in Massawa though, or in Senegal, for that matter. Barrick retained 11.45% of Teranga and is currently the second biggest shareholder in the company.

Besides being a top geologist, Bristow has an astute business brain, and the synergies between Massawa and Teranga’s flagship operation down the road at Sabodala was just too good to resist.

Massawa is within trucking distance of Sabodala, creating the opportunity for significant capital and operating synergies. At the time Bristow said that the proximity of the projects and the combination of Sabodala’s mill and Massawa’s high-grade ore are expected to scale Sabodala into a top tier asset.

Bristow has always fancied Senegal, and with reason. It falls within a very prospective region of West Africa, and remains reasonably unexplored, something Bristow (if his new role allows him to continue sniffing out new ore bodies) and other trailblazers like John Welborn, managing director and CEO of Australian company Resolute Mining, will not allow to pass them by.

Mergers and exploration

In fact, Resolute was involved in another significant deal in West Africa last year when they acquired an expansive exploration portfolio covering almost 2800km² across Senegal, Côte d’Ivoire and Guinea from private gold producer Toro Gold. So highly does Resolute rate its West African assets, that the company recently sold its Ravenswood gold mine in Queensland, Australia, to focus exclusively on its African acquisitions. One of these, Mako, only a stone’s throw from Massawa, recently released exceptional results from its drilling programme. Mako’s proximity to other operations like Massawa and Sabodala makes it easy to see the logic in some form of cooperation or joint venture, which Welborn indeed alluded to when announcing the results from Mako’s drilling programme at the beginning of the new year.

According to Welborn, high grade intersections from diamond drilling below the current Mako pit confirms the potential of a coherent lode at the north-eastern end of the existing Mako open pit. Welborn says that the positive exploration results demonstrate the potential for mine life extension at Mako.

“The positive exploration results are further confirmation of value creation at Mako. The drilling results indicate strong potential to increase open pit gold inventory at Mako which will extend the life of our new high quality, low cost operation. We are delighted to be operating successfully in Senegal and we are actively seeking to expand our tenement package to include new high-quality exploration prospects,” says Welborn.

Why Senegal?

The allure of Senegal is not difficult to grasp. Besides the exceptional geology and mineral endowment, the country has been reasonably peaceful, politically stable and the economic outlook is fairly positive with a number of major projects in the pipeline. According to George Ott, consultant at NKC African Economics, there are a number of infrastructure projects underway in Senegal, amongst others the Taiba Ndiaye wind farm project, the Dakar Regional Express Train and the construction of Diamniadio, a new futuristic city outside Dakar.

Notwithstanding, perhaps one of the most significant determinants of economic growth in Senegal, says Ott, will be the imminent onset of oil and gas production. “One of the major oil and gas projects in Africa, the Greater Tortue Ahmeyin project off the coast of Mauritania and Senegal, is currently being developed, which promises to give the Senegalese economy a huge injection,” he adds.
According to Tara O’Connor, managing director at London-based Africa Risk Consulting, the biggest opportunities in Senegal lie in the hydrocarbon domain and infrastructure development, especially in the energy space. “Senegal has announced it will sell 10 oil blocks in 2020 and has been attracting significant interest in this area, so it is one to watch out for,” she tells African Mining. “Furthermore, the country will start producing natural gas in 2022, and this could create space for the use of gas fired plants to provide energy for the population and industrial activity and mining. With the improving business climate, as well as Senegal’s coastal location and the enactment of the African Continental Free Trade Act (AfCTA), promoting the production of finished goods which can be exported can be a viable business activity which industrial activity will help to pursue,” says O’Connor.

Ease of doing business

West African analyst at Africa Risk Consulting, Leonard Mbulle-Nziege says that Senegal is increasingly becoming one of the most attractive places to carry out business in West Africa. “According to the World Bank Doing Business report, since 2018, Senegal has improved its ranking from 148 out of 190 countries to 122 in the most recent 2020 rankings. Some of the areas in which Senegal has made business easier to do include, easing tax payments, getting electricity, registering property, enforcing contracts as well as starting a business,” says Mbulle-Nziege.

Other than phosphates, which have dominated the mining industry for a long time, a wealth of diverse mineral and metal substances, including gold and platinum, base metals (iron, copper, chromium, nickel), industrial minerals (limestone, salts, barytine) and heavy minerals (zircon and titanium) have been largely unexplored and unexploited in Senegal until recently. “However, thanks to the significant investment promotion efforts made by the Senegalese government, the diversification of mining activity is developing through the development of the phosphates-fertiliser sector, the revival of the integrated iron project in Falémé, the accelerating gold mining in the Kedougou region, supervising and promoting artisanal mines, accelerating the exploitation of zircon deposits and developing a regional mining hub,” says Ott.

Geology and major operations in Senegal

By Nicolaas C Steenkamp

Western Africa’s oldest rocks from the Archean or Proterozoic Birimian basin is also found in Senegal. The Birimian rocks consist of metabasic, meta-andesite, breccia and greywacke and schist and contain the gold mineralisation found in Senegal. In the Kedougou inlier, these meta-sedimentary rocks were intruded by granite plutons during the Eburnean orogeny. In the south-eastern part of Senegal, the Madina-Koukta Basin developed during the Neoproterozoic period outcrops along the edge of the inlier. Two more basins were developed during the Early Cambrian period and are known as the Komba and Faleme Basins, the latter being filled with later carbonates and tillites related to a glaciation period during the Paleozoic. The Faleme Basin contains the carbonate-hosted iron deposit, the magnetite and iron hydroxides contain up to 60 % iron. Alluvial diamonds are also found in the Faleme and Gambia Rivers. Heavy mineral exploration has also been conducted in these rivers.

The Senegal-Mauritania Basin is one of the largest marginal basins that formed during the rifting of Pangaea during the Mesozoic. The basin has a length in excess of 1 400km and is up to 500km in width at its widest point near Dakar. The sedimentary units in this half-basin increase in thickness towards the coast, with most of the material deposited during the Oligocene. The sedimentary series starts with Triassic evaporites, gypsum, anhydrite and halite with coincidence of tholeiitic magmas. By the Cenozoic the ocean retreated, and the region was subjected to intense terrestrial weathering. The Cap-Vert peninsula experience peaks of volcanism during the Miocene and during the Quaternary, resulting in Mamellles volcano and associated vent and flow structures, consisting of undersaturated alkaline lavas. The large phosphate reserves in Senegal were formed during the Cenozoic and Eocene when the switch from marine to continental environment led to the enrichment of lime phosphates to aluminium phosphates. In addition, this area host deposits of limestone, palygorskite, clay, dolomite and heavy minerals and aggregate.

Off-shore resources include gas and oil. Oil was discovered in Senegal in 1961 in the Dima Naido field. The Dome Flore on the border with Guinea Bissau is indicated to host a heavy oil field in shallow water and a number of on-shore gas fields.

Mining operations
Prior to 2008, the Senegalese mining sector was, and continues to be, dominated by the phosphate sector, where it was locally processed into phosphoric acid and derived products. The Matam phosphate lime project started in 2014 and was producing 1.2 million tons of material by 2018. More exploration and research are being conducted on the phosphate fields in the central part of the Basin. The establishment of a fertilizer plant is the next goal set by the government.

Cement is also domestically produced from limestone, with other raw products such attapulgite clay and salt source in the same region. In 2019 there are three cement factories in Senegal, with the potential to not only supply the planned construction initiatives in-country, but also export to neighbouring countries, such as the Ivory Coast that have mills, but need to import all the clinker.

The gold mining sector in Senegal is relatively nascent in contrast to neighbouring Ghana. The oldest commercial gold mine in Senegal is the Sabodala Gold mine, discovered in 1961 the deposit is located about 650 km east of Dakar. The first pour took place in 2009 and the mine expansion program was completed in 2012. The mine has reserves in the order of 1.70 million ounces (oz) of gold from the Sabodala, Niakafiri, Gora and Sutuba deposits.

Resolute Mining made a USD305-million offer to take over privately held Toto Gold’s Mako gold mine in July 2019. The Mako gold mine was constructed in 2016 with the first pour in 2018, making it only the second commercial scale gold mine in the country. The mine has a targeted production of 300 000oz and indicated to host a mineral resource of up to 1.22 million oz and a reserve of 928 00oz of gold in 2019. The mine has a ROM head grade in excess of 2.5 g/t for the projected six-and-a-half-year life-of-mine. The processing facility is an industry standard CIL plant comprising a crushing circuit, a SAG mill and a gold extraction circuit prior to discharge to a lined tailings facility via a cyanide destruct circuit. The operation is powered by a diesel fuelled 14 MW power station.

Reports emerged in April 2019 that illegal gold mining was taking place in some of Senegal’s national parks, mostly supported by Chinese nationals, that paid USD42 per kilogram of gold delivered to them. This is only the tip of illegal mining in Senegal, with tax revenue losses amounting to several millions lost annually to such activities.

Mining of heavy mineral sand deposits is underway by Grande Côte Operations (GCO) to increase the country’s share of the world market, where it already supplies about 8% of the market and 25% of the European market. The potential of manganese and lithium deposits located in the eastern parts of Senegal are investigated for the potential of development.

Consistent regulations

Mining regulations in Senegal have been reasonably consistent, which creates some sort of certainty. “However, O’Connor says that the mining sector might take a leaf from the hydrocarbons industry which ratified a new petroleum code in January 2019 and that has already led to renewed interest among investors. “Senegal’s mining code has been consistent but has not necessarily resulted in significant interest from industry actors. In 2017, mining activity generated USD167.8-million or 89.2% of extractive industry revenue. Most of the activity was carried out at the Faleme iron ore mine by Turkey-based Tosyali Holdings,” she says.

According to independent consultant Nicolaas Steenkamp, preference is given to companies that offer the best conditions and guarantees to government when applying for exploration licences. He says that the tax provisions in the 2003 mining legislation were also moved to the general tax code of 2012. “The 2012 code introduced changes to royalty from 3% to 5% and tax calculations and the introduction of production share agreements. It also encourages sourcing of local skilled services and goods,” Steenkamp explains.

Politics affect the economy

Mbulle-Nziege says that Senegal’s main economic risks are linked to the country’s politics. “In the past these have led to asset expropriation and political intervention in the commercial operations of foreign-owned companies.” Moreover, corruption continues to be a headache. In October, opposition MP Ousmane Sonko accused the Senegalese government of granting a mining concession to Tosyali Holdings on terms which were unfair to the Senegalese state as well.

Mbulle-Nziege mentions further that in November last year, a situation emerged in which Senegal’s urban water management contract was granted to France-based Suez at the expense of the previous service provider, Senegalaise des Eaux (SDE) a branch of France-based Eranove. SDE accused the water and energy ministry of flouting the process as they had presented the best financial offer. The decision went through an appeal until Suez was confirmed in June.

“Issues of grand corruption come to the fore periodically. Nevertheless, Senegal is a country which is significantly less exposed than many of its African counterparts,” says Mbulle-Nziege.

Low to moderate political risks

Ott regards the political risk in Senegal as low to moderate with relative stability in terms of risk trends and developments. “The country has a stable democracy and boasts relative institutional maturity. Expropriation risks in the mining sector is also low with the country making strides in terms of regulatory transparency on this front in recent years,” he adds.

Senegal is a historically peaceful country. It has only experienced one failed coup in 1963 and power transfers between heads of state have been smooth, even in the event when an incumbent lost (2000 and 2012). However, O’Connor warns that there are still the unresolved calls for secession of the Casamence region by the armed militant group Mouvement des Forces Democratiques de Casamence (MFDC) which have existed since the early 1980s. The group has stopped violent action and its activites have been weakened by the loss of support from the Gambia, where ousted president Yahya Jammeh used to provide financial assistance to the group. Senegalese President Macky Sall has taken steps to engage formally with the group, with the talks taking place in October 2017 in Rome (Italy). Furthermore, Sall has promised significant development assistance to the region and as a result, has reduced secession claims.

Lingering challenges

Despite the obvious opportunities in Senegal, Ott says that there are lingering infrastructure gaps that will impact on transport and production costs. He adds that electricity supply remains unreliable.

On the other hand, the Senegalese government has made a genuine commitment to improve infrastructure constraints. The focus has been specifically on improving the power supply. In 2011, Senegal had an electricity production capacity of 571 MW. By 2018, this had risen to 1141 MW. “With the government’s aim to increase renewable energy production by 30% and the imminent production of natural gas by 2022, this figure will see an increase,” says O’Connor.

According to Steenkamp, there is still a severe lack of highly skilled and experienced staff. Senegal is able to source the majority of the skilled personnel from neighbouring countries with a more advanced and established mining sector but is still reliant on expatriate consultants and contractors for management and development.

“The country also has no analytical facilities, requiring a lengthy process to have samples geochemically or metallurgically analysed and tested. There is also a dire need for updated mapping and elevation or terrain models. Due to the embargo on the import on explosives in several West African countries, that is not in effect in Senegal, international suppliers import their products to Senegal, from where it can then be legally sold and shipped to these countries,” Steenkamp adds.

As in the case with most other African countries, transport and logistics remain a challenge. Most projects are in remote locations, with little to no supporting infrastructure. “A focus area of the Senegalese government is to revitalise and refurbish the French-era railway system. The ports are also seeking financial support to upgrade their facilities to handle rail and road connected logistics,” says Steenkamp.

Senegal: The political outlook and risks

By Africa Risk Consulting (ARC) managing director Tara O’Connor and West Africa analyst Leonard Mbulle-Nziege

President Macky Sall won the February presidential election quite comfortably in the first round, earning 58.26% of the vote and is firmly in control. However, this is Sall’s second and last term as stipulated by the constitution. Sall is yet to groom a successor and if he decides to run for a third presidential term, he might face the same fate as his predecessor Abdoulaye Wade whom political protesters forced to abandon hopes for a third term.

Nonetheless, the opposition might become a real force, especially with the release from prison of former Dakar mayor Khalifa Sall (no relation to the president) and the possible rehabilitation of former minister Karim Wade’s personal rights, which would allow him to run for political office. Firebrand opposition MP, Ousmane Sonko could also make waves following his third place finish in the February elections. The local elections which are set for 2020 or 2021 will be a barometer of how these individuals might position themselves within the Senegalese political landscape. Political violence is extremely rare in Senegal and even in the event that electoral contests are highly contested, we should not expect any such acts to occur.

New risks include a possible spill over effect of extremist violent group activities in neighbouring countries such as Burkina Faso, Mali, Mauritania and Niger. These countries have been subjected to attacks by suspected jihadists groups such as Al Qaeda in the Maghreb/Sahel, Islamic State of West Africa, Azawad and numerous splinter groups. The borders between these countries are porous and while Senegal has not been subjected to such attacks and has a robust defence force, there is a risk of an event similar to the 2016 Grand Bassam attacks in Cote d’Ivoire in which armed Islamist extremists opened fire on Ivoirians and foreign beach-goers.

About the contributors

  • George Ott is a consultant at NKC African Economics based in Paarl in the Western Cape Province of South Africa. NKC African Economics specialises in providing forecasts and insights for major African economies. Their services provide a comprehensive analysis of immediate and long-term prospects that will benefit organisations – monitoring risks or opportunities for their operations or investments in the continent.
  • Tara O’Connor is the managing director at London based Africa Risk Consulting (ARC) and Leonard Mbulle-Nziege is the West Africa analyst at Africa Risk Consulting. ARC has been facilitating the entry and successful operation of organisations across the African continent for over 14 years and has facilitated clean and long-term investment in Africa. The above information is drawn from ARC’s Africa country information service, ARC Briefing, which now covers 22 countries and is available on subscription.
  • Dr Nicolaas C Steenkamp has a decade and a half of post-qualification experience in the geological and geotechnical industry. He has been involved in a variety of activities ranging from exploration, geochemistry, geological and geotechnical, desktop studies, due diligence to EPCM contracts and related feasibility studies offered by Bowline Professional Services.