Burkina Faso used to be one of the preferred mining destinations in Africa as it was one of the most stable jurisdictions on the continent with a blue sky exploration potential. However, when the president Compaoré – which came to power almost 27 years ago – announced he wanted to change the constitution to secure another term, all hell broke loose and the citizens of the capital Ouagadougou organized mass demonstrations (including the more or less traditional ‘parliament burning’ stage) against this proposal. Even though the president quickly withdrew the proposed changes in the constitution, people were still asking for him to resign, which he did. It’s not unlikely the French president had an important role in all this, as he previously publicly said he’d personally back the Burkinese president for a ‘top-job’ elsewhere.
Now Compaoré has resigned, announced new elections within 90 days and has fled to Ivory Coast. The current problem is that there are two people claiming to be in power. Both the army chief (Honoré Traoré) and the second in command of the Presidential Guard (Isaac Zida) are now publicly taking up the responsibilities, but fortunately this does not lead to additional unrest. It does not look like Burkina Faso is on the verge of a revolution, as both Traoré and Zida are talking today with the main opposition party in Burkina to discuss a smooth transition to new elections. According to press reports, it’s very calm today in the streets of Ouagadougou, and people have actually started to clean up the mess (see the picture on top, which was taken by AFP today in Ouagadougou).
As the dust seems to be settling, it’s becoming very clear that it’s not unlikely the transition period will indeed be smooth and as Burkina Faso is very much depending on its mining sector which contributes roughly 15% to the country’s GDP. We think that companies operating in Burkina Faso such as True Gold Mining (TGM.V) and RoxGold (ROG.V) have been punished too hard, and it could be a very interesting moment to be a contrarian and pick up some shares as both companies own projects which should be viable at a gold price of $1000/oz (True Gold’s AISC will be less than $700/oz). ASX-listed Gryphon Minerals (ASX:GRY) could also be an interesting buy at this moment.
Disclosure: The author holds a long position in True Gold Mining and RoxGold. Please see our disclaimer for current positions.