Revolt Rocks Burkina Faso's Mines After President FleesPublished by MAC on 2015-04-29
Source: Bloomberg (2015-04-08)
Two London-listed mining companies, and one based in Vancouver, are being targeted by civil society groups, as a newly-democratised Burkina Faso
wrestles with accusations of the former regime's corrupt and illegal dealings with mining companies.
Revolt Rocks Burkina Faso's Mines After President Flees
Pauline Bax and Simon Gongo
8 April 2015
Gold miner Damien Tonde would never have considered taking his boss to court for firing him and 324 others until last year’s overthrow of Blaise Compaore, who ruled Burkina Faso for almost 30 years.
“Under the old regime, mining companies felt very strong,” Tonde, 35, clutching a clear binder with legal documents, said in the capital, Ouagadougou. “We didn’t stand a chance before the judge.”
His views have changed. He is suing London-based Avocet Mining Plc for firing him and his colleagues in December after a strike over pay cuts, a stoppage the company said was illegal. The case is one of many disputes that have rocked the nation’s mining industry since the ousting of Compaore, who fled the country in October after mass demonstrations against an attempt to extend his rule.
Emboldened by the popular uprising that toppled the regime, villagers and workers have turned to Burkina Faso’s mines to demand change. That’s made it hard for the interim government to reassure investors in the continent’s largest gold producer after South Africa, Ghana and Mali. Most Burkinabe are excluded from the industry’s benefits, the International Monetary Fund said in a July report. They now want to claim their share.
“Gold mines are our biggest source of revenue, but people don’t see the benefits, at least not locally,” Labor Minister Augustin Loada said in an interview. “They oppose the development of new mines, or they have all kinds of demands, and when they’re not satisfied, it ends in violence.”
Protesters in February smashed equipment and set fire to vehicles at the $1 billion Tambao mine, situated on one of the world’s largest manganese deposits. They accuse the company running the mine, a unit of London-based Timis Mining Corp. known as Pan Africa Minerals, of having unlawfully obtained a permit to develop the deposit. The government ordered production halted in March while it investigates how the license was awarded.
True Gold Mining Inc., based in Vancouver, suspended building its Karma operation in January after residents living nearby caused about $6.1 million of damage to the site and equipment, saying the project threatened their village’s existence.
During the December strike at Avocet’s Inata gold mine, workers occupied the operation and blocked management’s access, violating labor agreements, the company’s adviser on labor laws, Raphael Ouedraogo, said by phone. This entitled the company to fire the employees without giving notice or paying damages, he said.
“The insurrection has really been a catalyst for serious social movements in the mining sector,” Laurent Michel Dabire, director of corporate affairs at the company with the second-biggest gold-mining assets in the country, Semafo Inc., said in an interview. “It’s in the air. People say, ‘now is the time’. They think ‘if we can chase somebody who’s been in power for 27 years, we can chase the managing director’.”
The country shipped 36.6 metric tons of gold last year, worth $1.4 billion at current prices, the government said April 2. It could produce as many as 45 tons by 2017 if political stability is restored, Christian Ouedraogo, vice president of the Chamber of Mines, which represents producers, said in an interview.
The attacks on Burkina Faso’s mines mirror public resentment against Compaore, a former army captain who was criticized for his personal wealth in the country that ranks seventh-lowest on the United Nations’ 187-member Human Development Index.
Gold mining developed quickly in the West African country, accounting for three-quarters of exports within five years of starting up, according to the IMF. The metal has replaced cotton as the country’s biggest source of income, with hundreds of thousands of small-scale miners digging up the earth in the hope of an income.
The mining boom has fuelled social tensions because revenues are unequally distributed and mining operators hardly contribute to local development, the Brussels-based International Crisis Group wrote in a 2013 report. Meanwhile, “gold production has disrupted rural activities and stirred up rivalries within many villages,” it said.
The speed at which the industry developed also led to allegations by the opposition and monitoring groups that Compaore and his family were involved in deciding how permits were awarded. Compaore seized power following the assassination in 1987 of leader Thomas Sankara.
“It was a mafia economy,” Zephirin Diabre, head of a coalition of opposition groups, who in 1994 served as finance minister under Compaore, said in an interview. “To be granted a permit for exploration, you had to be part of the people they knew and liked.”
Daniel Da Hien, a spokesman for the Extractive Industries Transparency Initiative, echoed this view.
“The entire industry was developed and controlled by those who were close to the president,” he said in an interview. The EITI, comprising 29 nations and dozens of energy and mining companies, maintains a voluntary system for disclosing taxes and other payments companies make to governments.
“These are wild accusations,” Boureima Badini, a former Burkina Faso justice minister who remains close to Compaore, said by phone from Abidjan, the commercial capital of Ivory Coast. “The people around President Blaise Compaore didn’t monopolize the mining sector. The process of allocating mining permits was done according to Burkinabe law, in the most absolute transparency.”
Eight officials from Compaore’s government, including former mining, safety and transport ministers as well as two former mayors, were arrested as part of an investigation into the mining industry, Territorial Administration Minister Auguste Denise Barry said Tuesday. Presidential elections are scheduled for October.
The first mine that was ransacked in the aftermath of the revolt was Bissa, owned by Russian billionaire Alexey Mordashov’s Nordgold NV. The attackers accused the company of colluding with Compaore’s eldest brother Francois, a powerful businessman whose villa in the capital, a two-story structure with an indoor swimming pool, was stripped bare by looters.
Bissa Gold SA, which owns both the Bissa mine and Bouly deposit, “is consistent with all mining ownership in Burkina Faso and in line with the Burkina Faso mining code,” Nordgold spokeswoman Olga Ulyeva said by e-mail.
The government is planning to set up a special force to protect the mines by recruiting men from the police, forestry services and customs. Mining companies may help pay for the force, Semafo’s Dabire said.
A team from the mining ministry also began to tour the countryside to warn local communities against vandalism.
“People go on a rampage over the smallest thing,” Francois Ouedraogo, head of the Mines Ministry department working on security, told reporters last month. “These companies have signed formal agreements and we need dialogue to end the violence.”
A security official with Romanian citizenship was abducted at a manganese mine at Pan African Minerals’ Tamboa project on April 4, the company said on April 6.
Other reforms may stir renewed social unrest. The World Bank told Burkina Faso it won’t release $100 million in budget support until a new mining code and an anti-corruption bill have been approved. Under Compaore, the government unsuccessfully tried to adopt a new mining code twice after the industry opposed tax changes.
In a revised code that the interim leadership submitted to parliament for debate this month, mining companies are required to pay a revenue tax of 0.5 percent into a fund that’s meant to improve the lives of Burkinabe near mining sites.
That’s below the 1 percent a coalition of civil-society groups says Burkina Faso should impose. It’s not clear when the bill will be voted on.
“We need to make sure we remain competitive because we’re a landlocked country a thousand kilometers from the sea, and companies deal with high water and electricity costs,” said Ouedraogo of the Chamber of Mines. “We should be careful not to discourage investors. We don’t have a long tradition of gold mining like South Africa or Ghana. Our mining boom is fragile.”