The new regime “will want to be seen as business friendly,” Red Rock Resources chairman and CEO Andrew Bell tells The Africa Report. The new regime “appears to be patriotically minded” and the purpose of the coup “may be more effective governance”, he says.
Burkina Faso’s President Roch Kaboré was deposed on January 24. A declaration signed by Lieutenant-Colonel Paul Henri Sandaogo Damiba said that the ‘Mouvement Patriotique pour la Sauvegarde et la Restauration’ is taking over the country. Kaboré was deposed after becoming vulnerable to a military which had regularly targeted by jihadist groups in the country.
Since 2015, jihadist groups have killed more than 2,000 people in Burkina Faso, including 400 soldiers, and displaced more than 1.4 million people. The army felt that Kaboré was not doing enough to combat terrorism, and French military support had become less effective, Bell says. If the new leaders can deliver an improvement in security, that would be positive, he adds. “The former president should have focused exclusively on terrorism.”
Early in January, Red Rock bought two gold exploration projects at Bilbale and Boulon in the south-west of the country. The company, which trades on the Alternative Investment Market (AIM) in London, also gold exploration assets in Kenya and Australia, and copper and cobalt exploration assets in the DRC.
- “We are not for or against the coup,” Bell says. “We have to remain open minded. We hope to get any with any government” in the country.
- He expects there will be a continuity between the regimes. “We have elections, they have coups,” he says from London.
Barclays on Endeavour
Endeavour Mining, west Africa’s largest gold producer, said in a statement on January 24 that its operations and supply chains in Burkina Faso have not been affected and mines and projects are operating as usual. The company, which trades in Toronto and London, also has west African assets in Senegal and Côte d’Ivoire.
Barclays is overweight on the stock, with a price target of 2450 pence, versus the current 1645. The bank’s analysts Amos Fletcher, Ian Rossouw and Tom Zhang write in research on January 24 that Endeavour trades at a “significant valuation discount” relative to global gold peers, despite its strong margins and balance sheet. “We see investor concerns around geographical risk and M&A as overdone.” The company owns the Houndé and Wahgnion mines in Burkina Faso. The two mines were key drivers of strong operational performance in the fourth quarter, Barclays says.
- Endeavour has been able to increase production beyond market forecasts with minimal cost inflation, Barclays says, so putting it ahead of the wider industry.
- The company has hedged 29% of total forecast 2022 gold production and 21% for 2023 at weighted average prices of $1906 and $1925/oz, which will help to protect cashflow, Barclays says.
- The bank lifts its earnings per share (EPS) forecasts for 2021, 2022 and 2023 to $2.41, $1.82 and $1.87 from $2.30, $1.70 and $1.71 respectively.
- Total cash returns including share buybacks amount to a 4.9% yield on the current share price, which, says Barclays, is the highest in its global precious metals coverage by some distance.
- The bank sees scope for that to continue given a forecast free cashflow yield of 11% in 2022.
Miners are confident that Burkina Faso’s new regime will make business stability and security a priority.
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