Monsters of Rock: Rumble in the jungle bad news for West African Resources

West African Resources dives on Burkina Faso Junta mining permit cancellation threat
BMI has revised down its nickel price forecast from US$18,000/t to US$17,300/t for 2024
Rio sets eyes on Arcadium and Sayona, Piedmont both rise on positive lithium sentiment

Ructions in West Africa

Political instability and brewing conflict in West Africa’s Burkina Faso has hit gold miner West African Resources (ASX:WAF) right in the wallet as its share price plummeted today on the back of news from military Junta leader Ibrahim Traore that the government would cancel mining permits from (unnamed) foreign companies.

“We know how to mine our gold and I don’t understand why we’re going to let multinationals come and mine it,” Traore was reported as saying on national radio.

“In fact, we are going to withdraw mining permits.”

The news sent WAF shares down over 25% on open just to recover, yet still down over 19% to trade at $1.34 per share at time of writing.

“West African Resources is not aware of any plans by the government of Burkina Faso to withdraw any of its mining permits,’’ the company said.

“President Traore has spoken previously about taking action against miners who have not adhered to the mining code and also regulating the semi-mechanised and artisanal mining sectors.

“The government remains supportive of WAF’s position in Burkina Faso as demonstrated by recent positive interactions [with] the government last month.”

The miner was awarded the Best Mining Company award at SAMAO (west African Mining Week) for the second consecutive year and has engaged with government around the new mining code announced earlier this year.

The $1.53bn gold miner owns and operates the Sanbrado gold mine, set to produce 190-210,000ozpa gold this year, while it constructs its Kiaka gold project with a long term aim to produce ~4Moz gold over the next decade.

Meanwhile, Ghanaians are protesting illegal artisanal mining practices in Africa’s number one gold-producing nation.

The mining practices often pollute rivers and surrounding land that cannot be properly utilised for agriculture.

Big mining kahunas such as Newmont and Gold Fields are required to adhere to strict environmental guidelines, yet the burgeoning small-scale prospector scene has no regulatory oversight.

Pressure is also coming from in-house trade and labour unions to address the situation and, if resolved, could be a boon for established mining companies with projects in the region.

Nickel’s (not) back

Fitch’s BMI analysts have scaled down their nickel price projection for 2024 from US$18,000/t to US$17,3000/t as the market grapples with a substantial surplus driven by a rise in output in Indonesia and mainland China.

Last year the nickel market experienced notable price volatility but regained ground in the early months of 2024, reaching a year-to-date high of US$21,615/t in May.

After that, peak optimism soon faded and nickel prices reversed their gains, falling to US$16,996/t by late September.

Benchmark Minerals Intelligence (BMI) anticipates minimal price growth for the remainder of 2024 with average annual prices expected to decline for the second consecutive year, dropping by 20.2% from the 2023 average price of US$21,688/t.

“Despite the current downward pressure on nickel prices, we foresee potential upside risks such as possible supply disruptions and a weakening US dollar later in the year,” the analysts said in the latest Nickel Price Forecast.

“This could provide a price floor, preventing significant declines from current levels.

“On the supply side, we anticipate a significant increase in 2024 global refined production, which will be the core driver of price declines,” they said.

“The widening of the surplus is primarily attributed to Indonesia’s increased production of nickel pig iron and intermediate nickel productions, a direct consequence of heightened mainland Chinese investment in its downstream nickel sector following the opposition of a nickel ore export ban in 2020.”

Indonesia’s ramp-up in production was not unexpected, and it’s no surprise that BHP (ASX:BHP) recently halted its Nickel West operations to move that nickel opex into copper capex.

Surge in production driving prices down

Although the approval of new nickel brands on the LME was a strategic response to address low inventories and reduce the threat of price volatility, BMI said the increase has the potential to put significant pressure on prices.

“Indonesia’s growing ability to convert its abundant low-grade nickel into high-grade class I will exert pressure on LME nickel prices,” they said.

“As class I nickel production grows, a surge in LME nickel inventories looms over the market, pressuring the market further.”

Movements in lithium

In February, Piedmont Lithium (ASX:PLL) cut its workforce by 27% as a reflection of drastically lower lithium prices to save operational costs across its North American Lithium (NAL) JV with Sayona Mining (ASX:SYA).

This didn’t stop PLL working across its NAL and Ghanaian lithium projects, expanding NAL’s mineral resource by 51% to 87.9Mt at 1.13% Li2O in late August and receiving an environmental permit for its Ewoyaa lithium project with JV partner Atlantic Lithium (ASX:A11).

FY25 guidance for the NAL operation sees the spodumene concentrate run rate ramping up to 190-210,000dmt.

Both SYA and PLL shot up on trade today.

US$3.3bn market-capped Arcadium Lithium’s (ASX:LTM) shares were sent soaring today after confirmation by Rio Tinto (ASX:RIO) that it had made an approach to acquire the lithium miner.

LTM is one of the few producers to have rolled out direct lithium extraction (DLE) tech at its El Fenix site on Argentina’s Hombre Muerto Salar, where junior Galan Lithium (ASX:GLN) is proving up its adjacent HMW Li brine project.

Global mining giant Rio is testing a form of its own DLE technology at the Rincon brine project in a JV with Power Minerals (ASX:PNN), where a US$335m pilot project with a 3000tpa LCE capacity is set to be completed this year.

It’s also gained support from the Serbian Government for its proposed 58,000tpa Jadar mine in Serbia this year, though pitched community protests over the site make that far less than a certainty.