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Talk about a bounceback. After West African Resources (ASX:WAF) shares were slaughtered on Monday, Tuesday has seen shares jump nearly +10% to $1.47/sh.
That slaughtering of shares came after the current President of West African nation Burkina Faso – that President in force since a coup two years ago – told local radio stations the government was considering removing mining permits from foreign owned companies.
West African Resources’ flagship unhedged gold project is in Burkina Faso – cue the Monday sell-off.
But the company has stated on Tuesday that it spoke with the Burkina Faso government overnight, and it was assured only foreign-owned mining companies breaching the laws in Burkina Faso would be affected.
“WAF personnel have recently communicated directly with officials from the Ministry of Mines and Quarries in Burkina Faso,” WAF CEO Richard Hyde said.
“[They] have confirmed that none of WAF’s mining permits are under review and all of them remain in good standing.”
Still, investors are clearly nervous. Around lunch Sydney time on Tuesday, one week returns for WAF shareholders are down -15.3%. Shares were worth $1.66/sh at close on October 4; four days later, shares are just under $1.50.
Not the world’s most dramatic sell-off, but still evidence of a market not quite willing to jump all the way back in.
The real issue here is the notoriously shaky reality of doing business in West Africa in particular – part of the Sahel region long-plagued by Islamic militants and complex ethnic tensions that require nothing short of a PHD to truly conceptualise.
In fact, the Sahel region is sometimes referred to as Africa’s “coup belt.” The majority of affected countries are ex-French colonies, and they’re also the same countries where Russia has been increasingly active in recent history.
Earlier this year, anti-government protestors from Ethiopia to Mali were waving Russian flags.
A number of HotCopper users discussing the news in a company-specific thread on Tuesday were focused on the Russian element with a view towards the future stability of Burkina Faso and WAF’s flagship mine.
In June, Al Jazeera was also running stories on rumours there could be another coup in Burkina Faso coming up.
User AccountCracker noted there had been mine seizures in Mali and Niger in recent history, and, that ASX-listed Endeavour sold its project in Burkina Faso following a coup in the country.
But for now, West African Resources’ one year returns are still up an impressive +108%. It’s probable shareholders will be keeping “Burkina Faso news” as a bookmark in their browsers for the foreseeable future.
Looking at the geopolitical macro, whether Russia is deliberately inflaming tensions in an already unstable region remains to be seen. Obviously, should that be the case, West African Resources is a victim of greater forces at play.
Whether that truly is the case, though, it’s effectively unknowable. Talk about uncertainty.
Even after the myriad focus on Russia in the Western World ever since 2016, things are as murky as ever from the notoriously secretive nation. And the nature of mining West Africa as a foreign company remains the same risk-on environment it always has been.
WAF last traded at $1.47/sh.
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