Abstract
This paper evaluates the effects of the changes in Burkina Faso’s mineral policies of 2013 and 2015 and their economic attractiveness using the Natougou Project as case study. Cash flow analyses shows a higher NPV of US $93,817,833.84 and an IRR of 44.67% under the 2015 Mining Code. Sensitivity analysis shows the project was less sensitive under the 2003 Mining Code as it takes a 18.25% decrease in the revenue for the project to break even as against 13.04% under the 2015 Mining Code. The project was insensitive to changes in operating cost and capital cost under the 2003 Mining Code but will not be viable if the capital cost and operating cost increase beyond 30% and 32.75% respectively for the 2015 Mining Code. An amount of US $ 321,488,366.61 will accrue to the government for 2015 Mining Code as against US$ 245,442,053.07 for the 2003 Mining Code. Keywords: Mining Code, investment, physical policies, dividends, sensitivity analysis, government and project
Highlights
Burkina Faso, a West African nation, has witnessed an exponential mining boom in recent years
Project under two Fiscal Policy Regimes: The following estimates and basic assumptions were used in the economic evaluation of the Natougou Project: (i) Total capital investment = $ 219 600 000 (ii) Annual operating cost = $ 59 938 200 /yr. (iii) Annual production = 340 000 t/yr. (iv) Gold price = $ 35.36 /g (v) Mill head grade = 3.32 g/t ( vi) Recovery = 0.93 (vii) Ore dilution = 20% (viii) Ore loss = 5% (viii) Project life = 08 yrs. (ix) Interest on loan capital = 15% (x) Discount rate = 20% (xi) Capital structure = 50% equity and 50% loan (xii) Working capital = 25% of annual operating cost
Since the Net Present Value (NPV) of US $ 93 817 833.84 is greater than zero and the Internal Rate of Return (IRR) of 44.67% is greater than the minimum rate of return of 20%, the Natougou Project is declared to be economically viable under the 2003 Mining Fiscal Policy Regime
Summary
Burkina Faso, a West African nation, has witnessed an exponential mining boom in recent years. Geology of Natougou Gold Deposit: The West African Birimian Greenstone belt is predominantly composed of lower Protozoic age and sedimentary units with intrusions of related plutonic rock formations. The structure is hosted in amphibole greenstones which form an open dome dipping to North West It is a massive deposit composed of high grade flat laying quartz sulphide lodes. The objective of this study was to assess the effects of changes in fiscal mineral policies on the viability of mineral projects in Burkina Faso. This was achieved through the assessment and evaluation of the various
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