Burkina Faso’s new mining code presents further risks for established and prospective players

On 18 August 2024 Burkina Faso’s transitional legislative assembly (ALT) unanimously approved the country’s new mining code. The code, which has not yet been released in full to the public. The code was reportedly drawn up by the Burkinabe transitional government. with no material input private firms including the large international groups which dominate Burkina Faso’s gold mining sector – although some news outlets have noted that a member of the country’s Chamber of Mines was present at the ALT session and approved the mining code. Companies including Endeavour Mining, the largest mining group present in the country, have refused to comment publicly on the new code or on amendments in 2023 to the previous code. However, the mining sector is reported globally to be critical of the new code, with independent mining law experts also suggesting that it could expose foreign mining companies to significant integrity risk.

There is no shortage of reasons for mining groups to disapprove of the new mining code. As part of an avowed goal of increasing the Burkinabe government’s revenue derived from the mining sector (with gold accounting for some 80% of Burkina Faso’s exports), the “free stake” held in all mining companies by the Burkinabe state is set to increase from 10% to 15%, with the option of purchasing a further 15%. There will also be requirements to allow Burkinabe investors to acquire stakes in Burkina Faso-registered mining companies, as well as “on-shoring” up to 50% of their gold production’s refining to Burkina Faso. The country is notably constructing a gold refining plant which is meant to become operational in late 2024, and which is co-owned by a Malian firm, Marena Gold. The political importance of the refinery project to Burkina Faso’s transitional government is illustrated by the president, Ibrahim Traore, laying the first stone at the project site during a ceremony attended by other senior political and business figures.

Other reforms to the mining code which clearly aim to assert greater government control over the mining sector include reducing maximum terms for mining and exploration concessions across the board, with first-issue mining permits notably decreasing from a maximum of 20 to 10 years. Furthermore, in addition to excluding foreign firms and bringing a Malian company onboard to develop its inaugural gold refinery – a project conspicuously described by the Burkinabe Ministry of Mines as a “South-South Partnership” in its announcement press release – the transitional government has also publicly expressed its plans to bring its mining regulatory framework closer in line with the two other members of the Alliance of Sahel States and fellow putschist governments, Mali and Niger, to increase their competitiveness on the global minerals markets.

Major Risks

The new mining code could present a host of further risks to mining companies operating in Burkina Faso – companies which have already long been grappling with an extremely volatile security and political situation. If they are forced to open their share capital to Burkinabe investors, companies will have to vet these investors. They would hopefully ensure that they are not participating in the laundering of embezzled government funds by members of the junta or their proxies, although how much freedom companies will have to refuse investment if pressured by the transitional government or its eventual successor is debatable.

The largest risk, however, relates to a provision of the mining code which we have yet to mention: the compulsory participation in the Mining Development Fund (Fonds minier de développement or FMD). Previously the Local Mining Development Fund, the FMD will finance development projects but, crucially, it also is one of the major contributors to the Patriotic Support Fund (Fonds de soutien patriotique, FSP). The FSP, which was founded in January 2023 and extended in February 2024, had raised some CFA 86 billion (USD 145 million) as of June 2024 according to the Burkinabe government. In addition to collecting funds from the country’s private sector, the Burkinabe government has encouraged individual citizens to donate and publicly praised large private donations.

Funding the FSP, even indirectly, could present significant integrity and reputational risks for any mining company operating in Burkina Faso. This is because one of, if not the key function of the Fund is to finance the Volunteers for the Defense of the Homeland (VDP), a paramilitary “self-defence group” founded by Burkina Faso’s previous civilian government, but significantly expanded by the transitional government to help regular Burkinabe forces combat insurgencies in the country. The VDP, as explained by independent conflict analysis non-profit ACLED, have now become an integral part of the country’s security apparatus, with tens of thousands of members and operations across the country.

The VDP have been reported to have committed war crimes in Burkina Faso, including extra-judicial killings and forced conscriptions. In a further illustration of its political importance and close ties with Ibrahim Traore’s government, in July 2024 Reporters without Borders reported that Traore had forcibly conscripted a journalist which had published articles critical of the junta, saying he had been “recently conscripted because, since 2023, he has spent his time lying.” As ACLED reported in July 2024, the continuing difficulties faced by VDP and regular Burkinabe forces in combatting the country’s insurgency could also lead to them fighting alongside Russian private military groups including Wagner Group/Africa Corps, which are already in present in the country but have until now been limited to training duties and close protection for senior junta members.

As explained by mining legal expert Charles Bourgeois in a May 2023 interview with Ecofin, most foreign companies operating in Burkina Faso will be subject to ESG regulations as well as their own internal guidelines. As Bourgeois states, “financing the VDP will be a huge concern for mining companies and their financial partners.” In January 2024 the French Supreme court upheld a definitive ruling, finding cement multinational Lafarge guilty of complicity in crimes against humanity after it was found to have funded ISIS in Syria; if members of the VDP or Burkina Faso’s junta were to be found guilty of war crimes or crimes against humanity, or placed under international sanctions, this could lead to significant legal or sanctions exposure to companies which have been funding them, even if this is indirectly through the FMD. There is also further sanctions exposure to be considered should FSP funds be used to pay for Wagner/Africa Corps training contracts, due to international sanctions against the group.

Risk Management

Given how recently the new mining code has been passed, the full extent of its implication for the mining sector, and particularly foreign groups operating in Burkina Faso, is unlikely to become clear before the end of the year. In early August Australian junior miner West African Resources told a specialist news publication that it would not revise its production guidance for its operations in Burkina Faso after the mining code was passed, although it did state that its assessment of the code’s potential impacts was “ongoing”.

Even after mining groups have factored in the likely implications of the mining code’s new tax, shareholding and licence regimes, the volatility of Burkina Faso’s political and security situations – with insurgents continuing to make gains in the country and inflict significant casualties on regular forces and VDP alike – means a continuing ongoing assessment of the situation, as well as more forward-looking scenario planning, are essential.

Pierre le Jeune D’Allegeershecque, Head of Africa Practice

pierre.lejeune@aperio-intelligence.com