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Burkina Faso has struck a deal to nationalise two gold mines for about $80mn that London-listed Endeavour Mining agreed last year to sell to Lilium Mining for more than $300mn.
Lilium will transfer ownership of Boungou and Wahgnion to the west African state, which will pay Endeavour $60mn in cash, the FTSE 100 company said in a statement on Tuesday. Burkina Faso will also pay a 3 per cent royalty on up to 400,000 ounces of gold sold from Wahgnion, the statement said, a provision that analysts estimated was worth $20mn.
The settlement follows controversy around governance at Endeavour in the wake of former chief executive Sébastien de Montessus being sacked at the start of this year for “serious misconduct”.
As part of Tuesday’s deal, the two companies will drop legal cases against each other. Endeavour launched arbitration in March against Lilium for missing payments, which then lodged a counterclaim a month later that alleged information was concealed and misrepresented about finances and operations at the two mines.
Endeavour said “both parties would like to thank the Government of Burkina Faso for its mediation efforts”. Lilium Mining, a subsidiary of Lilium Capital, an investment vehicle founded by US-Burkinabe businessperson Simon Tiemtore, declined to comment. Burkina Faso’s junta did not immediately respond to a request for comment.
The nationalisation of the mines by Ouagadougou is the latest in a wave of African governments attempting to exert greater control over their natural resources as military regimes come to power.
In June, the military junta that seized power in Niger last year stripped French state-owned giant Orano of its mining licence at the Imouraren mine, one of the world’s largest uranium mines, in the country’s north. Chief executive Nicolas Maes told investors last month that the company had started legal proceedings to protect its rights at Imouraren.
Burkina Faso, Mali and Niger have been racked by a widening Islamist insurgency for more than a decade that has killed thousands, displaced millions and created security threats to mining operations. The three countries, which form part of the Sahel, the semi-arid strip south of the Sahara, have experienced multiple coups since 2020.
The three countries have been at loggerheads with former colonial power France, the wider western community of nations and other countries from the regional Economic Community of West African States (Ecowas) and have forged closer ties with Russia instead.
Gold miners in Mali, which include Barrick Gold, the world’s second-largest producer of the precious metal, have also faced the threat of the military-led government pushing to increase its ownership of new projects under an updated mining code that was adopted last year.
Burkina Faso revised its mining code last year to earn more royalties from mining companies following declining gold output as the long-running security crisis forced at least five mines to shut down.
Endeavour Mining is a gold producer that grew rapidly through a series of mine purchases and sales to become one of the London market’s blue-chip stocks with a portfolio of five producing mines across Burkina Faso, Ivory Coast and Senegal.
De Montessus was fired for an “irregular payment instruction” made in connection with the sale of the Agbaou mine in Ivory Coast. A subsequent probe unearthed two more “deliberately disguised” payments of $15mn to an unnamed third party.
In Endeavour’s annual report released in March, the financial value of the Boungou and Wahgnion mines at the close of the Lilium deal was estimated to be $285mn but only $34mn had been received from Lilium as part of the transaction.
Analysts said that the resolution was a boost for Endeavour given that no further proceeds were expected to be recouped anytime soon.
“This settlement removes the sentiment overhang and costs of ongoing legal proceedings,” said analysts at Berenberg.