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What Impact Will the Ivory Coast Unrest Have on Gold Prices

By Taras Berezowsky | Thu, 07 April 2011 11:49 | 0

Much has been speculated and written about the Egyptian and Libyan crises as they relate to the gold market, but another, perhaps even more volatile situation, has been brewing in Ivory Coast since last November. Although it is the world’s leading cocoa producer, the Ivory Coast is also home to several gold mines.

Stemming from a disputed November 2010 election in which current president Laurent Gbagbo was awarded the presidency on what many claim to be a faulty vote – the country’s Election Commission showed that his rival, Alassane Ouattara, won the majority. Nothing less than a civil war erupted, continuing to this day with more than 1,500 people killed so far.

Early in March, the London-based company Cluff Gold shut down its operations at the Angovia mine, one of two West African gold mines operated by the company, citing “shortages of fuel, explosives, cement and cyanide.” These shortages were mainly caused by disruptions in the supply pipeline. Even more recently, Australia’s Newcrest Mining has halted its operations in south-central Ivory Coast, where the Bonikro mine lies relatively close to the contentious city of Abidjan.

Bonikro began producing gold in August 2008, and during its first full year, production was 150,023 ounces, according to Reuters. The Angovia mine produced around 20,000 ounces in 2010, and intended to reach 25,000 ounces this year. Overall, Ivory Coast’s gold production had been exploding: Fraterne Matin, the country’s state-owned newspaper, reported total production of almost 7 tons in 2009, a 142 percent increase from 2.87 tons in 2008.

However, current total tonnage still only represents a fraction of global supply. Ghana produced an estimated 100 tons in 2010, making it the leading African producer of gold, according to a US Geological Survey report. (For context, the US produced 230 tons in 2010; China produced 345.) Although Angovia and Bonriko have scaled back, others, such as Rangold Resources’ Tangon mine in the northern part of Ivory Coast, has adapted to the country’s continuous strife and expects to hit between 750,000 and 790,000 ounces this year.

Gold mining, geographically speaking, is relatively much more diversified than, say, platinum production. (If any sort of disruption were to hit South African platinum mines, for example, the global supply would be hard hit.) That’s why Ivory Coast remains – for now – a blip on the total gold mining picture. But with the price continuing to hit all-time highs ($1430 per ounce today), production from African mines will help feed investor demand during times of global economic strife. With several exploratory ventures in the works (not to mention those of their neighbors), and reserves of iron, nickel, cobalt, manganese and bauxite, Ivory Coast could play a much bigger role in the decades to come.

By. Taras Berezowsky

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