Rash of African coups increases resource nationalism risks, experts say

A recent wave of coups d'état in seven mineral-rich countries in sub-Saharan Africa has raised the risk of resource nationalism and other geopolitical issues for mining companies operating in the region, Africa risk experts say.

Since 2020, rebels and military juntas have overthrown the governments of Sudan, Mali, Burkina Faso, Guinea, Niger, Chad and, most recently, Gabon. The political turmoil has affected important gold, uranium, bauxite and manganese operations, and in the case of Guinea, one of the world's largest undeveloped iron ore projects.

The seven countries' share of global gold production totaled 7.2% in 2022, led by skyrocketing output in Burkina Faso, Mali and Sudan over the past decade, according to an S&P Global Commodity Insights analysis. Gabon accounted for 23.0% of global production of manganese, an increasingly important element in electric vehicle batteries, Niger produced 4.1% of the world's uranium, and Guinea churned out 22.6% of the world's bauxite, an aluminum ore.

The increasing risk of unrest spreading across the African continent makes it more difficult for international mining companies to work in the region while opening the door for Russian mercenaries to exploit the situation, experts say.

"Once embedded, recent history tells us that military governments rarely make it easier for foreign miners to operate," Hugo Brennan, a research director at Verisk Maplecroft, a global risk intelligence company, said in an email.

Rich mineral wealth

Rebels in Mali and Guinea have demanded more from mining companies after taking over their respective governments.

Assimi Goita, the military head of Mali, became interim president of the country in 2021 after leading a coup the previous year. The Goita government established a new mining code earlier in 2023 that boosts potential state-ownership of new projects to 35% from 20%.

In Guinea, military forces under Mamady Doumbouya overthrew the freshly elected government of Alpha Condé in September 2021. Those forces went on to seek a greater share of the country's untapped resource wealth, experts say. The government has been pressuring miners to invest more in the massive Simandou iron ore deposit, and winning numerous compromises.

The Simandou deposit has been split into four concession blocks, but the development has been delayed for years. The main holders of Simandou blocks 3 and 4 are Rio Tinto Group and Aluminum Corp. of China's Chalco Iron Ore Holdings Ltd. in a joint venture. Simandou blocks 1 and 2 are held by China Baowu Steel Group Co. Ltd. and Winning Consortium Simandou.

Rio Tinto did not respond to an emailed request for comment.

"The junta that ousted Condé in Guinea has displayed resource nationalist tendencies," Brennan said. "Doumbouya has shifted the goal posts for the companies involved in developing the Simandou iron ore projects, [introducing] more stringent local content requirements, and is pushing bauxite miners to refine their output locally."

Guinea produced 86 million metric tons of bauxite in 2022, up 357.4% compared to 2013, according to a Commodity Insights analysis.

"Coups bring risk and creeping nationalism," said Joe Mazumdar, a mining analyst and publisher of Exploration Insights. "When a new coup leader comes in, they look at what makes them the most money. So they might say, 'Oh. It's gold. I'll just crank up our ownership of it.'"

Miners have faced renewed pressure to give up a greater share of their profits, even from stable governments in other regions. Chile recently launched higher copper royalties amid industry objections, and Indonesia has pushed miners to build domestic smelters to capture more of the metals value chain.

More to come?

Experts disagreed on the likelihood of additional coups in Africa, but several told Commodity Insights the flurry of coups at least increases the chances of more to come. Countries in the Sahel region, a stretch of land that marks the transition between the Sahara in the north and the rest of the African continent, have destabilized amid surging terrorist attacks. These assaults played a major role in fomenting regime change in Mali, Burkina Faso, Chad and Sudan, and could do so in other countries, experts said.

"Insecurity has been a catalyst," said Leonard Mbulle-Nziege, a South Africa-based political analyst who has worked for Africa Risk Consulting. "Insecurity is leading to the deaths of civilians, to the deaths of soldiers. There's a feeling that governments could not do [anything] to resolve the situation and this created a scenario where these militaries are looked to. ... These are restorative coups."

Mbulle-Nziege said the terrorist attacks, combined with public grievances over poverty, corruption and other issues, paved the way for coups in countries such as Mali and Burkina Faso.

In both countries, terrorist-related attacks surged to over 100 in 2020 from under 10 in 2010, according to the Global Terrorism Database. Among the worst incidents to touch the mining sector was an ambush near the Boungou mine in 2019, with 29 people killed and 60 injured. Boungou was taken over by Endeavour Mining PLC from Semafo Inc. in 2020 and later sold to Lilium Capital LLC.

"The major issue that has driven coups in the [Sahel] region is not necessarily popular dissatisfaction with the government, but rather chronic insecurity that has absolutely debilitated the state," said Ryan Cummings, a director at Signal Risk, a South Africa-based risk management consultancy. "That's a trend that's going to continue specifically in the Sahel where there's commonality [over insecurity] between the countries."

Cummings and Mbulle-Nziege agreed that new military governments are likely to target the mining sector for revenues, noting that the coups in Africa have popular support in many cases. The new military rulers want to bolster their domestic legitimacy, and one way to do so is to play hardball with foreign miners for a domestic audience.

"There's always so much focus on raw materials and the fact that raw materials are benefiting a group of elites, who are in partnership with multinational corporations, which are aligned to foreign states," Cummings said, pointing to Mali and the pressure on miners there to share more as one example. "Inherently, militaries are populist."

Commodity Insights sought comment from miners working in the region. Barrick Gold Corp. declined comment, and others did not respond. The World Gold Council said it is committed to increasing the transparency of gold supply chains.

"We believe that the ability to provide responsible sourcing and production credentials is critical in mitigating illegal mining and trading of gold," Joe Cavatoni, a market strategist at the World Gold Council, said in an email.

Increasing Russian role

Shifting geopolitics in Africa have also presented an emerging challenge for mining companies, experts told Commodity Insights. Russia has leveraged insecurity in the Sahel, exchanging muscle for minerals through the Russian mercenary group PMC Wagner, experts say. Wagner Group leader Yevgeny Prigozhin died in an airplane explosion Aug. 23, but the institution still has a deep footprint in Africa.

"They go to states which are not only chronically insecure, but also fiscally embattled," Cummings said.

One example is in Mali, where France was once the dominant colonial power in the region. France has been shrinking its military presence, and Mali has reportedly tapped the Wagner Group for help with security in exchange for access to minerals, according to media reports. Conditions in other Sahel-area countries are ripe for mercenaries to try to do much the same, experts said.

These types of move by Russia, which has become more isolated on the international stage after invading Ukraine in early 2022, is filling a power vacuum in some African countries. The US and its allies might be less willing to provide military help without strings attached for democratic reform, Cummings said. Meanwhile, Russia's willingness to do more transactional deals with newly installed leaders opens the door to play an increasingly important role in Sahel countries.

The US and other countries have taken note, and earlier this year the US targeted gold companies with ties to the Wagner Group, saying it derived revenues from the Central Africa Republic and Mali. Russia's increasing role in the region could pave the way for more, heavier-hitting sanctions, Cummings said.

A spokesperson for the US State Department declined to comment on potential sanctions.

"African countries that work with the Wagner Group to address their security needs consistently find themselves weaker, poorer, more insecure and less independent," the spokesperson said in an email.

Against the backdrop of greater Russia involvement in Africa, Cummings thinks it could become harder for some miners to do business. This might come in the form of obstacles over renewing contracts and permitting, he said, not just the prospect of sanctions and changing geopolitics.

"I wouldn't be surprised — two, three years from now — if traditional Western stakeholders within these areas ... start being muscled out of an extractive sector that Russian companies are able to dominate," Cummings said.

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