Gold exploration projects continue to attract significant investor interest, mostly owing to Asian markets’ increasing demand for the yellow metal, despite the commodity’s price decline, says mining consultancy The MSA Group.

Although the 21% decline since the beginning of 2013 has had a negative impact on the start-up of exploration projects in some parts of Africa, the company notes that gold demand remains high and has encouraged investment in certain regions.

“Downward pressure on gold demand has been a result of many of the central banks – which have traditionally been the gold market’s largest customer – having reduced their demand for gold in 2014, as well as increasingly positive data from the US economy depressing gold prices.

“However, underlying demand remains strong and Asian markets, specifically China and India and, more recently, South-East Asia, continue to have a significant impact on the sustainability of the gold market. Further, in times of global political and financial uncertainty, gold still represents a lower-risk investment alternative,” explains MSA GM Dr Ian Haddon.

Attractive Exploration Areas
The global supply of gold has been and will continue to be negatively affected by many factors, including the closure of mines, a decline in exploration activity and the increase in the cost of production in traditional gold mining areas, states MSA principal consultant Mike Robertson.

He adds that, despite a significant increase in exploration expenditure since 1980, a long-term general decline in the number of discoveries has been observed, particularly since the late 1990s. Further, new discoveries are not keeping pace with replacing production, and deposits are becoming more difficult to find, particularly in mature exploration regions.

MSA geological services head Dr Brendan Clarke adds that it is becoming increasingly technically difficult and costly to access the deeper-level reserves of South Africa’s goldfields on the Witwatersrand – which once accounted for half of the world’s gold – and explorers have increasingly been looking towards East and West Africa as prospective gold-bearing regions.

“Gold explorers are also looking towards the underexplored territory of north-east Africa and the Arabian peninsula, and we are currently executing projects on their behalf in countries like Ethiopia, Eritrea, South Sudan and Saudi Arabia.

“This north-east Africa region is underexplored, when compared to similar geological terrains elsewhere in Africa, with only a handful of operating mines across what is known as the Arabian Nubian Shield,” he explains.

Ethiopia, in particular, is one of the countries where MSA has seen an increase in interest from clients, adds Clarke.

“Ethiopia is currently an attractive gold destination for a variety of reasons, such as the nature of the geology, which is fantastic to work on. The country is becoming a significant economic player on the continent and is one of the fastest-growing economies in Africa,” he explains.

Clarke adds that, from a regulatory perspective, Ethiopia also has a favourable investment environment. “Despite the recent challenges that have been facing the gold markets, Ethiopia is still attracting a fair amount of investor interest, mostly because of its regulatory framework.”

Opportunities for South Africa
Haddon believes that, although South Africa still offers attractive exploration opportunities, a shift in focus from South Africa towards the rest of the continent and the Middle East would provide the highly skilled South African mining industry with an opportunity to do business on the rest of the continent.

“Many African countries do not have a mining culture and they lack appropriate mining skills and expertise. “This presents an opportunity for skilled South African individuals, suppliers and service providers to work in other African countries to provide equipment and transfer skills,” Haddon elaborates.

MSA is currently providing multicommodity exploration, mining and environmental services to international clients operating in 20 countries throughout Africa and the Middle East.

MSA’s recent work includes preparing a prefeasibility study on a Sierra Leone gold project and consulting for Saudi Arabian parastatal mining company Ma’aden on its early-stage greenfield projects and brownfield expansion projects.

About The MSA Group
The MSA Group was established in 1983 and provides specialist services on several international and local projects covering all commodities. MSA’s client base includes multinational mining companies, private equity and sovereign wealth funds, governments and juniors listed throughout the world.

MSA’s services encompass exploration and geology, mining studies and environmental consulting. The company has attained ISO 9001 certification for quality, an OHSAS 18001 certification for health and safety and SANAS ISO/IEC 17025 accreditation for its diamond exploration laboratory.