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Teranga Gold: Lasting Treasure

Corporate social responsibility – it’s something we take seriously in business, but some companies lift it to another level. One such company is Teranga Gold Corporation, a gold producer that is making waves in French West Africa, not only with an exciting and highly profitable organic pipeline, but with a vast slate of CSR projects to match.

Richard Young, Teranga Gold Corporation’s President and CEO, joined the Company at its inception: “I was the first employee, and Alan Hill, our Chairman, and I took the Company public in late 2010. I was the President and CFO until the fall of 2012, at which point I became President and CEO, and I’ve held that position ever since.”

The two men met at Barrick Gold Corp after Young joined the team in the early nineties. Prior to this, starting in 1984, Hill had led the development of Barrick’s mines, which gave him a wealth of experience with which to set out and achieve a pipeline of his own. “Barrick was smaller when we met, and then grew into a larger company, and both Alan and I left together with the goal of doing something more entrepreneurial. We’ve worked together ever since.” At first, the pair joined Gabrielle Resources, where Richard indicated they attempted to permit one the largest undeveloped gold deposits in the world – unfortunately, with no success. After five years, in 2010, they turned their attention to new horizons: “We had tried our hand at permitting, and we really wanted something that was already in production and was in a country that was mining-friendly – a country where we could grow. Sabodala Gold Mine in Senegal seemed to be that place.”

Teranga acquired this mine in 2010, and the flagship has now produced over 1.4 million oz. of gold. Last year saw a record yield of 233,000 oz., and for the next five years, the Company predicts an annual yield of 200,000 oz. Looking further ahead, there is a long life still in the mine yet! “It’s got at least a 13-year mine life left; it’s a quality asset for us.”

Off the back of this asset, the future holds a busy slate for Teranga Gold. Thanks to the Sabodala Gold Mine’s steady success, the Company has been able to expand: work has already commenced on their second mine, Wahgnion, located in Burkina Faso, which is anticipated to be in production by the end of 2019. Once up and running, Wahgnion is expected to increase the Company’s yearly production by 50% to between 300,000 oz. and 350,000 oz.

Teranga also has an excellent organic pipeline, the key focus of which is the Golden Hill project:
“We started drilling Golden Hill in the first quarter of 2017, and we expect to announce a maiden resource by the end of this year. We spent about $7 million on the project in 2017, and have a budget of $8 million for 2018. Golden Hill is moving along rapidly. We’re getting very good grades and continuity in our first five target areas; presuming we get the tonnage, we’ll move on to a feasibility study with a view to developing Golden Hill into our third mine.” This third project is particularly exciting because of the elevation it could give Teranga’s production profile: attaining mid-tier status is an active goal for the Company, and it seems that management has a clear path to achieving this vision.

On top of all this, Teranga also has exploration projects in both Burkina Faso and Côte d’Ivoire, which could turn into mines further down the line.
Teranga has an impressive pipeline, which represents heavy investments from the Company, as well as strategic forward planning. The acquisitions behind this line-up began in earnest in around 2013, when many gold mines in Africa were feeling the pinch of the downturn in gold prices. Instead of playing it safe, Teranga’s management team and board took a chance: “For the most part in 2013, companies retreated and focused on limiting costs and taking care of their balance sheets, whereas we took the opportunity to start building a strong pipeline of projects designed to take us to mid-tier status.” The decision was a gamble, but a wise one, and now Teranga faces the exciting prospect of reaping the rewards. “We’ve really set this company up for what we think is tremendous growth in the next few years.”
This foresight and bold investment could be highlighted as the key to Teranga’s success, but Richard and Alan feel it is something more than this. “First and foremost, I think it’s our focus on CSR.” Corporate social responsibility initiatives focus on ways that companies can operate sustainably, ethnically, and to the long-term benefit of the regions they work in. They are an increasingly important focus for many businesses, particularly for heavy industries that have the potential to greatly impact the communities around them, for better or for worse. However, for Teranga, CSR is not an afterthought, an addition or even a safety-net. It is the front line.

“We lead with CSR,” Richard explains with pride. “We have always believed that a strong CSR programme pays for itself. When you move into an emerging jurisdiction where there isn’t a history of gold mining, there’s a lot of work that a company needs to do in order to gain the trust of its stakeholders. We’ve really focused on that: it’s our aim to lead the West African mining community in CSR.”

Many companies express a similar sentiment, but the Teranga team is inarguably putting their money where their mouth is. We asked Richard to break down some of the initiatives that the Company has put in place, and it was far from a short answer. This focus seems as central and sincere as the Company’s focus on mining – and to Richard’s mind, the one can’t exist without the other. The first of the projects he explained to us was Teranga’s approach to government relations:
“In 2013, with a downturn in gold prices, there was less money coming into Africa. The Senegalese mining code had made sense when it came into effect in 2003, but the country was under severe financial pressure ten years later.” Teranga cooperated with the Senegalese government to make their operations in the Sabodala mine more mutually beneficial: “Within West Africa, when you’re converting an exploration licence into a mining licence, there’s an option for the government to take an additional interest, which generally speaking they don’t take, but we paid for that option. We also moved our royalty rate up from 3% to 5%. Many companies will pay the mining code and not a dollar more, but we understood that this was a long-term partnership. That made a world of difference for us and the government.”

This cooperation and understanding built up trust between Teranga Gold and the Government of Senegal; however, maintaining credibility with the central government alone was not enough. Richard and Alan believe that every stakeholder, including the Company’s shareholders, should benefit from responsible mining, and this meant working with the communities directly affected by Teranga’s operations. The first way to do this is to make sure the Company’s presence creates jobs, rather than taking them away: “At the beginning, between 10%-13% of our workforce was expatriate. We’ve now cut that down to between 5%-6%. We also work with small enterprises on precuring goods and services. We’ve gone to local companies for our ore haulage, for all of our bus services, and maintenance work on our mills – we really work hard to work with local companies to build up their skill set.”

These efforts keep money moving through the communities Teranga works in, which provides a strong short-to-mid-term benefit. However, more than this, they are thinking long-term: “We have a local training programme on site, where we bring casual labour in to learn skills – bricklaying, carpentry, iron works etc. This allows them to not only work but also to learn a trade that they can employ either regionally or at a national level.”

One of the most significant and innovative of Teranga’s long-term projects has been the development of ‘market gardens’. Some of the communities that the Company work in are in dry, arid areas far from the coast where there is a distinct rainy season, and the ground does not hold the moisture well, meaning that the food supply is weak. Teranga decided to do something about it:

“We had 18 months of consultation with local stakeholders and government on what they wanted to see this region grow, and then we looked for appropriate opportunities.” Following the consultations, the Company devised the idea of market gardens, and they have now constructed 12 to date. Areas of land are prepared for farming around the installation of a bore hole that can keep the crops watered all year round. Each garden costs around US$255,000 to create, depending on size, and an ergonomist works closely with the women of the communities to make sure that the farms cultivate a beneficial variety of crops between them. The project has been life-changing, improving the health of the families and the areas impacted, but surprisingly, it initially proved difficult for Teranga to get groups involved:

“It was tough. In fact, there were groups who didn’t think it was possible. We really believed it could be successful, but it took time. Ultimately, though, after the first market garden took off, then all the other communities wanted one.” Teranga has also built several health clinics in Sabodala, and runs a project called White Gold for Life, which works with artisanal miners who used to farm cotton before its global prices suffered. “They want to go back to farming. It’s more stable, it’s safer, and their kids can be in school. White Gold for Life is basically a seed to shelf project, because the area actually has all the five steps that are required to produce a finished product.”

The Company’s projects don’t end there: “We’ve got a social fund of between US$1.2-$1.5 million a year, which we spend on local projects. We establish an annual protocol with the community, where they set out how they want that money to be spent.  Everyone is aware of which projects each community has focused on and wants to move forward.” We also set up a dedicated fund after the discovery of a high-grade mine 25 kilometres from Teranga’s processing plant. When artisanal miners travelled to work the new site, Teranga used the fund to inject economic activity back into the areas they had travelled from, to mitigate the impact of them moving away.

Arranging CSR projects of this capacity, and with this level of local insight and involvement, is a full-time job in itself. In fact, it’s several! Teranga has made this scale of involvement possible by committing not only time and resources, but people. In 2010, the Company’s CSR team consisted of two employees; today, it has 50.

“We’re really proud of our CSR work. To be honest, it’s one of the most pleasurable aspects of our roles.” Teranga’s genuine commitment to CSR has paid off, both for the communities that have and continue to prosper as a result, and for the Company itself. Generosity and reliability have created strong business ties and bonds that are allowing them to pursue the exciting organic growth pipeline they have in the works: “It’s allowed us to grow the Company in Senegal, and more importantly, it’s allowed us to grow elsewhere in French West Africa, because our solid reputation precedes us.”

Smart business sense that benefits everyone, combined with the gutsy decision to expand when other companies were internally focused – Teranga Gold is a company set to achieve great things in the coming years, and in our opinion, they deserve to do so!