keep calm and carry on in mali, page-9

And This From; National Bank Finance Geopolitical Hotline.
Long Winded but worth reading.


THE COUP IN MALI: LOOKING AHEAD
Companies most affected:
Randgold Resources (GOLD-NASDAQ) -17% since March 21st
Avion Gold Corp. (AVR-TSX) -27% since March 21st 1
Bottom line: While the current political instability and uncertainty in Mali will persist for some time, we
expect that it will not have a significant long-term impact on mining operations. Thus far, the mining
sector has suffered no disruptions, although the imposition of sanctions by the Economic Community of
West African States (ECOWAS) on April 2nd may lead to temporary fuel shortages. More importantly,
none of the major political players and factions in southern Mali – where mining operations are located –
are seeking to assert control over the industry and its assets. While stock prices may continue to reflect
the turbulence of Mali’s internal political conflicts for some time, they will likely recover and start
reflecting their fundamentals sooner rather than later.
(i) The Tuareg Rebels
The Tuareg of Mali are a largely nomadic tribe based out of the northern Sahara region, and contain both
secular and Islamic fundamentalist elements. The Tuareg have long felt economically and socially
marginalized by the Malian government, which is based in the south and controlled by the Bambara
ethnicity.2 Since Mali gained independence from France in 1960, the Tuareg have launched a number of
unsuccessful offensives to gain independence. The current uprising – launched in January 2012 and led
by the Azawad National Liberation Movement (MNLA) – is the Tuareg’s latest attempt to gain sovereign
control of what they consider their homeland.
While significant, the rebellion does not pose a direct threat to current or future mining operations in
Mali. This is mainly because the vast majority of mineral deposits are located in the south and well away
from the contested region, as well as the fact the MNLA lacks the military capacity to advance beyond
the northern strongholds of Kidal, Gao and Timbuktu. The Tuareg rebellion is even showing early signs
of division, with the Islamic fundamentalist faction reportedly forcing the secular MNLA faction out of
Timbuktu, captured on April 2nd. Even in the event of a foreign (i.e., ECOWAS) sponsored mission to
confront the Tuareg, mining operations based in the south are unlikely to be affected.
1 Avion’s share price fell around 10% on Friday, March 30th after the company announced weaker than expected Q1 earnings and
that it would sell forward some production to raise $25 million in cash. Political risk is therefore responsible for roughly 17% of
Avion’s recently declining share price, on par with the decline experienced by Randgold.
2 The Bambara of Mali generally practice a more liberal form of Sunni Islam than do the religious elements of the Tuareg, some of
whom wish to impose sharia law in the north.
April 2, 2012
Pierre Fournier - (514) 879-2423 Michael Fini - (416) 869-7538
Geopolitical Analyst 2 Associate Analyst
(ii) The Junta
What started as a mutiny to protest former president Amadou Toumani Touré’s (aka ATT’s) handling of
the Tuareg rebellion rapidly evolved into a full-scale coup on March 21st, led by rank-and-file soldiers
and mid-level officers. Since that time, the junta – officially led by Captain Amadou Sanogo – has
encountered a number of difficulties that have prevented them from realising their primary goal of ending
the Tuareg insurgency and “re-establishing the territorial integrity of the state”. Two weeks later, it is still
unclear how tight a grip the junta has on the country as a whole and whether they are supported by the
military in its entirety.
What is clear, however, is that the Tuareg have capitalized on the confusion caused by the coup, securing
the strategically key northern towns of Kidal and Gao on March 30th and 31st, respectively. The junta’s
leaders have been greatly distracted by the demands of rebuilding an effective government from the
ground up, in addition to internal unrest. International condemnation of the coup and subsequent
suspension of American, French and UN aid flows to the country – on which Mali remains highly
dependant – has also constrained their capacity to govern.
The junta has given no indication that it is seeking to nationalize the mining sector or renegotiate existing
contracts. Gold accounts for 70% of Mali's merchandise exports and the vast majority of government
revenues, and the junta has made specific note of mining’s importance to Mali’s economic future. The
junta’s desire and ability to control the country appears to be rapidly fading under the enormous pressures
applied by ECOWAS, which was established in 1975 with the aim of making West Africa a “selfsufficient”
region of the continent. There are 15 permanent members, although Mali was suspended from
the group following the coup.
(iii) ECOWAS
On Thursday, March 29th, ECOWAS gave a 72-hour ultimatum before they would impose sanctions that
would close their borders with Mali, effectively cutting off the country’s food and fuel supplies. They
would also suspend Mali's account with the regional bank, cutting off its access to hard currency. The
threat is meant to pressure the junta to cede power back to democratic civilian rule immediately, or even
harsher sanctions and military intervention may be pursued. ECOWAS then announced on April 2nd it
would be imposing these sanctions due to the junta’s lack of cooperation, and has mobilized 2,000
soldiers from their Standby Force.
By imposing such harsh sanctions just days after meeting junta leaders in Bamako, ECOWAS
demonstrated the seriousness with which they are taking the coup. They will therefore likely continue to
increase their pressure on the junta until their demands – i.e., a return to civilian democracy – are met.
ECOWAS has repeatedly stated they are not willing to compromise on their demands, and its members
have several reasons for wanting to end the junta’s fractured hold on Mali as quickly as possible.
Not least of these reasons is to discourage their own militaries from launching coup attempts, such as
which occurred as recently as last year in regional heavyweights Burkina Faso and Ivory Coast. A united
Tuareg in northern Mali also poses risks to several neighbouring states that are also home to Tuareg
April 2, 2012
Pierre Fournier - (514) 879-2423 Michael Fini - (416) 869-7538
Geopolitical Analyst 3 Associate Analyst
tribes. A quick end to the coup is therefore necessary if ECOWAS is to ensure the Tuareg rebellion in
Mali is suppressed.
(iv) The Malian People
President Amadou Toumani Touré had been losing favour with the Malian public well before last week’s
coup amidst accusations of corruption, nepotism and a failure to adequately respond to the latest Tuareg
rebellion. Mali remains a young democracy and political legitimacy is not gained simply by winning an
election, but by actions. For this reason, many Malians now support the junta simply for their taking
decisive action against what people had begun to see as an illegitimate government. ATT had in any case
already announced he would not be running in the elections originally scheduled for late April.
Based on the size and frequency of both pro and anti-junta protests in Bamako, it is not yet clear how the
majority of Malians feel about the coup’s leaders and the country’s current direction. What is clear is that
a significant majority are fundamentally opposed to foreign powers intervening in the country – by
ECOWAS or otherwise – and the threat of sanctions have only exacerbated these anti-foreign sentiments.
At the same time, the harsh nature of the threatened sanctions may cause them to rise against the junta
once food and fuel runs low. How the Malian people react to whichever government replaces the junta
will therefore weigh on political and socioeconomic stability in the short term, but any unrest that does
occur is likely to be short-lived.
Scenarios and short-term risks
Market concerns currently reflect the stalemate between the junta’s leaders on the one hand and
ECOWAS on the other. The rapidly advancing Tuareg rebellion in the north only adds to the sense of
urgency to resolve tensions and stabilize the country. When push comes to shove, however, the junta will
likely collapse under the pressure of ECOWAS and international sanctions, as well as from internal
dissent. The junta has already backtracked by announcing it would reinstate the original constitution it
abolished on April 1st, although no specific timetables for elections have yet been given.
If the current sanctions do not pressure the junta to bring democracy back to Mali, ECOWAS has the
political will and military capacity to overthrow the junta. The rapidly deteriorating situation in the north
and the advance of the Tuareg rebels heighten the probability of a military intervention by ECOWAS if
the junta does not step aside.
While political instability will remain for some time in Mali and while the timing for a return to
“normalcy” is not entirely predictable, the potential downside for affected mining stocks appears limited.

They should have a sentiment: Stop selling you tossers!