Nigeria looks to start production at first large-scale gold mine

Canadian firm Thor Explorations will begin production at its Segilola gold mine in Osun, southwest Nigeria next month. The processing plant has a nameplate capacity of 625,000 tonnes per year and is the most advanced gold mining project in the country. Notwithstanding the contract frustration, and legal, regulatory & licensing risks demonstrated vis-à-vis social media, crypto currency and mobile telecommunications businesses over the last 12 months, the Segilola project is supported by comparatively benign regulation, as the government keenly seeks greenfield investment in new areas.

Significance – Something to prove

The Segilola project is politically significant because its gold will be the first ever produced at an industrial scale in Nigeria. While FDI and wider economic diversification is a longstanding policy objective, the Muhammadu Buhari government views this project as strategically significant for proving the conduciveness of the policy environment and thereby attracting more large-scale investment to the sector. Crude oil has been the principal export here for many decades while other extractives received negligible government attention. Now, there is renewed devotion to the development of solid minerals as oil majors retreat in pursuit of cleaner energy and the government’s oil revenue declines[1]. Mines Minister Olamilekan Adegbite said at Mining Indaba 2020 that the government aims to raise mining’s share of GDP from 0.3% now to 3% in five years. And in that context, one may note Thor Explorations CEO Segun Lawson’s comment this week that, “gold prices are in a much more favourable place than they were when we finished our feasibility study two years ago”.

However, violent crime in mining areas pose immediate operational risks. Informal mining has been at the centre of attacks on locals and the abduction of foreigners. Law enforcement has been weak and turf wars for land surrounding gold deposits common. For example, two foreign employees of a gold mine in Osun were kidnapped in April – the same state where Segilola is situated. The risk is higher still in northwestern states like Zamfara where gold deposits are largest, such that the government banned all mining there in March after 279 schoolgirls were kidnapped by so-called bandits. Obscure armed groups in the region seize informal mines and illicitly trade gold in exchange for arms.

Outlook – Benign regulation

In the coming years, we expect the government will maintain its benign posture toward mining to stimulate greenfield investment – although more established sectors such as telecommunications have recently seen disruptive regulation (See: With its Twitter ban, Nigeria stretches the scope for fiat). The Segilola project will be a crucial case study for prospective investors on managing the operational risks associated with informal gold mining.

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[1] See – Who benefits as Nigeria’s parliament wraps up petroleum industry bill?

*Image credit - Ivan Bandura, Unsplash

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