Sarama Resources pursues $120M arbitration against Burkina Faso over Tankoro 2 Permit revocation, supported by litigation funding agreement with Locke Capital
Executive summary: Sarama Resources Ltd. has entered into a Litigation Funding Agreement with Locke Capital II LLC to finance arbitration proceedings against the Government of Burkina Faso over the alleged unlawful revocation of its exploration permit for the Tankoro 2 gold deposit, a key asset in its Sanutura Project. The company is preparing to file a Request for Arbitration with the ICSID, seeking compensation exceeding $120 million for damages it claims to have incurred, including the value of the permit, its investments, and the project's value at the time of revocation. Despite efforts to reach an amicable resolution, the government has not substantively responded, prompting Sarama to proceed with arbitration, assisted by the international law firm Boies Schiller Flexner LLP.
Following its entry into a Litigation Funding Agreement ("LFA") with Locke Capital II LLC, an independent entity specializing in dispute resolution funding, Sarama Resources Ltd. ("Sarama") announced that it is now preparing to lodge a Request for Arbitration with World Bank’s International Centre for Settlement of Investment Disputes (“ICSID”). This action relates to Sarama’s investment dispute with the Government of Burkina Faso over the unlawful revocation of the company’s exploration permit for the Tankoro 2 gold deposit, which contained a multi-million-ounce gold resource.
Through this action, the Company will seek compensation for the damages it claims to have incurred as a direct consequence of the Government's unlawful actions. This includes, among other things, the value of the Permit, the value of the Company’s investments in the Project, and the value of the Project at the time of the Permit’s revocation.
In a December 2023 material change report submitted to Canadian regulators, Sarama estimated its damages claim to exceed $120 million. However, since that time, gold prices have reached new highs.
The Tankoro Deposit, covering an area of 250km², is the key component of the Company’s 100%-owned Sanutura Project, located within the prolific Houndé Belt in south-western Burkina Faso. The Project contains a substantial amount of high-grade and free-milling material which has the potential to support a low capital intensity, staged mine development.
Sarama has been exploring the Tankoro 2 deposit for the last 12 years through successive permits granted by the Ministery of Energy, Mines and Quarries. Moreover, in November 2021, the Government of Burkina Faso granted the Company a new Exploration Permit covering the Tankoro 2 Property. This permit was supposed to be valid for an initial term of 3 years and renewable for a further two 3-year terms, subject to satisfaction of routine conditions regarding execution of work programs and minimum expenditure thresholds.
Under the applicable Burkina Faso laws, following the grant of an exploration permit, the Government issues the respective arrêté (or licence certificate) which is an administrative process.
The Company had successfully been re-issued exploration permits through this same process on multiple occasions.
Nevertheless, on 31 August 2023, Sarama received notification from the Government of Burkina Faso that the Company’s application for the Exploration Permit had been purportedly “rejected”.
According to the Company, this was inconsistent with, and contradictory to previous formal correspondence from the Government.
On 6 September 2023, Minister Simon-Pierre Boussim stated at the Africa Down Under Mining Conference in Perth that the Permit was available for purchase. Based on the notification from the Minister and his subsequent statements, the Company interpreted the Minister’s letter as withdrawing the Company’s rights to the Permit.
The Company stridently disagreed with the withdrawal of its rights and intended to pursue all avenues to appeal this decision.
On 29 November 2023, the Company issued a Notice of Intent to Submit Claims to Arbitration under the Agreement between the Government of Canada and the Government of Burkina Faso for the Promotion and Protection of Investments (Canada-Burkina Faso BIT).
As informed by the Company in its last press release of 24 October 2024, the Government of Burkina Faso did not respond substantively to the Company’s efforts to reach an amicable resolution of the dispute.
The Company is being assisted in the dispute by the leading international law firm Boies Schiller Flexner LLP.
The Litigation Funding Agreement
The Litigation Funding Agreement (LFA) provides Sarama financial support to cover legal costs associated with the proceedings against the Burkina Faso Government.
The LFA offers the Company a four-year, non-recourse loan of USD 4.4 million. This facility is designated to cover all costs and fees linked to advancing its arbitration claim, including legal fees, expert witnesses, and procedural expenses to ensure the company’s claims related to the Project.
All funds provided under the LFA are non-recourse and repayable only if the company achieves a successful claim, secures a settlement resulting in proceeds, or defaults under the terms of the LFA.
In other words, the funder’s return is directly tied to the successful award and settlement of the claim and, in the event that an award or settlement is not reached, the Company will not be obligated to return the money to Locke Capital.
Moreover, since distribution of the proceeds remains confidential, it is not known the percentage of compensation the funder will receive in the event of an award or settlement favorable to the investor.