Original-Research: Desert Gold Ventures Inc. (von GBC AG): Buy

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Original-Research: Desert Gold Ventures Inc. - from GBC AG

17.02.2025 / 09:01 CET/CEST

Dissemination of a Research, transmitted by EQS News - a service of EQS

Group.

The issuer is solely responsible for the content of this research. The

result of this research does not constitute investment advice or an

invitation to conclude certain stock exchange transactions.

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Classification of GBC AG to Desert Gold Ventures Inc.

Company Name: Desert Gold Ventures Inc.

ISIN: CA25039N4084

Reason for the research: Research Comment

Recommendation: Buy

Target price: 0.425 CAD

Target price on sight of: 31.12.2025

Last rating change:

Analyst: Matthias Greiffenberger, Marcel Goldmann

Opportunities and Challenges in Mali's Evolving Mining Sector

Mali's mining sector is currently undergoing a period of dynamic

transformation, triggered by the implementation of a new mining code from

August 2023. While the Junta government has framed these changes as a way to

ensure that Mali benefits more significantly from its vast mineral wealth,

the regulatory adjustments have been designed specifically to increase state

ownership in mining projects and raise taxes on the sector. The goal is to

capture a larger share of the profits from mineral extraction, potentially

boosting the government's revenues. However, there is a broader pattern in

the region that is critical to understand. Historically, regulatory changes

made by military Junta governments tend to result in a temporary shift, only

to be repealed under civilian governance once it becomes clear that these

changes have been counterproductive to sector growth and foreign investment.

This is a vital consideration for investors and companies operating in the

region, as such policy swings can introduce uncertainty and risk to

long-term operations.

Under the new mining code, the government has increased its stake in new

mining projects from 20% to 35%, and royalty taxes have risen to 10.5% from

approximately 6%. While the intention behind these increases is to ensure

greater state participation in Mali's mineral wealth, they could act as

serious roadblocks to the commissioning of new large-scale commercial mines,

potentially slowing sector growth. One of the primary mechanisms introduced

to achieve this goal is the expansion of state participation in mining

companies. Under the 2019 Mining Code, the Malian state had an automatic

"free carried" interest of 10%, with an option to acquire an additional 10%

interest for cash. Under the New Mining Code: The free carried interest is

now set at a minimum of 10%, implying that the state may negotiate an even

higher share in specific projects.

The additional optional participation the state may acquire has increased to

20%.

Additionally, whereas the 2019 Mining Code required that a 5% interest be

transferred to local Malian investors without defining the specific

beneficiaries, the new code mandates that these shares be transferred to the

state, which will oversee their allocation to local investors-though no

timeline for this process has been provided. In total, the state now has the

option to acquire at least 35% ownership of local mining companies operating

in Mali, a significant increase compared to other regional mining

jurisdictions such as Burkina Faso, Gabon, Kenya, Mozambique, Tanzania, and

Senegal, which have typically capped optional state participation at 25%.

Another major headwind for companies and investors has been the suspension

of operations at the Direction Nationale de la Géologie et des Mines (DNGM),

which has been ongoing for three years. This has created significant

disruptions in mining and exploration license renewals and new application

processes, leaving the sector in limbo and generating an atmosphere of

uncertainty for investors and corporations alike. However, the eventual

lifting of this suspension represents a major catalyst once resolved and

will mark a significant positive development, restoring confidence and

accelerating new investment, assuming it is handled effectively by the

Malian government.

Key Developments

Revised mining code designed for long-term growth but raises concerns:

Mali's new mining code aligns with a broader trend seen in the region, where

Junta-led governments have sought to increase state ownership in extractive

industries. Historically, these changes are often walked back or rescinded

once a country transitions back to democratic civilian rule.

Commitment to stability and legal clarity: While regulatory changes have led

to operational hurdles, including temporary halts at some sites, the

government and mining companies are engaged in constructive discussions to

resolve disputes. Positive momentum has already been observed, as major

firms such as Allied Gold, B2Gold, and Resolute Mining have reached

agreements with the government, while Barrick Gold remains in active

negotiations. This dispute resolution process represents another key

catalyst for sector stability moving forward.

Sustained gold production and future prospects: Mali's industrial gold

production saw a temporary dip in 2024 but remains robust at 51 metric tons

(PY: 66.5 metric tons). With new projects in development and expansions such

as B2Gold's Fekola project progressing, production is expected to rebound in

the coming years, reinforcing Mali's position as a top global gold producer.

However, investor sentiment remains cautious as companies navigate the

shifting regulatory landscape.

Proactive Industry Engagement and Political Catalysts: Mining companies

continue to engage with the Malian government to ensure regulatory clarity

and business continuity. While concerns persist, the expectation of an

eventual election and potential return to a civilian-led government

introduces another key catalyst. Historical precedent suggests that a new

administration may reassess the current mining code, potentially rolling

back some of the more restrictive measures.

Company-Specific Updates

Desert Gold Ventures (DAU): Desert Gold Ventures is strategically positioned

to capitalize on Mali's evolving mining landscape. The company holds a 440

km² land package in the Kenieba Window, surrounded by major industry players

such as Barrick Gold, B2Gold, Allied Gold, and Endeavour Mining. Given the

ongoing regulatory transition, Desert Gold sees increased potential for

strategic partnerships and M&A activity.

B2Gold (BTG): With environmental approvals secured for the Fekola expansion,

B2Gold is well-positioned for increased production. The project is expected

to significantly contribute to Mali's gold output starting this year,

reinforcing the country's strong mining sector.

Barrick Gold (GOLD): The Loulo-Gounkoto complex remains one of Mali's

largest gold operations. While facing temporary regulatory challenges,

Barrick is actively negotiating with the government, demonstrating a

commitment to long-term collaboration and continued operations in Mali.

Resolute Mining (RSG): Resolute Mining is actively engaged in strategic

discussions with the government regarding its long-term presence in Mali.

The company's willingness to work within the evolving regulatory framework

underscores the resilience and adaptability of mining operators in the

region.

Conclusion

Mali's mining sector is in a phase of constructive evolution, balancing

state interests with investor confidence. The government's engagement with

industry leaders suggests a commitment to refining policies that promote

sustainable growth and long-term investment. While regulatory changes

introduce significant challenges, they also present opportunities for a more

stable and equitable mining environment.

Key positive catalysts moving forward include:

Lifting of the DNGM suspension, which would reinstate clear licensing and

renewal processes, removing a major barrier to investment.

Resolution of disputes with major mining companies, already achieved with

Allied Gold, B2Gold, and Resolute Mining, with Barrick Gold still in

negotiations.

A potential election, which could lead to a rollback of the current mining

code, aligning Mali with historical regional patterns where Junta-era

policies are often revised under civilian rule.

Current valuations in the sector reflect a worst-case scenario, with many

investors previously fearing full nationalization-a scenario that has not

materialized. As political and regulatory conditions improve, this

disconnect presents a compelling opportunity for companies with strong

positions in Mali.

For Desert Gold Ventures, these conditions offer significant potential

upside. With an expanding gold resource in a prime location near major

players, the company stands to benefit from improving investor sentiment. As

valuations adjust to reflect the improving reality on the ground, Desert

Gold remains a promising exploration and development play with strong upside

potential.

We reaffirm our target price of USD 0.311 (CAD 0.425; EUR 0.29), emphasizing

its strong upside potential, and maintain a Buy rating.

You can download the research here: http://www.more-ir.de/d/31777.pdf

Contact for questions:

GBC AG

Halderstraße 27

86150 Augsburg

0821 / 241133 0

research@gbc-ag.de

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Beim oben analysierten Unternehmen ist folgender möglicher

Interessenkonflikt gegeben: (5a,11); Einen Katalog möglicher

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Date of Completion: 14.02.2025 (12:30 pm)

Date of First Distribution: 17.02.2025 (09:00 am)

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2086679 17.02.2025 CET/CEST

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