Predictive Discovery (ASX:PDI) and Robex (ASK:RXR) are merging to become a major gold miner; but is West Africa too risky?

On Monday October 6 2025, whilst NSW and Queensland were on holiday, Predictive Discovery (ASX:PDI) and Robex (ASK:RXR) investors were informed of the news that their companies would be merging. Both companies were already well-positioned companies with individual gold mines that were amongst the lowest cost and most advanced.

But this merger puts both companies in a spectacular position given their scale, combined leadership scheme and the leveraged cash flows from Robex’s project, which could fund PDI’s Bankan project. We hate to rain on the parade, but there is one thing investors should be aware of. Namely, sovereign risk.

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Recap of Predictive Discovery and introduction to Robex

We used that heading because we think many Australian investors would know about Predictive Discovery, but not so much about Robex. Robex is a major miner dual-listed in Australia and Canada, its assets lie in the Birimian Greenstone Belt.

It has two projects, first the Nampala Mine in Mali which is a producing mine but only has a resource in the hundreds of thousands of ounces. Second is its Kiniero project in Guinea which it picked up in April 2022 via a merger with Sycamore. The JORC Resource is 3.7Moz gold and the first gold pour was anticipated by the end of CY25. This company had been listed in Canada but dual listed on the ASX in early June 2025, raising A$120m in the process.

Best of both worlds

As for Predictive Discovery, it too has a project in Guinea in the Kininko project. We last wrote about the company in early January 2025 when its Mineral Resource was 5.38Moz, including a 3.05Moz Ore Reserve. Since then, the company delivered a DFS that depicted a project with an NPV of US$1.6bn/A$2.5bn, an IRR of 46% and a payback of <2 years. This was at a gold price of US$2,400/oz.

At a gold price of US$3,300/oz, the project’s NPV becomes US$2.9bn/A$4.5bn, the IRR becomes 73% and the payback period falls to 1 year. Of course, current gold prices of over US$3,800/oz would deliver even higher returns. The capex was estimated to be US$463m, inclusive of contingency. Another achievement was obtaining a A$69.2m investment from the Lundin family and Zijin Mining. The former is a prominent mining family dynasty whilst the latter is a partly-state-owned gold miner and trader, which is worth over US$100bn and is the world’s third largest. Both join an already impressive registry that is led by Perseus with 17.8%.

In merging with Robex, the company was able to proclaim that the pair were on the ‘pathway to becoming one of West Africa’s Leading Gold Producers’. The companies claimed they would have 9.5Moz in Mineral Resources, including 4.5Moz in Ore Reserves. Robex investors were promised 8.667 PDI shares for each share of their own, and the combined company would be worth A$2.3bn with a 51-49% split.

Investors were told that there would be >400koz production annually by 2029 and the companies could be included in the ASX 200 and Van Eck Junior Gold Miners indices. Cash flows from Kiniero could be used to help pay for the development of Bankan. The company would be co-run by Andrew Pardey as Non-Executive Chairman and Matthew Wilcox as CEO and Managing Director.

But is Guinea too risky?

West Africa is a risky place to do business as a miner. Just ask West African Resources (ASX:WAF) and Leo Lithium (ASX:LLL). But Guinea is different to Burkina Faso and Mali, you might say. It is true that Guinea is a major mining country with the industry contributing to >90% of exports and ~21% of GDP. It has a 2Moz producing gold industry, but also a 127Mt bauxite producing industry and an iron ore industry too which is led by the Simandou Iron Ore Project, which is the world’s largest mining-related development.

There’ve been stable fiscal terms since 2013 which provide for a 30% corporate tax rate, 15% free carried equity interest for the state, a 5% royalty plus 1% local development contribution. Guinea’s GDP growth is expected to be 6.1% in 2024, followed by 7.1% in 2025 and more than 10% per annum from 2026 to 2029.

The country, an ex-French colony, has been governed by a military faction since 2021, following a decade or so of democracy, and it suspended the constitution. So far the regime has not touched the mining sector, but it could take just one outrageous tax claim against one big miner (or demands for a higher free carried interest) to kill sentiment for all companies operating in the country, even if it does not touch any other company.

Now, the IR department of either company may claim that Guinea has given PDI every necessary permit in place so far, but the reason these shocks (i.e. what we saw in Burkina Faso and Mali) is because investors thought those countries were safe havens too…until they were not.

Given all of this, combined with the abundance of gold mining stocks with exposure to far safer jurisdictions, we wouldn’t invest in this company just because the sovereign risk is too high, in our view.