Burkina Faso has granted an industrial mining licence to Russian miner Nordgold for a gold project, the military-led West African government said, aiming to capitalise on record-high gold prices to strengthen an economy hit by insecurity.

The move signals deepening economic ties between Russia and Burkina Faso, as the junta that seized power in 2022 continues its pivot away from traditional Western allies towards Moscow.

The Niou gold deposit, located in the Kourweogo province of Burkina's Plateau-Central region, covers 52.8 square kilometres (20.4 square miles) within the exploration licence area held by Jilbey Burkina, which is now owned by Nordgold. Nordgold already operates the Bissa and Bouly mines.

The council of ministers said late Thursday that the Niou mine was expected to yield approximately 20.22 metric tons of gold over its eight-year lifetime.

Jilbey Burkina will retain an 85% stake in the project, while the Burkinabe government will hold the remaining 15% without financial contribution, in accordance with the country's new mining regulations.

The project will contribute 51.5 billion CFA francs ($89 million) to the state's budget over its lifespan and 7.06 billion CFA francs to the state's mineral wealth fund, the council of ministers said.

Gold prices have risen by over 25% this year, fuelled by geopolitical instability and US President Donald Trump's trade policies.

Burkina Faso, which has been fighting Islamist militants since 2015, is a major gold producer. According to non-governmental organisation Swissaid, which analyses mining, the country produced over 57 tons in 2023.

Mining companies operating there include Canada's IAMGOLD and Endeavour Mining, and Australia's West African Resources Ltd.

"The cooperation with Nordgold and other industrial mines is important (for Burkina's government) as the country faces a budget crunch," said Ulf Laessing, head of the Sahel programme at Germany's Konrad Adenauer Foundation.

However, the Niou project will be located in a large artisanal mining area and might deprive the people working as artisanal miners of key income, he said.

The government said the mine could generate 204 jobs, while also helping sustain employment at the nearby Bissa Gold SA mine.