AngloGold re-launched to take advantage of high gold price
President Nana Addo Dankwa Akufo-Addo re-opened the Obuasi mine last week during a colourful ceremony, in fulfilment of a campaign pledge and promised to stop encroachment by illegal miners on the concession.
“I think gold price has been ticking up quite a bit but it is not up to the 2016/2017 levels yet. But I think it has been holding firm, generally we know it is driven largely by geopolitics and of course economics as well and therefore when stocks tend to be doing pretty well, generally would have an adverse impact on the price of gold particularly the ma
jor mineral that is mined in the country,” he said.
The drop in price has affected the profits of the mining industry which has also impacted their contribution in terms of taxes.
Presently, an ounce of the commodity is estimated at US$1, 286.
According to data and research from the Ghana Chamber of Mines and the GRA, the total mining fiscal receipts mobilised by the Ghana Revenue Authority (GRA) increased by 31 percent, from GHC1.65 billion in 2016 to GH¢2.16 billion in 2017.
This indicates an increase of 17.11% as compared to the 2017 first half value of GH¢877 million.
The sector also contributed 7.2% to Gross Domestic Product (GDP) in 2017, compared to 8.0% GDP in 2016.
This means the sector contributed GH¢17.1 billion to the Ghanaian economy in 2017, compared to GHC15.8 billion in 2016.
Meanwhile, AngloGold Ashanti (AGA) has related that, the over US$500 million spent on the Obuasi mine during the four years that it remained shut is due to the firm’s confidence in Ghana’s mining sector.
Managing Director of the AngloGold Ashanti, Eric Asubonteng has said, there exist viable opportunities in the sector, especially at its concession at Obuasi in Ashanti Region.
“What has been missing over the years has been how to get value out of that. Our challenge going forward is how to turn the world-class Ore Body into a world-class mine and how we operate the mine is going to determine how we do it,” he said.
Apparently, encroachment on AngloGold Ashanti’s concessions had been one of the major causes of the firm’s prolonged losses which contributed to mining giant resolved to shut down the Obuasi mines, retrenched over 4,000 workers and initiated a “limited operating phase.”
Mr Asubonteng explained that, the four-year shut was important to give AngloGold Ashanti a clear view of how to fix the then-troubled mine.
“We had gotten to the point where we couldn’t fix the mine on the run. The example I always use is trying to fix the wheel of a vehicle while it is in motion,” he explained.
According to the company, the shut-down of the Obuasi mines and retrenchment of over 4,000 employees cost the firm over US$240 million.
“It was mainly severance package…that could buy several mines in its own right. But we had a commitment and we have values as a company and we can’t let employees go without meeting our full obligations so we did that very smoothly.
“After that, we had to spend money to conduct a feasibility study to determine first if the mine is viable to be resurrected and secondly if so how [we] going to do it?” he said.
Another problem that managers and shareholders of the mining giant had to resolve was finding the most suitable operating model that will guarantee returns.
While all these were going on, the mining firm did not renege on its environmental and social obligations “so we continued to spend between $50 million to $60 million a year just to make sure we maintained the infrastructure of the mine so that we don’t flood the mines; because once we flood the mines it becomes extremely difficult to re-open it, so we had to spend all that money to ensure that it continues,” Mr Asubonteng.
He said, “all the key things that we support the community with, for instance, the hospital we run, the school we operate, the AGA Malaria Control Programme all continued during this phase even though we weren’t producing. That is how come we were spending between $50 million to $60 million a year.
“We did also keep an employee size of about 300 just to keep these programmes going so it cost a lot of money.”
The investments to redevelop the mine, the AngloGold Ashanti MD said, are even bigger.
AGA intends spending about US$800 million to US$1 billion over an initial period of about six years.
With a mining life of 21 years, Obuasi has reserves of 5.8 million ounces.
The mine will now operate on the contract mining model, moving away from the previous owner mine model.