Local miners ready for gold price peak

On the back of current gold prices, Ghanaian miners are investing heavily to jack up production at their existing operations.

AngloGold Ashanti, the oldest company which operates two mines at Obuasi and Iduapriem in Tarkwa Nsuem area has already invested $800 million in the past seven years to modernise and expand its Obuasi operation, which is by far the biggest in terms of reserves and employment.

Peter Anderton, the newly appointed Senior Vice President responsible for Ghana operations, disclosed that the company will be spending more this year to improve infrastructure and development.

Production currently is at $317,000 but the mine has the capacity to do more in future, Peter Anderton told the Minister of Lands and Natural Resources at his recent courtesy call at his office.

AngloGold Ashanti is here to stay and it is looking at the long recovery of the operation of Obuasi, he said.

Newmont, which is currently the second largest gold producer in terms of ounces, is poised to hit the ground with a big bang in three years time as the number one gold producer, producing at 1.2 million ounces. It has started its underground operation at Ahafo and is constructing an over $850 million mine at Akyim.

The good news is that its current 4000 labour force could double, which in turn would mop up thousands of Ghanaians wandering as unemployed.

Edwin Allotey Acquaye, Tax Director, Newmont Ghana, told B&FT in an interview in Accra that the production outlook for the next six month, looks positive as the rise in global gold prices continues. “Its revenue implication for Newmont and the country is huge,” he said.

Goldfields, which operates and owns Demang and Tarkwa, is also looking at one million plus ounces of gold in the future from 930,000 ounces. It also employs thousands of Ghanaians, and currently prides itself as production and cost leader in Ghana.

It is expanding its operations at both mines to sustain and increase production to consolidate its prestigious position. This could also mean more direct and indirect jobs.

In their own small way Chirano Kinross Mine, Golden Star Resources, Adamus, Owere, Keegan Resources, just to mention a few second tier producers, are all gearing up to take advantage of the gold rally.

The government, which has 10% carried interest in these companies is also raking increased revenue in the form of corporate tax, royalties and dividends, with some companies paying between 3% minimum and 5% maximum dividends.

It recently made $209 million (net) from the sale of part of its interest in AngloGold Ashanti and could even make more now that share prices are on the upward swing, from its free carried interests in other mining companies to support the Better Ghana Agenda. As a major foreign exchange earner, Chamber of Mines sources say not less than 60% of what the mining companies earn are repatriated to the country.

A gold price rally also means increased spending on social and community development by the mining companies. The mining companies are already spending millions of dollars annually to support local economies, especially in the areas of access to modern medical care, agriculture, employment, feeder roads construction and others. This has improved lives in the communities.

The AngloGold Ashanti malaria programme, for instance, has literally saved thousands of lives as malaria cases were reported to have been reduced by 75% in the Obuasi municipality.

The company is also reported to be holding itself in readiness to launch a major programme with Global Fund in 40 districts. Goldfields sponsorship of Ghana Black Stars, Newmont’s agriculture improvement schemes and many others have all benefitted the country.

Gold price trends

Spot gold hit an all-time high last week, for the sixth time in two weeks, as worries grew whether the embattled United States could avert a debt default while its two key political parties were belligerently and uncompromisingly locked in stalemated talks to raise its debt ceiling.

Spot gold rose as high as $1, 625.24, before easing to $1, 624.19 last week. It was up in 16 of this last's 19 trading sessions so far. US gold also hit an all-time high at $1, 625.8.

However, spot gold dropped for the first time in three days after the House of Representatives passed the measure to raise the U.S. debt limit by at least $2.1 trillion and cut federal spending by $2.4 trillion or more.

“Increasing the debt ceiling is not going to make the debt go away, while the debt problems in Europe aren’t going to be resolved overnight, and we’re seeing all these getting reflected in the weaker economic numbers,” said Zhang Yingying, an analyst at Galaxy Futures Co., a brokerage that’s 16.7 percent owned by the Royal Bank of Scotland Group Plc.

Gold for December delivery in New York rose 0.3 percent to $1,626 an ounce, after futures reached a record $1,637.50 on July 29. Spot silver gained 1 percent to $39.6825 an ounce.

Dealers reported muted reaction on Asia's physical market to gold's rally, as buyers and sellers alike cautiously watch the outcome of the US debt talks.