Obuasi mine revival takes centre-stage

Government is to hold discussions with management of Anglogold Ashanti on the future of the Obuasi Mine.

The discussion, likely to be fixed this week, is expected to focus on issues including the stability agreement, the high tax regime and poor power supply among others.

The Obuasi Mine has been struggling with overage equipment, poor security, inadequate power supply and the activities of illegal miners.
The mine also needs massive capital injection to renew its antiquated infrastructure, improve underground transport and sharpen the skills of its employee.

Once the biggest gold mine in the country and the leading employer in the industry with about 8,500 workers, Obuasi Mine has in recent years become a high-cost producer and not produced above 400,000 ounces since 2004. It has over 20 years of mine-life with 9 million ounces of gold reserves.

Already, with the persistent drops in gold price, mining companies are struggling to keep the cap on rising cost of operations.
The metal lost 25 percent of its value last year, and this came on the back of an increase in the mining sector’s corporate tax rate from 25 percent to 35 percent.

Briefing the press after a two-day working visit to Obuasi Mine to learn at first hand the myriad challenges facing it, Alhaji Inusah Fuseini -- Minister of Lands and Natural Resources -- said the meeting will allow both parties to know whatever intervention in the mine is needed from government to address its challenges.

“Obuasi Mine needs to be restrategised to help address the production challenges it is facing since the mine is not posting profit in its operations.

“Obuasi Mine has tremendous potential and all efforts should be made to make it profitable.

“It is an important mine in the country, contributing to the improvement of communities and the nation at large.”

The illegal mining activities, he said, poses huge problems to the environment -- with many water bodies being polluted.
“Government is committed to fighting the menace in the mining industry to bring sanity,” he stated.

Mr. Macombe, Senior Vice President of Anglogold Ashanti indicated that the mine is facing challenges including a decline in production.

He said the meeting will consider a number of options to improve the situation at the mine, which has potential mine-life of over 20 years.


Mr. Macombe told B&FT that “Although the mine is making progress in some areas, it is far from profitability as it is still making losses.


“The operation is currently undergoing ‘painful but necessary transformation’ at all levels to shore-up gold production and reduce cost of production with a view to setting it on the road to profitability -- because of declining gold production, increasing costs of power tariff, increasing activities of illegal mining and escalating costs.


“These challenges mean that the Obuasi mine is underperforming; it is not producing enough gold to generate profit to improve its cash flow, hence forcing the operation to borrow unsustainably to keep it afloat.


“Obuasi is simply a loss-making entity, but this cannot go on forever.”


He said reversing these challenges definitely needs strong and courageous decisions to address and fix the mine, which is one of the oldest in the world.


Mr. Morcombe said the company will be shirking its responsibility if it fails to reverse the decline and address the fundamental challenges undermining the future of the famous Obuasi Mine, saying that ‘we are implementing painful but necessary measures to grow the company as a ‘lean and profitable operation’.


About 430 Obuasi employees have already been retrenched, and the signs are that more changes are being planned ahead.


Mr. Morcombe explained that in spite of the changes made, the mine is still not out of the woods; suggesting that more changes will be made later to stabilise and secure the future of the Obuasi operation.


“The mine will continue to engage and update the stakeholders on ongoing activities to ensure their cooperation and continuous support,” he said.