Mining companies must adopt effective cost management - Koney

Accra, July 30, GNA - The Chief Executive Officer of the Ghana Chamber of Mines (GCM), Mr Sulemanu Koney has urged mining companies to adopt effective cost management in order to remain competitive.

Speaking at the GCM Mining for Development Forum, Mr Koney said effective cost management would enhance profit and increase investment.

The Forum was attended by stakeholders, including Ghana Revenue Authority, National Development Planning Commission, civil Society and the media, was to discuss the rising cost of mining, especially gold in Ghana.

Mr Koney said mining required huge outlay of capital but the mining companies are not in control over the price of gold they produce, necessitating the need to critically look at cost control.

Mr Koney said mining plays a critical role in the economy, contributing immensely to government tax revenue and job creation.

The Acting Vice President of Gold Fields West Africa, Mr Augustine Wireko Asubonteng who did a presentation on the cost build-up for gold mining said the erroneous perception among stakeholders that mining companies make huge profits is not true.

"The mining industry is going through tough times and it is not as easy as people see it," he said.

Mr Asubonteng said the high cost of inputs in the mining and processing of gold eats deep into the profit the companies and in some instances produce even at a loss.

For example, it costs more than $1000 to mine and process an ounce of gold, he said, adding that the cost build-up included high cost of capital, rising input cost, exploration, fuel, procurement and maintenance of mining equipment, energy, labour, royalty and management of mining waste.

Besides, the mining and processing cost, the companies had to continuously invest additional capital to sustain the mine.

Mr Asubonteng said to be able to determine sustainable cost of mining, Gold Fields Ghana had adopted a new cost metrics that incorporates the various cost that is incurred.

The new cost metrics, he said, had recorded about the 95 per cent of the cost incurred by the company in its operations in order to arrive at the true cost of mining and processing for an ounce of gold.

Mr Asubonteng said a better definition of associated cost of producing an ounce of Gold would help to improve visibility of the true margins mining companies make to stakeholders.

It would also enable host governments do away with the wrong notion of high margins and help reduce pressure for higher taxes and royalties.

Mr Asubonteng called for a friendly tax regime to attract more capital and investment in the mining industry.

Professor J.S Kumah, the Vice Chancellor of the University of Mines and Technology, said the forum was timely and the discussions on the challenges mining companies face would go a long way to help government formulate policies to accelerate the growth of the mining industry.

GNA