Mining plays a very important role in the economic development of both Ghana and Australia. On the world gold production ranking for 2001, Australia was the third largest with a production of 285 tonnes (after South Africa and the USA). Ghana ranked tenth with 72 tonnes of gold. On the employment front, Ghana’s mining industry employs about 20,000 people. In Australia, mining employs about 79,500 people, but represents only 0.9% of total formal sector employment (ABS 2000 estimate). This is largely due to a highly technological base and a productive workforce in Australia. Both Australia and Ghana have suffered declining trends in gold production. After peaking at 313 tonnes in 1997, gold production in Australia has declined about 2% per year due to mine closures. Ghana’s gold production declined 5% in 2001 leading to gold revenue shortfall of US$21 million. Even in the midst of the similarity in trends in both countries, Australian mining houses have played a major role in the development of Ghana’s mineral resources. Besides the development of mines, the highly skilled Australian miners have imparted technical knowledge to the Ghanaian workforce, both in basic equipment operations, general management and through technical exchanges. In recent times, I have been hosting some Ghanaian Mining Professionals visiting Australian mines to enhance their technical knowledge as they strive to reduce costs and improve operational efficiency. One of my Australian mining colleagues told me the best thing that happened to him during his working days in Ghana is marrying a Ghanaian woman. Many other Australian expatriates have also married Ghanaian women to further strengthen the Australia-Ghana relations.
Like Australia, Ghana has a long history of gold production. Around 1700 AD, a Dutch writer estimated that the Akan regions were trading about $0.5 million worth of gold each year. This amount is equivalent to several million dollars in today’s monetary terms. In the 1870s, there was a gold rush in the Tarkwa area and mining was so intensive that food was brought in from neighbouring towns. Prior to World War 2, there were about eighty operating gold mines in Ghana but by 1948, there were only eleven, and then only four by 1983. A lot of factors combined to prevent the development of any new mines for almost forty years. These include low mineral prices, high taxation, increased government levies and constraints on transfer of dividends. Additionally, a severe shortage of foreign exchange to finance essential imports and unrealistic exchange rate for the local currency led to rising production costs. The cumulative effect of lack of any development in the mineral sector led to gold decline from 915,000 oz to 282,000 oz in 1960.
The survival of Ghanaian gold mines depends to a large extent on the price of gold. The gold price has risen about 14% in the US dollar-denominated price between early January and late November. Additionally, the market has factored a “war premium” into the price for much of the year which I believe to be as much as US$15 to $20/oz. The gold price could hit an annual average of US$308/oz this year. As mining companies re-evaluate their investment plans, the Australia-Ghana Investments Company (AGI) has been at the forefront providing free geological information and Ghana’s investment initiatives. In a series of presentations, AGI has been alerting potential investors not to forget Ghana as they send fact-finding, technical, evaluation and financial teams to mineral rich countries to enhance their relative positions in highly competitive, international markets. The “mining rush” is fueled by developing countries such as Ghana, seeking international investment capital to explore for, develop and exploit sizable mineral endowments in an attempt to support the increasingly popular, but expensive wave of democracy and self-determination sweeping the world.
Ghana, with its blend of prospectivity, strength of leadership, political stability and attractive social and cultural environment, stands to gain from the recent “appetite” for project financing from the major investment banks in Australia. The challenge for Ghana is to re-examine the adequacy of its institutional capability to carry out promotional activities in the wake of intense competition for investment capital. Strengthening economic and political ties between Ghana and Australia is even going to be critical as the competition for investment capital intensifies in coming months.
Ghana is experiencing declining exploration activity and some companies have relocated to other African countries while others have disposed of their assets. While some neighbouring countries do not charge for reconnaissance and prospecting, the current mining laws in Ghana demand a license fee of $15,000 (Amponsah Mensah, 2002). The competition for international capital investment warrants that the country implements policies conducive to attracting capital and creating the right atmosphere for investment. The most challenging aspect is the resolution of conflicts between mining companies and local communities. The government has to acknowledge the context within which mining companies operate and put practical measures in place to involve all stakeholders – shareholders, communities, traditional leaders etc. The government cannot afford just to be the regulator. It also has to act as a liaison between companies and communities, and to ensure that mining development is turned into long-term sustainable development. The need for this has recently become obvious in the context of the Prestea community versus Bogoso Goldfields episode.
Rationalisation has led to retrenchment of mine workers and some of the miners who were affected have found their way in the developed world. For those who remained in the country, re-adjusting into the local economy without jobs has been devastating and imposed tremendous psychological and social strains. Uncertainty, unpredictability and volatility continue to be among the dominant features of mineral resource companies and hence mine closures are continually going to impact on communities. There is therefore the need for proper planning to ensure that our highly skilled miners can be used in other sectors of the economy.
Ashanti Goldfields is putting its financial problems behind and working hard to recapture its competitiveness in the international gold market. With the appointment of a Ghanaian Managing Director for the second time in the company’s long history, the Obuasi mine had a record-breaking production at the end of November. The mine produced 49,081 ounces of gold at a cash cost of $179/oz against budget of 46,615 ounces at $195/oz. I happened to meet with Ashanti’s Productivity Improvement Team in Obuasi early in the year, and it became obvious to me that the company is continuously evolving ways to reduce costs. Cutting the cost of production is even going to be critical for gold operations and priorities should be targeted at development of good quality and low cost projects.
Ghana has to accelerate both political and economic reform and ensure that traditional foundations of strong productivity and improvements in living standards are established. The forward-looking NPP government should make a difference by applying the true meaning of ‘governance’. By that we should have in place the proper structures, processes and relationships that should be the vehicles through which the objectives of the government are set, and the means of attaining those objectives and monitoring performance are determined. Institutional relationships should be encouraged to promote shared vision, team learning, information sharing and system thinking within the Executive, Legislature and the Party to enhance positive results in all aspects of the economy - employment, education, health, infrastructure and overall standard of living. The writer is a mining engineering consultant based in Sydney, Australia
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