The on-the-ground impact of falling gold prices will be serious for Africa's gold producers according to South Africa's Gold Fields. Company officials, announcing a major restructuring, are prepared to close mines if doing so would increase profits, including the major mine at Damang in south-western Ghana that is 90% owned (through share ownership of "Abosso Goldfields Limited") by Gold Fields with the remaining stake held by the government. This is even if the Gold Fields mine at Tarkwa would remain financially viable even assuming continued low gold prices of not much more than US$1,300 per ounce. It should be noted that Gold Fields, citing low gold prices and high operating costs, last week announced the slimming down of its board of directors from twelve members to nine.
By contrast, another major international gold operator in Ghana – the US' Newmont - emphasized last week at the Public Accounts Committee's public hearings that it remains "committed to Ghana for the long-term" and that it had kept around 80% of its Ghana gold sales earnings in Ghana during 2012. However, digging beneath this official picture of its Ghana operations, PAC members complained that "up to 100%" of earnings of gold companies could be held offshore under a rumoured in-progress "retention" agreement between Newmont and the government.
Under Ghana's current minerals and mining laws - particularly the 2006 Minerals and Mining Act which provides incentives to mining companies - retention account agreements signed by the relevant mining company, the Finance Ministry, and the Bank of Ghana, can allow greater offshore retention of earnings.
Given Newmont's emphasis on domestic earnings retention, and the spotlight being turned on natural resource companies, including IOCs operating in Ghana, such a scenario seems extremely unlikely, and likely reflecting concerns of domestic observers over what current mining laws could potentially allow. More information should be forthcoming from PAC proceedings, focusing on the Auditor General's 2012 report, in the coming weeks.
For more news and expert analysis about Ghana, please see Ghana Politics & Security.
© 2013 Menas Associates
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