Concern Mounts In Ghana As Gold Production Drops And Unemployment Rises
06 Jan 2014 by Ryan Jackson
minesite.com
Ghana has long been the crown jewel of the West African mining scene.
The country is not only blessed with deposits of enviable quality but the political stability which has been achieved there has been lauded as an example to emulate in the region.
It has drawn significant foreign investment in as executives perceive Ghana as a lower risk jurisdiction to do business in.
That in turn has generated rapid economic growth which has resulted in a significant reduction in poverty which contributes to further political stability.
While the feedback loop of political stability and economic growth has catapulted Ghana into the limelight as a shining example of an African success story, critics have pointed out that government bureaucracy has grown quickly and resulted in a bloated public sector.
Economic productivity in Ghana is strong, the high government expenses have led to large deficits none the less.
Now, government officials in Ghana may have a major problem on their hands as gold production has faltered in response to the dramatically falling gold price.
Over 2013 the price of gold fell 28 per cent, the greatest decline since 1981, as production slumped to 840,600 ounces from 1.02 million ounces in the second quarter.
The marked decline in the gold price has forced companies to re-evaluate their operations with an eye to cutting costs in order to remain profitable.
As a result of this effort, many companies have ended production from marginal operations and, in Ghana, the result has been an 18 per cent reduction in gold production during the third quarter of 2013.
In contrast, companies mining bauxite, diamonds, and manganese have delivered production growth in Ghana over the same period. But gold makes up a large percentage of Ghana’s economic output and an 18 per cent drop there is felt almost immediately.
Falling government revenues are a major concern, but political leaders appear even more concerned about increased unemployment as miners seek to streamline their operations to remain profitable.
So far, management at Newmont Mining has announced that it intends to lay off 300 employees in the days to come, while AngloGold Ashanti has announced a further 400 layoffs.
Newmont and AngloGold are two of nine companies which have announced layoffs in Ghana, creating a worrying situation in a region which has become accustomed to a growing mining industry.
What’s more, local sources have reported that the low gold price has put the squeeze on artisanal miners.
Those free miners have already been wrestling with a government crackdown as well as rising reagent costs over the past couple of years.
The combination of reduced employment opportunities in both the formal mining industry and the artisanal sector are likely to lead to worrying unemployment in mining districts.
In other parts of Africa there has already been strong government opposition to layoffs in the mining industry.
Late last year Vedanta Resources drew a great deal of attention when it announced plans to lay off 1,500 employees at their Konkola Copper Mines operation, the second largest copper project in Zambia.
The planned seven per cent reduction in employees was in reaction to the gold price decline and drew significant opposition from legislators.
Zambian President Michael Sata threatened to cancel the company’s mining license if a single job was lost, but Konkola’s defiant chief executive, Kishore Kumar, went ahead with an initial 76 layoffs.
In response, the Sata regime terminated Mr. Kumar’s work permit accusing him of fleeing the country when he failed to appear a meeting with the interior minister due to pre-arranged travel plans.
The situation is a marked change from the boom times only two years ago when companies were pouring capital into African mining projects.
Back then gold was at a record around US$1,900 an ounce, copper was around US$10,000 a tonne and platinum traded at US$1,900 an ounce.
Those prices have now dropped 34 per cent, 45 per cent and 25 per cent respectively sending the entire industry into disarray.
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