Gold production picks up in Ghana, but country loses out
In spite of the high cost of energy and rising cost of doing business in the country, gold production rose 2% to 1.9 million ounces from January to September 2008 as higher prices brought in a total export revenue of about US$1.75 million, but government sources say, Ghana has not been making gains from the industry.
According to the Ghana Chamber of Mines, the association of all the major mining companies in the country, whilst gold production increased by a paltry 2%, the production of diamonds, manganese and bauxite recorded abysmal declines, mainly due to a poor railway system for transporting the bulk mineral to the Takoradi port.
Diamond production in Ghana has declined significantly due to exhaustion of the Akwatia diamond fields and lack of fresh capital to transform the government owned Ghana Consolidated Diamond Corporation, which was the world’s biggest diamond producer in the past.
The Western railways is in poor shape and it is deteriorating, but the government, which owns the line is not doing much to fix it, hence “we are forced to transport the bulk minerals by road, which is not sustainable in terms of costs,” a keen market watcher, formerly of the Awaso Bauxite mine said.
Ghana produced just over 2.4M oz of gold in 2007, when output in the first nine months was 1.8M oz, coming from Newmont, Golden Star, Chirano, Central Africa Gold, AngloGold Ashanti’s Obuasi/Iduapriem mines and Goldfields and Tarkwa mines.
Gold continues to account for more than 90% of Ghana’s mineral revenues. However, in spite of high energy costs, increased cost of labour and increased cost of doing business in the country, average cash cost went down considerably by 38% in the third quarter of 2008, compared to the second quarter of the same year.
Nevertheless, a government official says the country has not been benefitting adequately and fully from the bountiful revenue coming to the mining companies because these companies are owned by “foreign shareholders.”
Apart from the meager 3% royalty that is paid by some gold producers, almost all their earnings are taken away by retention schemes granted them by law.
The government announced its intention to increase the royalties and to remove subsidies enjoyed by mining companies in the 2007 budget, but not much has happened ever since, except in June 2007 when the Volta River Authority (VRA) imposed a 100% tariff increase on the mining companies to force them to “pay the full cost of power.”
“The mining industry has one of the strongest lobbyists in the form of the chamber of mines and I really doubt whether government has what it takes to force popular policies in the throat of the chamber,” says an NGO official in Tarkwa.
On the other hand, those in the mining sector defend the industry as a major source of foreign exchange, major source of employment, major tax contributor, major source of development funding in rural areas and above all contributor of more than 6% to the country’s GDP.
Credit: John Boadu
Source: GB