Ghana and SA in a race for gold

2019-02-14T12:42:59+00:00 October 24th, 2018|Country in Foucus|

After negotiating stormy waters over the past five years, Ghana is once again attracting investment, writes Leon Louw. 

In 1902, there were only two gold producing countries in Africa that international mining companies, with enough capital and a love of gold, could invest in. The one was Ghana in West Africa, where gold production and trade started about 2 500 years ago, and the other close to what was to become Johannesburg, on the southern tip of the African continent. Both had spectacular gold deposits.

Before gold was discovered on the Witwatersrand reefs of South Africa in 1886, Ghana was the only gold producer on the continent. But the Witwatersrand deposits were more prolific and continued delivering yellow metal for 130 years. It still does, but South Africa has lost some of its shine recently, while the Birimian and Tarkwaian hosted deposits of Ghana have, arguably, become more attractive.

Today, gold investors are spoilt for choice, with countries like Mali, Burkina Faso, Tanzania, and Senegal vying for the coveted dollar, pound, or yuan, although Ghana and South Africa remain the top dogs.

Most of the gold operations in Ghana have been developed in the south, where the vegetation is dominated by tropical rainforest. Image credit: Nicola Theunissen

Most of the gold operations in Ghana have been developed in the south, where the vegetation is dominated by tropical rainforest. Image credit: Nicola Theunissen

Political headwinds

Both countries have faced similar political and economic headwinds over the past five years. However, during the last two years of the Zuma pillage in South Africa, Ghana was, unlike South Africa, on the road to recovery in the wake of the Mahama maladministration. Ghana has found its feet under new President Nana Akufo-Addo, and although public debt is still a concern, the country’s economy is expected to grow strongly in 2018 and 2019.

In contrast, South Africa is struggling to get its economy moving after initial optimism when President Cyril Ramaphosa took over the reigns from a reluctant Zuma. Ramaphosa is not, like Akufo-Addo, only faced with economic headaches. While faction fighting within his party (the ruling African National Congress) and corruption continue to taint the first year of Ramaphosa’s rule, a defiant Zuma has started beating the drums of defiance in his homeland of KwaZulu-Natal.

Meanwhile, the new South African Minister of Mineral Resources Gwede Mantashe has to contend with a controversial Mining Charter and an unprecedented increase in mine fatalities. Most of those fatalities have been in South Africa’s ageing gold mines. As deposits become deeper and more difficult to mine, mining operations are under increased pressure to reach their targets, often at the expense of safety. And as unrest spreads in the run-up to the 2019 elections, and more underground miners lose their lives, so South Africa moves up the list of high-risk countries to invest in, while at the same time moving down on the global list of top gold producers.

According to Reuters’s latest Gold Survey for 2018, South Africa has steadily dropped on this list over the years, and it is now down to the eight biggest gold producer in the world (it held the number one spot for many decades). South Africa produced 139.9 tonnes of gold in 2017, behind sixth-placed Peru (162.3 tonnes) and Indonesia (154.3 tonnes). More noteworthy, though, is that Ghana has creeped up to the tenth position, just behind Mexico, which produced about nine tonnes less than South Africa. Ghana produced 101.7 tonnes of gold in 2017 (38.2 tonnes less than South Africa) and is slowly eroding South Africa’s dominance of the African mining sector.

Since gold was discovered in Johannesburg in 1886, it happened only once before that Ghana’s gold mining industry attracted more foreign investment than its South African counterparts. That was with the onset of the Anglo Boer War in 1899, when there was a significant outflow of capital from South Africa. But there is a feeling among pundits that investors are casting their eyes (and their money) north-west of the Witwatersrand Basin once again, and for good reason.

Ghana or South Africa?

“The renewed interest to exploit Ghana’s gold is an indication of the huge potential of Ghana versus the challenging nature of the South African mining environment,” says Warren Beech, partner and head of mining at Hogan Lovells.

“It is an acknowledgement that South Africa’s gold reserves are limited on the one hand and on the other that Ghana is one of the few countries in Africa where large deposits can still be found,” Beech adds. Beech says there are several companies, including South African companies, actively doing exploration work in Ghana. This is in stark contrast to South Africa, where a dearth of exploration and greenfields projects (in all minerals, not only in gold) doesn’t bode well for the future of the industry in the country.

Some believe, though, that South Africa still hosts substantial gold deposits. There are geologists that are re-looking the formation of the Witwatersrand Basin, and their theories that the best is yet to come is slowly gaining ground. One of the believers is Australian Michael Quinert, chairperson of ASX-listed West Wits, who firmly believes that South Africa is still the best place to mine gold. West Wits is currently re-looking deposits in the Central Basin of the Witwatersrand and is producing respectable ounces from deposits sterilised by historical mining companies. Some of these deposits got caught up in the deadly Kebble saga in the 1980s and has since laid idle, until another Australian listed company, Mintails, started unearthing them again in the early 2000s. “I do not understand why companies would want to go mine in remote regions where there is no infrastructure or bad infrastructure, while there is so much gold left in South Africa, which boasts world-class infrastructure,” he says.

“Infrastructure is a concern in Ghana and might be a detractor, especially in remote regions, where, of course, new deposits are always found,” says Beech. In an interview with African Mining late last year, Ghanaian geologist and business development manager at the Corporate Geoscience Group, Kwesi Appiah, said that most exploration projects in Ghana were then at an advanced stage, with many having seen detailed exploration, including drilling.

“While some of these advanced exploration projects are readily accessible, many of the greenfield projects in Ghana are in more remote areas where the infrastructure is poor. The greater distance from an existing infrastructure means that these projects would have to be explored on their own terms, and any new discovery would most likely have to be of a certain size and quality as to warrant development of a standalone mining operation,” Appiah said.

Nevertheless, and despite talk about new deposits yet to be found in South Africa, Ghana keeps luring investors — at the expense of South Africa. Beech says that the Ghanaian government is doing everything right to attract exploration and development. “Ghana’s government is committed, from a legislative point of view, to make sure there is certainty, and they have shown that they are serious about addressing the infrastructure concerns, while the country’s financial system and exchange control are conducive to investment,” says Beech. Beech adds that the government has acknowledged the role that mining can play in the future development of the country, but at the same time they are not shying away from important considerations like communities and the environment.

A long history of mining

Mining is, as in South Africa, an institution in Ghana. Modern exploration of gold in Ghana dates to 1874, and the country’s industry has been through good times and bad. After independence in 1957, Ghana experimented with nationalisation of its mining industry in the 1960s, much like Zambia did later, with dire consequences. After bail-out programmes, mining output recovered in the 1980s through Ghana’s Economic Recovery Plan, and today gold is once again the country’s main export by far.

Most of Ghana’s gold occurs in two forms of mineralisation: the mesothermal quartz vein-hosted and associated gold in metavolcanics and metasediments and modified paleoplacer gold in conglomerates. These styles of mineralisation occur in the Paleoproterozoic Birimian Supergroup and Tarkwaian Group that make up Ghana’s mainly south-west to north-east-trending Birimian belts. Significant gold resources also occur as hydrothermal mineralisation in basement-type granitoids that show some geological association with the Birimian Supergroup-hosted mesothermal mineralisation.

Modern mining activity began in1878 when the African Gold Coast Company started mining activities in Tarkwa. Today, that same deposit is still mined. The operation is owned by Goldfields, who acquired the mine from the Government of Ghana in 1993. Goldfields was one of the first South African companies (the other being AngloGold Ashanti) to enter Ghana, which was then regarded as a risky venture. But Tarkwa was destined to become an extremely profitable operation and continues to be one of the top producing mines in Ghana. Tarkwa is about 300km west of Accra, the capital of Ghana.

South African gold mines are becoming deeper and more difficult to mine. Image credit: Sibanye

South African gold mines are becoming deeper and more difficult to mine. Image credit: Sibanye

The late-nineteenth century also marked the first large-scale gold mining at Obuasi, from 1895 onwards, which led to increased gold production in Ghana. Obuasi was to become the flagship and pride of Ghana’s gold mining industry. Ashanti Goldfields Corporation was listed in 1897 and by 1902, produced 20 000 ounces of gold per year. Obuasi is in the southern part of the Ashanti region, south of the Ashanti capital city of Kumasi. Gold mining giant AngloGold Ashanti acquired the mine in the early 1990s, but mothballed the operation after mass layoffs in 2014. The mine was beset by operational and technical problems, and plagued by environmental issues, while an invasion by artisanal miners, called the galamseyers in Ghana, made it impossible for the mine to continue operations.

Mark Bristow, CEO of Randgold, known for his ability to develop profitable mining operations in risky jurisdictions of Africa such as the DRC and Mali, turned down the opportunity to partner with AngloGold Ashanti at Obuasi in 2015 because of what Bristow described as a combination of technical issues and the illegal mining threat. Randgold and AngloGold Ashanti operate the highly profitable Kibali gold mine as joint venture partners in the DRC.

During an interview with the media in 2016, Bristow said that the social risk at Obuasi is enormous and that corruption was a serious concern in Ghana. The newly elected government of Akufo-Addo has implemented changes, though, and delivered on its promise to deal with the galamseyers. This provided AngloGold Ashanti with the opportunity to start working on its plan to reopen Obuasi, which has, according to the company, about 5.8 million ounces (Moz) of ore reserves and more than 34Moz of mineral resources left.

Work starts at Obuasi

AngloGold Ashanti signed an agreement with the Government of Ghana earlier this year, which will provide the framework for the redevelopment of Obuasi into a modern, productive mining operation. AngloGold said in a press release that the environmental impact assessment process has been completed.

“Redevelopment of Obuasi will establish the mine as a world-class operation, rejuvenating the proud gold mining history of the Ashanti region in Ghana,” said Srinivasan Venkatakrishnan, then CEO of AngloGold Ashanti (since then Venkatakrishnan has resigned and now heads up Indian company Vendata).

“Obuasi now has the mine and labour plan, geological understanding, and social model to match its world-class, high-grade ore body. The project metrics show a high-return, long-life project that not only brings ounces to account quickly and profitably, but also offers attractive returns on our investment,” Venkatakrishnan said.

The redevelopment will establish Obuasi as a mechanised underground mining operation. The approach to redeveloping the Obuasi Mine is a fundamental departure from how the mine was operated in the past. The redevelopment makes use of automation and controls for improved operational efficiencies and consistency in performance. The project implementation will be undertaken in two phases, with stage one comprising project establishment, mine rehabilitation and development, and plant and infrastructure refurbishment to enable production at a rate of 2 000t per day for the first operating year. This is expected to take roughly 18 months, with the first gold pour expected in the third quarter of 2019.

The second phase includes refurbishment of the underground materials handling system, shafts, and ventilation; and construction of the primary crusher, the SAG/Ball circuit, carbon regeneration, a new gold room, and tailings storage facility. This is expected to take a further 12 months and will enable the operation to climb to 4 000t per day. The operation is then expected to ramp up to 5 000t per day over the following three years.

Mine production for the first 10 years will be focused on the upper ore bodies and is expected to average 350 000oz to 450 000oz at an average head grade of 8.1g/t. In the second 10 years, production averages 400 000oz to 450 000oz.

After the completion of phase two, extended project capital expenditure of USD94-million is expected to continue through to year six, covering the development of the Obuasi Deeps Decline to the lower level of the mine, refurbishment of the KMS shaft, installation of new underground pump stations, and construction of the flotation tailings storage facility. It envisages a smaller but skilled workforce that can operate in a mechanised/automated operation with a strong sense of accountability. The operation is expected to create between 2 000 and 2 500 jobs.

Up to now, most of Ghana’s gold was produced by the Tarkwa, Obuasi, and Prestea mines; however, new projects are coming online, and according to geologists in the know, there are many deposits yet to be discovered. (See the information box in this article or consult the African Mines Handbook for information on other projects in Ghana.)

Resolute recommissions Bibiani

One of the many project in Ghana is Resolute Mining’s proposed recommissioning of the Bibiani gold mine, following the receipt of an environmental permit authorisation (EPA). According to John Welborn, MD and CEO of Resolute, a recent study update demonstrates potential for a long-life, high-margin project and confirms that Bibiani presents a compelling growth opportunity for the company.

Bibiani has produced about four million ounces of gold over a long period and is a regionally important gold mine. “Our study update demonstrates that the mine can meet our thresholds of producing 100 000 ounces of gold a year over a ten-year mine life at an all-in sustaining cost in the region of USD750 per ounce. We will now focus on an operational readiness programme with the intention of making a final investment decision during 2019,” says Welborn.

“The main mining method at Bibiani will be long hole open stoping (LHOS) with pillars. This method will be applied to most of the mining areas where the stope blocks are less continuous, occur in multiple lodes, and vary in width. In the lower southern portion of the mine, there is a large continuous block of ore at a lower cut-off grade of about two grams per tonne of gold (g/t Au), with widths of up to 25m. In this area, the sublevel shrink method is preferred. This method is currently used at Resolute’s Mt Wright Mine at Ravenswood in Queensland, Australia.

The Bibiani ore processing plant was designed and operated at a rate to suit the open-cut mining programme at the time. To match the proposed mine ore production rate, the processing plant will be modified to treat ore at a nominal rate of 1.1 million tonnes per annum.

Bibiani is approximately 80km south-west of Kumasi and has been in intermittent production since the early 1900s. It has passed through the hands of a number of companies, including Ashanti Goldfields, which acquired Bibiani in the mid-1990s and redeveloped the mine as an opencast operation with a modern processing plant. It also developed a trackless decline to provide access to the underground workings for resource estimation and exploration work.

Looking for the big elephants

So far, most of the gold production in Ghana has come from the southern regions, with only minor prospects discovered in the north-west. Geographically, the country is divided into tropical rainforest in the south and savanna in the north.

According to an article titled “A review of the Birimian Supergroup and Tarkwaian Group-hosted gold deposits of Ghana” by Albertus Smith, George Henry, and Susan Frost-Killian, sophisticated GIS programmes have mapped the prospectivity and estimated the number of undiscovered prospects for lode gold in the south-western Ashanti Belt of Ghana. According to the article, mineral prospectivity mapping (MPM) and mineral resource assessment (MRA) predicted the occurrence of 37–40 undiscovered lode deposits in the south-western Ashanti Belt.

The late Professor DA Pretorius, the founding director of the Economic Geology Research Unit (EGRU) (now Institute – EGRI) at the University of the Witwatersrand in Johannesburg, once said: “To search for elephants, you have to be in elephant country.”  Although Ghana provides it fair share of challenges, it is certainly elephant country, and according to many geologists, it is only a matter of time before some of the undiscovered lode gold deposits are found.

Recent advances in Ghana – a summary

Ghana’s mineral resources

  • Precious minerals (gold and diamonds)
  • Industrial minerals (iron ore, limestone, salt, bauxite, manganese).

The year 2017

  • Mining retains its position as top domestic revenue earner in Ghana, accounting for 16.3% of all domestic revenue (together with quarrying).
  • Total mining fiscal receipts: GHS2.16-billion (about USD480-million). (Ghana Revenue Authority)
  • Increase from GHS696.9-million to GHS969.6-million in corporate income tax receipts.
  • Increase from GHS550.7-million to GHS702.4-million in mineral royalties.

Key mining companies

  • AngloGold Ashanti: Obuasi and Iduapriem
  • Goldfields Ghana: Tarkwa and Abosso
  • Newmont: Ahafo and Akyem
  • Kinross: Chirano
  • Persius Mining: Edikan Mine (Ayanfuri)
  • Golden Star Resources: Bogoso/Prestea and Akyempim
  • Ghana Bauxite Company and Ghana Manganese Company operate Ghana’s sole bauxite and manganese mines at Awaso and Nsuta-Wassa, respectively.
  • Ghana Consolidated Diamonds: Akwatia diamond mine
  • Government holds a free carried interest of 10% in all mining companies in Ghana.

 Regulatory framework – key laws

a. The Constitution

  • The ownership of minerals is vested in the president in trust for the people of Ghana (article 257 of the Constitution).
  • Parliamentary approval is required for grants of mineral rights, but not for their subsequent transfer or assignment.
  • Minerals and Mining Act, 2006 (Act 703).
  • Mineral rights licensing.
  • Land subdivision — introduced a cadastral system under which the country is divided into geographical blocks of 21 hectares each.
  • Replaced deeds of warranty with stability agreements and introduced development agreements.
  • More comprehensive provisions on compensation for surface-rights holders and a dispute resolution procedure.
  • Obligation of mineral-rights holders to provide the Minerals Commission with reports/records on mineral operations and geological information, which shall be confidential.
  • Flat 5% royalty rate.

b. Mining regulations

  • Regulations of 2012 revised and existing subsidiary legislation on mining updated;
  • Scope of subsidiary legislation include environment, health and safety, mining support services, compensation, and resettlement of affected persons.

c. Income Tax Act, 2015 (Act 896) – special provisions for mining companies

  • Income tax rate of 35%
  • Ring-fencing of each mine(s) sharing the same processing facility
  • Carrying forward of losses for five years
  • Pooling of reconnaissance and prospecting costs

Latest developments

Multilateral Mining Integration Project (MMIP)

  • Developed to counter adverse effects of illegal mining.
  • Project is multifaceted and involves investment in reclamation of affected lands, implementation of social intervention schemes to integrate galamsey, adapting technology to ensure efficient mining, and capacity building of stakeholders.
  • Project is to run for five years.
  • Estimated costs: USD500-million.

PMMC appointed national assayer

  • Part of government’s efforts to tighten control and for appropriate taxation of sector.
  • PMMC jurisdiction being expanded from the assaying of gold produced on small-scale only to large-scale gold production.

Recent developments in mining industry

Newmont Mine’s Ahafo Mine disaster

  • Reclaim tunnel roof caved in during work by Newmont subcontractor Consar.
  • Six people killed.
  • Newmont prepared to compensate families of victims.

AngloGold’s redevelopment of Obuasi Mine

  • Obuasi Mine was shut down due to profitability and encroachment on concession sites by illegal miners.
  • AngloGold seeking to invest USD590-million in revamping the mine.
  • Development agreement approved by Parliament.
  • Government has granted AngloGold tax waivers amounting to USD295-million for the redevelopment.
  • Tax waiver has generated concerns in the media on actual benefit to Ghana.

Goldfields partners with Asanko Gold

  • Government has approved a joint venture agreement between Goldfields and Asanko Gold.
  • Goldfields expected to acquire stakes in Asanko Gold’s Ashanti Mine.
  • Investment will enable Asanko Gold to settle its indebtedness to Red Kite.
  • Joint venture transaction expected to close in July 2018.

Pipeline projects

Integrated aluminum industry

  • Aim is to bring the aluminium industry under a single entity (authority) to ensure effective management of bauxite resources, to add value to alumina produced locally, and to promote employment.
  • Authority to hold all of Ghana’s bauxite reserves, current interests in bauxite mining companies, and VALCO.
  • Authority will have power to enter into joint ventures with private entities.
  • Proposed bill is yet to be laid before Parliament for debating.
  • Government has allayed fears that the authority will assume some regulatory functions of the Minerals Commission. The authority will be purely commercial.

Proposed Mineral Royalties Fund

  • Fund will hold all royalties from Ghana’s minerals (may carve out bauxite).
  • Objective is to monetise Ghana’s royalty receivables for upfront cash from local or international markets.

The above information was provided by Divine Letsa, partner at Bentsi-Enchill, Letsa & Ankomah (LEX Africa Ghanaian member).

LEX Africa is an alliance of law firms, formed in 1993, with over 600 lawyers in 24 African countries. More information may be found at www.lexafrica.com

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