Bleak future for mining sector; Gov’t set to lose US$724m

The country’s earnings from mining is set to drop significantly in the last seven years, from a high of US$1.74billion in 2013 to about US$1.01billion by 2022 — mainly on account of the distressing low price of gold on the world market, a report by the International Council on Mining & Metals has revealed.

The sector’s contribution to the national kitty is projected to reduce by about US$724million, which means in 2022 government will be earning 41.58 percent less than it earned in 2013 [US$1,741billion] from companies mining its resources.

According to the report that was commissioned by the Ghana Chamber of Mines, the projected revenue shortfall corresponds with a similar decline in production levels. With gold production at 2,047 ounces in 2013, the report projects that production will decrease by an average 4.6 percent over the next nine years to about 1,510 ounces in 2022.

Declining volumes and lower gold prices (compared to the all-time high in 2011) bring about lower revenues and expenditures. This will diminish incomes for both mining companies and the government.

Commenting on the report, Sulemanu Koney, Chief Executive Officer Ghana Chamber of Mines, said the decline in production levels not only reflects genuine reduction in production but is also because a low gold price constrains mine extension plans.

“Genuine reductions happen because mines are in different phases of the life-cycle. For example, one mine is expected to close in 2019 while others are (almost) at full production,” Mr. Koney said.

The mining sector plays a key role in the country’s export revenues. The sector contributed significantly to Ghana’s overall export and tax revenues: 37 percent of export revenues were attributable to mining and the sector was responsible for 19 percent of all direct tax payments in Ghana.

This clearly indicates the significant importance of mining in the country, which is also reflected in mining’s contribution to GDP and direct employment, accounting for 1.7 percent of Ghana’s GDP and 1.1 percent of the Ghanaian labour force respectively.

The report, which is dated July 2015, had data taken from seven mining operations and does not include any new projects that may come onstream in the future; nor does it include exploration companies, and therefore the decline in projected gold production is not necessarily a trend for the entire gold mining industry.

The report explained that life-cycle projections include what the sample of mining companies planned for production in the beginning of 2014, and are based on a US$1,300 per ounce gold price — and it is assumed that international and national policy conditions remain broadly as they are now.

The CEO of the Mines Chamber, Mr. Koney, speaking on the report’s essence said it is a well-recognised fact that a comprehensive understanding of the life-cycle contribution of mining is fundamental to realizing the shared objective of maximising the spectrum of benefits induced by the mine’s presence.“

In recognition of this challenge, the Chamber collaborated with the ICMM to undertake a watershed research on the life-cycle contribution of mining to the economy of Ghana,” he said.

Seven mining operations, namely Gold Fields Tarkwa, Gold Fields Damang, Newmont Ahafo, Newmont Akyem, Golden Star Wassa, Adamus Resources, and Chirano Gold Mines were sampled in the report.