President of the Ghana Chamber of Mines, Michael Edem Akafia, says soaring global gold prices present mixed fortunes for mining firms in Ghana, as production struggles continue to weigh on the industry.
Speaking on Joy News’ PM Express Business Edition last Thursday, he explained that while the rising price of gold appears to signal prosperity, it comes with new pressures and challenges that many outside the industry fail to appreciate.
“Well, absolutely. Generally, you would say that, given what I said about ground exposition and all of that. But like all things, there are two sides to it. They are the upside and all the things that you hear about. But then there are also the downsides to it,” he said.
According to him, high prices are quickly factored into costs, leaving companies with smaller-than-expected margins.
For instance, when people look just at the gold price, that doesn’t tell the whole story. Because in periods like this, one of the things that happens is that your input prices are almost adjusted accordingly, because most people will factor that into their pricing.”
He further explained that miners are sometimes compelled to exploit marginal reserves at higher costs, in order not to sterilise concessions.
If you have a concession, when the gold price goes up, that may require you to mine some of your marginal areas. Because if you don’t do that, you may end up sterilising your mine. Now that gold price is going up, this is the time to mine that portion. What that means, though, is that you are mining it at that high cost. So it means your margin is not as high as everybody expects it to be.”
Akafia pointed out that production among large-scale players has stagnated at 2.9 million ounces, despite a surge in small-scale output.
If you looked at the industry and looked at some challenges, and as I pointed out, you would ask yourself, why did production stagnate for large-scale players? Of course, for small scale it jumped from 1.1 million ounces to 1.9 million ounces, but stagnating at 2.9 million is telling you a story, right?”
For him, the limited pipeline of new exploration projects is a warning sign for the future.
“It may be that there are few projects coming on stream, but the global picture will give you an indication. One of the big indicators of how the future is likely to be is a pipeline for exploration projects. And if you compare us to others, you know, jurisdictions that are focusing on mining, then that’s why you see that we may have challenges that we may want to address.”
Despite the difficulties, Akafia maintained that the sector remains central to Ghana’s economy, particularly through its collaboration with government on critical programs.
As a chamber, that’s one of the things we work in partnership with government to do a whole lot of things. One of the things that we can visibly tell is the currency and its performance recently, and everybody knows that a big chunk of that is attributable to the gold industry, because it’s coming on the back of two key programs that we collaborated with government to sort of institute the gold purchase program.”
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