INVESTORS AND MEDIA In the news
"The market response in Ghana is likely to be more cautious because the factors driving up the current high price are temporary. When these factors normalize, we are unsure if gold prices will continue to maintain their current high levels."
Could you give us a brief understanding of Gold Field's history in Ghana, and the importance of the region for the wider corporation?
Gold Fields has been active in Ghana over 26 years, and we currently operate two mines, Tarkwa and Damang, and also have a JV agreement with Galiano Gold for the Asanko Mine. Through our experience in the country, we have come to understand the culture, the business environment, and the people too, and it is worthwhile to mention that Ghana's democracy is mature and very politically stable. West Africa represents 34% to 37% of the overall production of Gold Fields, so it is a very important region for the Group.
The mine life of Tarkwa, Gold Field's first and largest mine, was extended through the Akontansi Underlap, for the first time replacing the annual depletion of reserves. What is the current strategy to delineate further resources at this deposit?
Tarkwa continues to be the Group's flagship mine, and it has maintained a steady production at over 500,000 oz/year. Because it is a low-grade resource, we need to mine large volumes, and our experience has helped us maximize mining recovery. Over the years, I believe we did not give Tarkwa a fair chance for exploration, so we have now changed our strategy and launched an aggressive exploration program. Through this exploration agenda, we were able last year to replace the annual depletion of mineral reserves for the first time in 15 years. The mine has another 15 years of life left at the present level of reserves – and a processing capacity of about 14 million mt/y.
How successful has been the Damang Re-investment project started in 2017?
Damang is a high-grade mine compared to Tarkwa and has a current life of mine of about five years, but we believe this can be further extended, as we have already increased our reserves through exploration. Gold Fields started the re-investment plan in 2017, after acknowledging that the high-grade reserves were running out. We decided to expand our existing pits and, three years after the expansion, we are ahead of our production targets and we have also reduced our cost base. Currently, Gold Fields is planning another round of studies to further push towards the eastern side of the existing pits, which will extend the life of mine beyond five years.
Could you summarize how the Asanko acquisition fits within the broader strategy of the Group?
Our regional strategy is to grow the current portfolio by considering opportunities in the M&A space, exploration, productivity improvements and cost optimization. What informed our decision to enter into a JV agreement with Asanko is the huge upside potential for exploration, which Gold Fields can tap into thanks to our depth of expertise. This mine is operated by Galiano Gold (previously Asanko Gold), but we work closely with them in joint management committees.
With most of Ghana's gold development projects being brownfield, how is the current tax system influencing (the lack of) greenfield exploration? Ghana is comparatively less attractive to other countries when looking at the benchmark for fiscal incentives in terms of exploration. Through the Ghana Chamber of Mines, we and our peers are in discussions with the government to review the current fiscal regime to attract more investors. The country is endowed with rich deposits, but without exploration, gold resources will simply reach exhaustion.
How do you think the mining sector in Ghana will react to the high gold prices?
The market response in Ghana is likely to be more cautious because the factors driving up the current high price are temporary. When these factors normalize, we are unsure if gold prices will continue to maintain their current high levels. The market looks at the situation on a continuous basis, but certainly, the current high price environment will encourage producers to leverage these positive market conditions in the short-term. My concern is that some governments will try to squeeze more out of the current licenses, even though increasing taxes will only result in shrinking the mining revenue "pie"- but I believe it is in everyone's interest to seek to grow the "pie," that is, the material benefits for all stakeholders.
What are the biggest challenges that Ghana will need to overcome to maintain its crown as the top gold producer on the continent?
Illegal mining activities remain a significant challenge to the country, and the industry is currently collaborating with the government to find the best solutions. The government has started a concept known as community mining scheme, but at Gold Fields, we decided to launch our own initiative which entails ceding areas of limited mining importance from our mining lease to the government for use by local artisanal miners. Another challenge that affects mining in Ghana is the high electricity, fuel and reagent costs, which make operations very expensive.