Ghana Mining Report Q2 2008

In February, Christian Rampa, the new vice-president of AngloGold Ashanti's West Africa division, said that illegal mining was proving a major problem for the company's Obuasi gold mine in Ghana, which was in danger of failing to meet its output and financial targets, adding that the mine's 2008 target of producing 400,000 troy ounces of gold might not be achieved. Earlier, AngloGold's president for Africa, Robbie Lazar, had warned that mine production had been 18.6% below target in Q307, and that it could even be forced to close. Rampa said the mine had been besieged by illegal miners who had overwhelmed local police and AngloGold security staff. 'These illegal miners have been threatening our workforce, beating our security guards with machetes, destroying underground infrastructure, setting fires, stealing ore and electrical cables with no regard for health and safety' Rampa was quoted as saying. According to local press reports, farmers have for long claimed that cyanide emissions from Obuasi have degraded the soil and undermined orange tree cultivation. Some journalists have claimed that unemployed agricultural workers have joined the ranks of the illegal miners, who in turn have contributed further to pollution in nearby areas.

Ghana hosts the second-largest gold deposits in the African region after South Africa. Consequently, the nation derives a bulk of its external revenues from gold mining -forming as much as 90% of the total mineral exports of Ghana. Apart from gold, Ghana also produces significant quantities of bauxite and diamonds. The country is also counted among the top five nations across the globe for its manganese ore production. Ghana plays host to some of the biggest names from the global extractive industry -Gold Fields (Ghana), Newmont Ghana and South African AngloGold Ashanti.

Though the mining industry has been successful in attracting foreign capital, it has also been subject to criticism from the Ghanaian government, environmentalists and human rights activists. Foreign players have been known to exploit legal loopholes and abuse both human rights as well as the environment.

Frequent disruption in power supplies is another challenge and continues to considerably escalate operating costs in mining operations. Nonetheless, Ghana has gained credit for its efforts to prevent the trade of 'conflict diamonds', which have earned praise from the European Union (EU).

The basic law governing the mining industry is the Minerals and Mining Act 2006 (Act 703). Under the law, the president holds the power to grant mining rights. However, the pressure to amend the law and allow farmers to have a say in authorising their lands for mining activity is increasingly gaining favour in the country - and is being seen a necessary move to crack down on the rampant exploitation of the environment by mining industries.

Industry Forecast The Ghanaian mining industry has a promising future based largely on its untapped mining potential and stable government along with a reasonable tax regime. Ineffective laws, however, pose an impediment to its growth. Accordingly, in its newly released Ghana Mining Report Q208, BMI forecasts the mining industry to register an average growth of over 6.5% per annum over the 2008-2012 period.