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Ghana Gold
Ghana has produced and exported gold for centuries. In
precolonial times, present-day Ghana was one source of the gold
that reached Europe via trans-Saharan trade routes. In the
fifteenth century, Portuguese sailors tried to locate and to
control gold mining from the coast but soon turned to more easily
obtained slaves for the Atlantic slave trade. Most gold mining
before the mid-nineteenth century was alluvial, miners recovering
the gold from streams. Modern gold mining that plumbs the rich ore
deposits below the earth's surface began about 1860, when European
concessionaires imported heavy machinery and began working in the
western areas of present-day Ghana. The richest deposit, the Obuasi
mine, was discovered by a group of Europeans who sold their rights
to E.A. Cade, the founder of Ashanti Goldfields Corporation (AGC).
Since the beginning of the twentieth century, modern mining in the
Gold Coast has been pursued as a large-scale venture, necessitating
significant capital investment from European investors.
Under British colonial rule, the government controlled gold
mining to protect the profits of European companies. The colonial
government also restricted possession of gold as well as of
mercury, essential in recovering gold from the ore in which it is
embedded. Following independence, foreign control of the sector was
tempered by increasing government involvement under the Nkrumah
regime; however, production began to decline in the late 1960s and
did not recover for almost twenty years. In the mid-1960s, many
mines began to hit poorer gold reefs. Despite the floating of the
international gold price in the late 1960s, few investors were
willing to invest, and the government failed to provide the capital
necessary to expand production into new reefs. Of the two major
gold mining enterprises, neither the State Gold Mining Corporation
nor AGC (40 percent controlled by the government) expanded or even
maintained production.
Under the ERP, the mining sector was targeted as a potential
source of foreign exchange, and since 1984, the government has
successfully encouraged the rejuvenation of gold mining. To offer
incentives to the mining industry, the Minerals and Mining Law was
passed in 1986. Among its provisions were generous capital
allowances and reduced income taxes. The corporate tax rate was set
at 45 percent, and mining companies could write off 75 percent of
capital investment against taxes in the first year and 50 percent
of the remainder thereafter. The government permitted companies to
use offshore bank accounts for service of loans, dividend payments,
and expatriate staff remuneration.
Companies are permitted to retain a minimum of 25 percent of
gross foreign exchange earnings from minerals sales in the
accounts, a level that can be negotiated up to 45 percent.
Reconnaissance licenses are issued for one-year renewable periods,
prospecting licenses are valid for three years, and mining licenses
are in force for up to thirty years. The government has the right
to 10 percent participation in all prospecting and to extend its
share if commercial quantities of a mineral are discovered. In
response, between 1985 and 1990 eleven companies became active with
foreign participation, representing investments totaling US$541
million. Since 1986 there has been a gradual recovery in overall
production.
More than 90 percent of gold production in the early 1990s came
from underground mines in western Ashanti Region, with the
remainder coming from river beds in Ashanti Region and Central
Region. AGC, the country's largest producer, mined 62,100 fine
ounces in January 1992, the highest monthly production ever
recorded since the company began operation in 1897. The company
also lowered its costs in relation to production during the last
quarter of 1991 from 0.26 percent in October to 0.24 percent in
December. Production during the company's fiscal year of October
1990 to September 1991 was 569,475 fine ounces, 42 percent more
than the previous year's figure of 400,757 fine ounces and the
largest amount ever produced by the mine. The second largest amount
produced was 533,000 fine ounces, produced in 1972.
AGC planned major expansions in the early 1990s funded by World
Bank loans. In early 1991, the corporation announced the discovery
of new reserves estimated at more than 8 million ounces, in
addition to its known reserves of 22.3 million ounces. The new
reserves include lower-grade and remnant ores that the corporation
had been unwilling to mine because of high costs. AGC planned to
lower costs through capital-intensive operations and a sharp
reduction of labor costs. It also planned then to raise output from
a projected 670,000 fine ounces for 1992 to more than 1 million
fine ounces a year in 1995. The expansion was to be funded by an
International Finance Corporation loan package totaling US$140
million. AGC was to put up the balance, estimated to exceed US$200
million.
AGC was not the only company to benefit from an upsurge in
production. Despite its increased production, the company's overall
share of the domestic gold market declined from 80 percent to 60
percent in the same period that other operators entered the
industry. Provisional figures for 1991 showed that two new mines,
Teberebie and Billiton Bogoso, produced 100,000 fine ounces each,
while other companies, including State Gold Mining Corporation,
Southern Cross Mining Company, Goldenrae, Bonte, and Okumpreko,
were stepping up production.
Several other enterprises were on the drawing board or were
about to open by mid-1992. The British company Cluff Resources had
raised US$10.2 million to finance a new mine at Ayanfuri. The
company had been involved in exploration since 1987 and planned to
produce as much as 50,000 ounces of gold annually. A CanadianGhanaian joint-venture gold mine and associated processing
facilities was commissioned in mid-1991 in Bogoso, western Ghana.
Finally, in May 1992, a joint-venture company was created to
prospect for gold in the Aowin Suamang district in Western Region.
Shareholders in the new company included the Chinese government
(32.68 percent), private investors in Hong Kong (32 percent), the
Ghanaian government (10 percent) and private Ghanaian interests.
In 1992, Ghana's gold production surpassed 1 million fine
ounces, up from 327,000 fine ounces in 1987. In March 1994, the
Ghanaian government announced that it would sell half of its 55
percent stake in AGC for an estimated US$250 million, which would
then be spent on development projects. The authorities also plan to
use some of the capital from the stock sale to promote local
business and to boost national reserves. The minister of mines and
energy dispelled fears that the stock sale would result in foreign
ownership of the country's gold mines by saying that the government
would have final say in all major stock acquisitions.
Data as of November 1994
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