South Africa’s struggling gold industry has suffered yet another humiliation – losing its status as continent leader to Ghana.
The country that led global gold production for a century and extracted about half the bullion mined to date is now Africa’s second-largest gold producer. Output is shrinking as operators capitulate to stubbornly high costs, regular strikes and the geological challenges of tapping the world’s deepest mines.
Meanwhile, Ghana, a country whose gold mining industry dates back to the nineteenth century, is benefiting from lower-cost mines, friendlier policies and new development projects.
South African industry stalwarts AngloGold Ashanti and Gold Fields are shifting their focus to other countries – including Ghana – where deposits are cheaper and easier to mine. The largest remaining gold miner in South Africa, Sibanye Gold, is cutting thousands of jobs and diversifying into platinum-group metals as it struggles to contain costs.
The difficulties facing South African gold mines mean output is contracting even though the country has the world’s second-largest reserves of the metal, according to estimates from the US Geological Survey.
In Ghana, gold output jumped 12% in 2018, according to data from the Ghana Chamber of Mines. Small producers account for the largest share of the total, although Ghana also hosts some of the world’s biggest gold miners, including number one producer Newmont Goldcorp. Although Newmont is exploring in Ethiopia, Ghana is the only place in Africa where it operates.
“It’s an important part of our portfolio and, geologically, we see really good potential to continue to expand,” CEO Gary Goldberg said in an interview. “We’re very happy operating in Ghana.”
The West African nation’s output will get a further boost when AngloGold Ashanti’s Obuasi operation, previously overrun by illegal miners, restarts later this year. Production from Obuasi is forecast at 350 000 oz to 450 000 oz of gold a year during the first ten years.
The Obuasi operation “will be an engine for growth” for AngloGold, CEO Kelvin Dushnisky said in September. The company is investing as much as $500-million to revive the mine.
Gold Fields, which has operated in Ghana for 26 years, says authorities there understand what makes for a “sound” business environment. Ghana cut corporate taxes in 2016 and, in 2017, changed Gold Fields’ mineral royalty to a sliding scale based on the gold price, from a 5% flat rate.
“The government of Ghana’s 10% free-carry stake in all mining companies provides a level of security to the investment,” said Sven Lunsche, spokesperson for Gold Fields.
Back in South Africa, a dearth of exploration and investment meant the sector that once powered Africa’s most industrialised economy would continue to shrink, said Mineral Resources and Energy Minister Gwede Mantashe. As South Africa’s 130-year-old industry limped towards its final years, mining investors had to look beyond gold for better returns, he said.
“Gold is an old sector and, naturally, it will decline,” Mantashe said. “New minerals that are discovered are becoming more important.”