Mining Gold in Ghana: Africa’s New Industry Leader

by Ina King (Potgieter) August 15, 2019

In 2019, Ghana eclipsed South Africa’s gold production for the first time, producing 4.8 million ounces of gold in 2018, compared to South Africa’s 4.2 million oz.

Ghana vs. South Africa: The quest for gold

South Africa’s gold output has been shrinking since 1980. In the last 20 years, gold miners have only seen two years of positive annual growth – in 2002 and 2013. South Africa produced 83% less gold in 2018 than it did in 1980. While gold contributed 3,8% to gross domestic product in 1993, that contribution had fallen to just 1,7% 20 years later. While South Africa has extracted about half the bullion ever mined, a combination of geological challenges of extracting ore from the world’s deepest mines (reaching over 4 kilometres in depth), labour challenges, rising energy costs, widespread policy uncertainty, and increasing health and safety concerns have contributed to South Africa losing its status as continent leader.

While Ghana’s gold mining industry, like South Africa’s, dates back to the 19th century, it did not see the extensive and sustained capital investment of its more southern neighbour until more recently.

Now the country is benefiting from less capital-intensive mining and friendlier investment policies, which is leading to a variety of new project developments. The country has over 100 gold mines, 11 of which have a capital value of over ZAR 1 billion (USD 67 558 894). This includes Tarkwa Mine, one of the world’s largest gold mines, with estimated reserves of 15.1 million oz. The recently reopened ZAR 859 860 992 Obuasi Gold Mine, with annual output 450 000 oz., is also considered critical to Ghana’s long term growth.

The Ghanaian government cut corporate taxes in 2016 and 2017 with the Ghana Corporate Tax Rate plan. This saw mining companies such as Gold Fields’ mineral royalty change from a 5% flat rate to a sliding scale based on the gold price. The government of Ghana’s 10% free-carry stake in all mining companies provides a level of security to the investment and it certainly appears that the authorities in Ghana understand what makes for a sound business environment.

South African gold mining companies AngloGold Ashanti and Gold Fields have shifted their focus to African countries like Ghana, which are far more conducive to new investment. Ghana has investor-friendly mining policies, new development projects and cheaper and easier-to-mine ore deposits. Ghana’s gold output thus rose 12% during 2018, while SA’s dipped 10.8% in the first quarter of 2019 alone. The largest remaining gold miner in South Africa, Sibanye Gold, is cutting thousands of jobs and diversifying into platinum group-metals in its struggle to contain costs.

The Ghanaian touch

An upsurge of investments in the last few years has seen significant increases to Ghana’s gold and manganese output. In 2005, gold production accounted for about 95% of total mining export proceeds. Ghana’s annual gold revenues rose to $3.52 billion in 2017, a 10,2% increase from 2016. In addition, the government has acted firmly to improve industry regulation, and tackle long-term issues of illegal activity and environmental damage.

The Ghanaian government has realised that in order to encourage and maintain investment, they need to create an attractive climate for new business and infrastructure development. A progressive policy environment emphasises capital investment, sound business practices and the incorporation of small mining into the national framework.

Ghana’s Minerals and Mining Act, which first came into effect in 2006, and was revised in 2014, has helped the country address an ongoing problem of its mining industry: illegal gold mining. In December last year the ban on small-scale mining operations was lifted. The ban was originally imposed due to the proliferation of illegal mining activity over the past decade. Now hundreds of licences are being issued under a new framework for small-scale mining. Changing policy to accept the reality of small miners is a good move on the Ghanaian government’s part as it allows the country to retain its mineral wealth.

The future looks gleaming

Those factors make gold mining in Ghana a pursuit with great potential. Ghana is considered one of the world’s most prolific regions for gold discoveries with both gold producers and explorers enjoying success there.

The Ghanaian mining industry is in a strong position for long-term growth and hosts more estimated reserves than key gold-producing countries like Peru and Papua New Guinea. The scope for expansion of greenfield investment and downstream activities is also considerable with both junior and major miners pursuing Ghana’s gold. In addition, Ghana is politically stable and has a strong institutional framework, both of which underpin investment in the mining sector now and in years to come.

The Ghanaian mining industry is in a strong position for long-term growth and hosts more estimated reserves than key gold-producing countries like Peru and Papua New Guinea. The scope for expansion of greenfield investment and downstream activities is also considerable with both junior and major miners pursuing Ghana’s gold. In addition, Ghana is politically stable and has a strong institutional framework, both of which underpin investment in the mining sector now and in years to come.