On Monday May 19, AngloGold Ashanti released a statement about the company’s performance. The release which revealed a general positive financial performance for the mining giant also highlighted the problems at the Obuasi Mine, which has resulted in the planned retrenchment of over 5,000 employees, including contractors.
AngloGold Ashanti has progressed a range of interventions to address the historic under-performance and the high cost structure at Obuasi, but substantial further work is required to establish a sustainable future for the mine.
Srinivasan Venkatakrishnan, Chief Executive Officer of AngloGold Ashanti commenting on initiatives said “we have now developed a good working partnership with the Government of Ghana, the Ghana Mineworkers Union and other key stakeholders to address the challenges facing Obuasi. We must do all we can to stop the current cash outflows at Obuasi and define a sustainable future – and we appreciate the support of our partners in taking the decisive action necessary to achieve this.”
AngloGold Ashanti on Thursday, May 22, announced plans to spend $220 million in a major retrenchment exercise. This exercise, according to management, is part of a series of steps being taken to make the Obuasi Mine a profitable venture.
A decade of mining in Obuasi
Commercial mining at the Obuasi Mine has been going on for about 117 years. The Mine, currently under the management of AngloGold Ashanti – the world’s third largest gold producer – employs about 6,500 people and is the main backbone of the economy of the Obuasi municipality and a key foreign exchange earner for Ghana.
- AngloGold Ashanti took over the Obuasi Mine on the 24th of April 2004.
- The mine’s total output in 2005 was about 400,000 ounces in 2005 with a total expenditure of $200 million.
- Total output dropped to 200,000 ounces in 2013, with a total expenditure of $550 million.
- Revenue started improving in 2008, even though production was relatively low, because of Gold price increases on the world market.
- Since 2004, AngloGold has recorded losses in Obuasi every year except 2009, 2010 and 2011.
- In 2013, the Mine made a total loss of $220 million.
- Since 2005, AngloGold has made over $600 million dollars in losses at Obuasi.
- AngloGold has also invested about $500million dollars to improve the mine.
Measures to fix Obuasi
The Obuasi Mine has potential to be profitable again, according Mark Morcombe, Senior Vice President (SVP) Ghana of AngloGold. However, the Mine would not see any gains if the measure planned to restore it are not effected as soon as possible.
Hence, mining would stop in the main mine in the north, ‘the big house’, for redevelopment. The redevelopment process will last between 18 to 24 months. Within that period, mining will be done south of the current mining area, to keep production ongoing. Also, tailings will be processed using new technology to increase gold production.
Management, in consultation with key stakeholders, has decided on the following courses of action:
- Substantial reduction in production to tailing re-treatment only
- Targeted mine development
- De-watering and water management
- Environment control
- Care and maintenance
- Commensurate reduction labour
The above measures, described as ‘radical interventions’ by Mark Morcombe would reduce the cash drain on the Mine and make its production sustainable in the future.
Reactions
The Ghana Mine Workers Union (GMUC) has described the measures taken by AngloGold Ashanti as progressive and fair. According to the Secretary General, Prince William Ankrah, there is a ‘need to do what the management intends doing’ and that it’s ‘rational business logic’.
He says what is happening to the mine can be related to a patient diagnosed with cancer.
“The cancer patient can decide to postpone treatment or get it immediately and that is what they are doing, fixing it.”
He has urged management to ensure the retrenchment is done in a transparent way with a human face.
The Member of Parliament for Obuasi East, Edward Ennin, says he’s also satisfied with the plans in place for the redevelopment of the mine and retrench staff.
“People are happy here. Even the staff themselves. I have psyched most of them and it seems they want to take the money and go home. People are ready to go home because they are going to get a good package but my fear is how they will invest the money. If they don’t invest well and they just waste the money, that is going to be a problem.”
The legislator says he is consulting with other stakeholders to find means of helping the retrenched staff to invest gainfully.
Nana Anokye Kwaw Tutu II, the Akrofuom Nifahene and Adokwaahene of Obuasi, is however unhappy with the plans to retrench staff.
“To me it’s not human centered and I have so many reservations about it. Retrenchment means laying off labor not machines and you know the effects. It will affect the schooling of the children of the workers and increase unemployment,” he said.
To him, the workers should not be happy because they will be paid huge sums of money. He explains that the payouts are relatively not sustainable enough.
He has therefore asked AngloGold to as a matter of urgency ensure that the university promised the people of Obuasi is built immediately to introduce some development in the municipality.
Effects on Obuasi and its environs
Mining has been the main backbone of Obuasi and its environs. Direct employment provided by the Mine and the peripheral services that feed off the existence of the Mine are the ones to be hit the most with the latest development.
The Mine funds some social services including the AGA Hospital, AshantiGold FC, farms, schools and a whole lot more. A large part of the plans outlined by Mark Morcombe concerns the social wing of AngloGold. AngloGold as he stated may not be able to fund these existing social services and are currently consulting stakeholders on the best way forward.
MP for Obuasi East, Edward Ennin, says the municipality is going to suffer. According to him, a chunk of the revenue for the municipality comes from AngloGold and the current state is going to deprive the assembly of funds. Also, government will lose revenue because taxes from workers will not be forthcoming anymore.
There is a general fear that Obuasi would turn into a ‘ghost town’ by the end of 2014. According to some concerned citizens, most of the workers at the Mine currently are not indigenes of Obuasi and may leave after receiving their payouts. Also the indigenes may also decide to resettle in other towns and cities in Ghana and start life anew.
Summary
AngloGold Ashanti is not shutting down the Obuasi Mine as earlier reported but redeveloping the concession. Production would therefore continue while major maintenance works are undertaken within a period of 18 to 24 months.
The mine would maintain between 500 to 600 workers out of the 6500 current workforce during the period of maintenance.
One thing that is sure is that after resumption of full operations only a fraction of the number of staff that is laid off would be recalled. This is because the strategic mine repositioning plans of AngloGold mainly hinges on cost-cutting and enhancing large scale mechanized underground mining.
After the redevelopment, the mine is expected to operate for about 17 years based on the existing 6.5 million ounces of ore deposits currently available.
Mark Morcombe asserts that the mine has the potential to be profitable way beyond the current 17 years target if the redevelopment is done effectively.
By: Kojo Akoto Boateng/citifmonline.com/Ghana