Ghana

Greenfield exploration needed to rejuvenate the mature market

The continent’s largest gold producer after dethroning South Africa in 2018, Ghana remains the sub-region’s prime-rated jurisdiction; its continuous political stability, together with a track record of producing over 100 million oz, and the long-standing success of majors like Newmont or AngloGold Ashanti have earned Ghana the trust of investors. Yet the country’s maturity in gold production is also read as a downside; Ghana’s prospectivity at surface is reduced considering the extensive drilling in the country, while its metallurgy is becoming more challenging and deposits are found at greater depths. A more demanding regulatory framework is another mark of its maturity. These factors combined, Ghana’s competitiveness has been eclipsed by newcomers such as Nigeria, who are creating tax havens for explorers, or by largely untouched jurisdictions like Ivory Coast.

Ghana’s faltering reputation for exploration was caused by a dearth of major discoveries in the last five years. With the exception of Cardinal Resources and Azumah Resources, there are a few greenfield projects underway. The country’s stringent fiscal environment, compared to other “younger” jurisdictions, has not helped to attract new exploration ventures. At the Ghana Chamber of Mines, president Sulemanu Koney has been advocating for junior-friendly policies, such as scraping VAT for services like assaying and drilling services, which are often outsourced, to make up for the high-risk nature of exploration and urgency to replenish the country’s project pipeline: “For as long as the gold price holds up, mining companies will try to mine as much as they can, but the reality is that producers cannot change their guidelines overnight. (…) We should create an environment in which mining companies can expand proactively and not wait for a pandemic to realize the importance of the gold sector,” he said.

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“Investors often get frustrated with the slow pace of transactions in Ghana, mainly due to bureaucracy and long waiting times, which have been magnified by the COVID-19 pandemic. International clients are generally accustomed to more automated and expeditious processes employed in their home countries.”

Zoe Phillips Takyi-Appiah, Senior Partner, JLD and MB Legal

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“In Ghana, originally horizontal sedimentary rocks have been folded into near vertical structures, so ore bodies tend to plunge to depths that can be 10 times the strike length. There’s no question that most of Ghana’s gold is deep.”

Bashir Ahmed, Vice President Production & Development, Asante Gold

Ghana’s regulatory framework has naturally progressed towards stricter regulations to see the country benefit more from its long history as a gold producer. Ghana is often the trend-setter for regulation, having already triggered a movement towards more comprehensive local content policies. This year, the country is also revising its GIPC (Ghana Investment Promotion Centre) Act, raising the minimum requirement for foreign investment. The Minerals and Mining Act of 2006 is being revised, although the pandemic and the upcoming general elections in December this year are likely to slow down any concrete update.

The high gold prices, in a jurisdiction producing 142.4 mt/y of gold, have alerted some analysts that governments may increase taxation in a trend of ‘resource nationalism’. George Kwatia, partner at PwC Ghana, does not adhere to this view: “Whoever ends up in power following the election in December, I am convinced positive mining initiatives will be continued. The mining industry has been a staple of Ghana's history for centuries, and it remains the bedrock of our investment profile.”

The rise in the gold price may not only fuel more M&A activity, but it will also make projects deemed uneconomic under previous price conditions more attractive. This change of perspective especially resonates with Ghana’s under-developed, yet highly prospective, underground opportunities. AngloGold Ashanti’s redevelopment project to optimize the underground Obuasi mine is already showing how technology can maximize success in underground operations. After being put on care and maintenance in 2016, the Obuasi mine poured its first gold last December, producing 400,000 oz/year in 2020, and looking at a LOM beyond 20 years. Mining at Obuasi now goes down to 2.5 km, and academics are suggesting that the mineralizing system could go as deep as 7 km. Other mines, such as Golden Star’s Wassa, have also moved underground, while explorer Newcore Gold foresees that its Enchi project will return more interesting results once more drilling is done into the sulfide at depth.

Images courtesy of Gold Fields (1) and Trevali (2)

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