Ghana’s next gold mine enters construction

If all goes according to plan Ghana will have its newest large scale gold mine enter into commercial production by late 2025. This is the Ahafo North mine being developed by Newmont Mining, the American miner that is the biggest in the world with interests in gold, silver, copper, lead and zinc spread across North and South America, Australia and Africa ,

That however is a big if – the current targeted date for the commencement of production is nearly three years after the original date of end 2023. The antics of land speculators who set up flimsy structures across the area that Newmont Mining had declared the mining area to host its impending Ahafo North mine caused an 18 month delay in the commencement of its construction, as they sought public sympathy to get the mining company to pay them compensation along the same lines granted to genuine property owners on the land. Eventually, Newmont, prodded by the Ahafo Regional Government had to cough up some GHc45 million in what it called relief payments rather than compensation, to get those land speculators off its back.

But there are similar troubles still ongoing; now a group of 26 farmers who go by the name Concerned Farmers are standing their ground, refusing to accept the compensation offered by Newmont to relocate their farms out of the Mining Area at rates agreed by the Crop Compensation Negotiation Committee. Efforts to come to a negotiated settlement by Newmont itself, civil society leaders in the area, traditional authorities, the regional and local government’s and even the Asantehene himself have all proved fruitless so far, in part because the concerned farmers keep shifting their demands between insisting on a higher – but specifically unstated – rate of compensation above that agreed with all the other farmers – and refusing to relocate their farms no matter the compensation offered.

However, even as Newmont continues its efforts to negotiate a settlement with those recalcitrant farmers it is moving ahead with its plans for the Ahafo North mine’s development, with actual construction now scheduled to begin in April.

To be sure the stakes are high. The mine is projected to produce between 350 to 375 million ounces of gold on average each year over its expected 13 year mine life span, although during the first five years, production will be closer to 300 million ounces before ramping up thereafter.

It is designed as an open pit (surface) mine utilizing a stand-alone mill for processing 3.8 million ounces of gold reserve and 1.4 million ounces of identified gold resource. Newmont claims there is plenty of upside potential for more resources on all sides which may result in increased production and/or longer mine life.

The mine will not come cheap. After initially budgeting US$850 million to build it – the amount approved by Newmont’s board of directors back in 2021 – the approved mine development cost has risen to between US$950 million and US$1,050 million.

Andries Havenger, Project Director for the impending mine confirms that the budget has seen some adjustments in part because of the unexpected cost of acquiring land and in part due to inflation and exchange rate flunctuations.

However, the economics of the mine show it to be well worth the investment. Over the first five years of the mine production cost is projected at just US$600-US$700 per ounce and even its all inclusive sustainable cost (which includes all costs incurred from mine development to reclamation of the land at the end of the mine’s life span) is projected at just US$800-US$900 an ounce. Instructively this means production at the mine will be significantly lower than the average for all Newmont’s gold mining activities globally, of US$1,200 per ounce currently.

Newmont has forecast an average gold price of US$1,700 per ounce over the impending mine’s life span and is satisfied with the profit per ounce before tax of at least US$800 this would generate. But the situation could even be better still;’ currently the global market price for gold is over US$1,900 per ounce, propelled by global macro-economic uncertainties.

This means strong profitability potentials for Newmont and consequently, huge fiscal income for government in the form of corporate income tax at 35%, royalties at a minimum of  3% plus the state’s freely carried equity interest. But perhaps even more importantly, it means major foreign exchange inflows for Ghana at a time it needs them direly. At the current global market price fix of nearly US$2,000 per ounce, the impending mine could eventually generate up to US$700 million in foreign exchange earnings yearly and based on current arrangements this would allow the Bank of Ghana to add some US$140 million to the country’s gross foreign reserves each year in the form of gold, through cedi payments to Newmont for the gold it purchases. If the gold for oil initiative is sustained a similar amount in gold could become available for the importation of petroleum products, this reducing pressure on those reserves  – and consequently the cedi – dollar exchange rate.

As well as all this the mine will create some 1,800 jobs during its construction stage, although this would fall to about 550 jobs when construction is completed and the mine commences actual production. But with 40% of these jobs reserved for locals  – this rising to 53% by 2025 – the host communities stand to gain heavily. Local contractors and suppliers also stand to get contracts worth US$3 billion in 2023 alone, this rising higher by the year as mine construction gathers speed. A core business opportunity reserved for local contractors is the building of 250 homes for households to be resettled outside of the mining area at a cost of US$14 million.

Ahead of the expectedly imminent commencement of actual construction, Newmont is already busy. It is financing the diversion of an 8.5 kilometer stretch of the Kumasi to Sunyani highway, by the Ghana Highways Authority to accommodate the impending new mine, a project that started on February 1 and will take 12 months to complete. Already the company is constructing temporary field offices for its staff and key contractors; has established a depot for its pipelines and for fuel, and has built a communications mast to improve on the hitherto poor quality of telecommunications in the area, which the whole local community will also benefit from.

Based on its Influx Study, the company is also addressing the expected impact of increased need and actual demand for health, security, water and sanitation. Part of this will involve a small town water supply system for communities not connected to Ghana Water Company which is scheduled for completion by the end of 2023.

The impending Ahafo North mine being developed by Newmont should retain its position as the biggest gold miner in Ghana; it already produces close to a million ounces a year from its mines at Ahafo South and Akyem.