Falling gold prices and high cost of production, coupled with overage equipment and encroachment by illegal miners is making mining giant, AngloGold Ashanti, consider a shut, fix and re-open proposal in a final decision to give its ailing Obuasi mine a face-lift, a source close to the talks has divulged.
After the retrenchment of about 430 employees last year, the strategy; which could take between 18 to 24 months will see more job cuts.
Affected workers are in talks with the company to decide on a severance package.
“The falling gold price is a major problem pushing Obuasi into a protracted loss-making situation. Production is falling rapidly; this creates an exposure to the current falling gold price. And because the operating cost base is weak, the cash cost is so high,” the source said.
In 2013 AngloGold invested about US$200million in Obuasi, which it believes is worth more than 20 years of mine-life with 9 million ounces of gold reserves.
However, in the fourth quarter of 2013, the company registered a loss of US$16million at the mine, the biggest among its operations anywhere in the world. After output plunged to a 20-year low of 239,000 ounces in the early 2000s, the low price of gold is posing danger to its survival.
Minister for Lands and Natural resources, Alhaji Inusah Fuseini encouraged the restructuring saying it was necessary because the mine was not “posting a profit in its operations,” adding that, “the mine is important to the improvement of its communities and an important national asset.”
Within the wider mining industry, the unfavourable gold price has triggered retrenchment and a rethink of investment plans.
Following a similar incident last year where 240 workers were laid off, Newmont Ghana, another of the country’s major miners, last week, said it will be terminating the employment of additional 500-600 miners in the first quarter of the year.
Official data released this week showed the industry’s gold production declined by 5% last year with the key causes being declining prices and the Obuasi mine’s challenges.
Output fell from 4.324 million ounces in 2012 to 4.12 million ounces in 2013 following gold’s 28 percent price drop.