Obuasi, home to Ghana’s most prominent gold mine, is emptying out.
On a recent morning, Paul Baah-Ampofo watched as yet another
neighbour packed up and left. One of almost 5,000 workers laid off by
global mining company AngloGold Ashanti in November, Mr Baah-Ampofo has
three months to vacate his company bungalow.
AngloGold Ashanti, the world’s third biggest miner by output, has put operations in the Obuasi mine on hold while it restructures to cut costs. The mine underpins the economy of the town, which is about 250 kilometres northwest of Ghana’s capital, Accra. Many fear high unemployment and the floundering local economy will throw Obuasi off course - but workers, the union and some residents agree that to survive, the mine has to shut down.
“It was not a surprise,” says Mr Baah-Ampofo, 52, who worked for AngloGold for 16 years. He knew the company was facing financial woes and made a back-up plan to open a pharmacy with his severance pay. “It is not easy to leave employment,” he says. “But it is the order of the day.”
After a decade of roaring demand that saw mining operations mushroom across the continent, global commodity prices have plunged: gold, for example, has
declined around 40 percent since 2011. This is forcing extractives firms to shutter unprofitable operations, pitting companies looking to streamline against towns and governments hungry for revenue.
“Ghana has had to endure the harsh economic impact of the recent declines in commodity prices,” Ghana’s minister of finance, Seth Terkper said, announcing the 2015 budget. “Our mining towns are taking the full brunt of the negative effect.”
The problem child
Gold makes up about 40 percent of external trade in Ghana, and mining companies provide vital employment. Extractives firms often bring much-needed infrastructure and services with them. In Obuasi, AngloGold subsidised everything from electricity to a community hospital. Staff numbers at the hospital have been cut, and other services are under review.
But the underground mine was far from profitable. The cost of production at Obuasi, which is over a century old, has more than doubled since 2008. Now it exceeds the current price of gold bullion, making the Ghanaian operation dependent on its South African parent company to cover costs.
"The problem child in our portfolio is the Obuasi mine,” says AngloGold Ashanti chief executive Srinivasan Venkatakrishnan, announcing earnings, adding that the mine consumed $220m in 2013. “The cash bleed rate is simply not affordable.”
To stem the flow, AngloGold plans to mechanise the mine and restart production in 18 to 24 months. The company is also considering selling part or all of the operation.
“They are trying to address a major problem with one of Ghana’s major assets,” says Prince William Ankrah, secretary general of the Ghana Mine Worker’s Union.
“In Ghana, jobs are hard to come by,” he says, but so are viable sources of revenue. “Without the restructuring the mine would have just sank and sank. Ghana needs this for the future.”
The immediate consequences are most acute in places such as Sanso, a village about 30 minutes from Obuasi which houses an AngloGold mine shaft. The fortunes of the people who live in the area rise and fall with the mine, says Peter Adansi, 58, who worked at AngloGold for 20 years.
Industry experts expect the town to suffer in the short term, but also see an opportunity. “Obuasi is the mine and the mine is Obuasi,” says Sulemani Koney, CEO of the Ghana Chamber of Mines. But, he adds: “Mines are finite. It is about time Ghana implemented policies that will help the town survive long after the mine shuts down for good.”
Obuasi’s town council is making plans to do just that. “We want to diversify our economy,” says Richard Ofori-Agyeman Boadi, the municipal chief executive. There are plans to open a light industrial area designed to draw businesses from nearby Kumasi, as well as a satellite campus of the Kwame Nkrumah University of Science and Technology. “It will improve the social, infrastructural facilities that we are all yearning for.”
The fall in commodity prices could also strain public finances. Ghana is faced with a budget deficit of 9.4 percent, which the government is hoping to reduce to 6.5 percent in 2015. This has contributed to Ghana seeking an $800m bailout from the International Monetary Fund.
Pressure points
Other governments across Africa are contending with the implications of falling prices for their natural resources. Zambia, which relies heavily on copper production, has increased open-pit mine royalties to 20 percent from 6 percent. In response, Canada based Barrick Gold announced in December that it will suspend operations at the Lumwana mine, which supports 4,000 jobs.
Zambia’s new tax rate is self-defeating, says Jackson Sikamo, president of the Zambia Chamber of Mines. “The resultant reduced production at higher costs will result in job losses and subsequently reduced overall revenue collections by government,” he says.
There is similar tension in Mali, where AngloGold Ashanti and Iamgold Corporation have stopped operations at the Yatela mine to focus on processing stockpiled ore. The government there is improving financing for artisanal mining, which is helping to drive up gold exports despite the decline in large scale efforts.
In South Africa, the continent’s leading gold and platinum producer, extractives firms are struggling with the impact of labour unrest in the mining sector, and harder to reach deposits. “They have mined the easy stuff already, so they are mining more difficult stuff [now], and it is expensive,” says Bruce Shapiro, president of business development firm MineAfrica.
“It is not a pretty picture anywhere, and the less stable the country, the less pretty it is.”
However, analysts are optimistic that limited production will reduce supply enough to trigger an increase in global bullion prices. Commodity prices are cyclical, Mr Shapiro points out. “As the commodity becomes unavailable and it is required, mines that are marginal will suddenly become profitable again.”
In Obuasi, Calliscus Nuamah hopes for the same turn of events. Mr Nuamah, 27, got a geological engineering degree he thought would guarantee a good job, and moved to the town in December. Reality dashed his ambitions.
“It will take some time before they take some people,” says Mr Nuamah. “The opportunity is not there.”
AngloGold Ashanti, the world’s third biggest miner by output, has put operations in the Obuasi mine on hold while it restructures to cut costs. The mine underpins the economy of the town, which is about 250 kilometres northwest of Ghana’s capital, Accra. Many fear high unemployment and the floundering local economy will throw Obuasi off course - but workers, the union and some residents agree that to survive, the mine has to shut down.
“It was not a surprise,” says Mr Baah-Ampofo, 52, who worked for AngloGold for 16 years. He knew the company was facing financial woes and made a back-up plan to open a pharmacy with his severance pay. “It is not easy to leave employment,” he says. “But it is the order of the day.”
After a decade of roaring demand that saw mining operations mushroom across the continent, global commodity prices have plunged: gold, for example, has
declined around 40 percent since 2011. This is forcing extractives firms to shutter unprofitable operations, pitting companies looking to streamline against towns and governments hungry for revenue.
“Ghana has had to endure the harsh economic impact of the recent declines in commodity prices,” Ghana’s minister of finance, Seth Terkper said, announcing the 2015 budget. “Our mining towns are taking the full brunt of the negative effect.”
The problem child
Gold makes up about 40 percent of external trade in Ghana, and mining companies provide vital employment. Extractives firms often bring much-needed infrastructure and services with them. In Obuasi, AngloGold subsidised everything from electricity to a community hospital. Staff numbers at the hospital have been cut, and other services are under review.
But the underground mine was far from profitable. The cost of production at Obuasi, which is over a century old, has more than doubled since 2008. Now it exceeds the current price of gold bullion, making the Ghanaian operation dependent on its South African parent company to cover costs.
"The problem child in our portfolio is the Obuasi mine,” says AngloGold Ashanti chief executive Srinivasan Venkatakrishnan, announcing earnings, adding that the mine consumed $220m in 2013. “The cash bleed rate is simply not affordable.”
To stem the flow, AngloGold plans to mechanise the mine and restart production in 18 to 24 months. The company is also considering selling part or all of the operation.
“They are trying to address a major problem with one of Ghana’s major assets,” says Prince William Ankrah, secretary general of the Ghana Mine Worker’s Union.
“In Ghana, jobs are hard to come by,” he says, but so are viable sources of revenue. “Without the restructuring the mine would have just sank and sank. Ghana needs this for the future.”
The immediate consequences are most acute in places such as Sanso, a village about 30 minutes from Obuasi which houses an AngloGold mine shaft. The fortunes of the people who live in the area rise and fall with the mine, says Peter Adansi, 58, who worked at AngloGold for 20 years.
Industry experts expect the town to suffer in the short term, but also see an opportunity. “Obuasi is the mine and the mine is Obuasi,” says Sulemani Koney, CEO of the Ghana Chamber of Mines. But, he adds: “Mines are finite. It is about time Ghana implemented policies that will help the town survive long after the mine shuts down for good.”
Obuasi’s town council is making plans to do just that. “We want to diversify our economy,” says Richard Ofori-Agyeman Boadi, the municipal chief executive. There are plans to open a light industrial area designed to draw businesses from nearby Kumasi, as well as a satellite campus of the Kwame Nkrumah University of Science and Technology. “It will improve the social, infrastructural facilities that we are all yearning for.”
The fall in commodity prices could also strain public finances. Ghana is faced with a budget deficit of 9.4 percent, which the government is hoping to reduce to 6.5 percent in 2015. This has contributed to Ghana seeking an $800m bailout from the International Monetary Fund.
Pressure points
Other governments across Africa are contending with the implications of falling prices for their natural resources. Zambia, which relies heavily on copper production, has increased open-pit mine royalties to 20 percent from 6 percent. In response, Canada based Barrick Gold announced in December that it will suspend operations at the Lumwana mine, which supports 4,000 jobs.
Zambia’s new tax rate is self-defeating, says Jackson Sikamo, president of the Zambia Chamber of Mines. “The resultant reduced production at higher costs will result in job losses and subsequently reduced overall revenue collections by government,” he says.
There is similar tension in Mali, where AngloGold Ashanti and Iamgold Corporation have stopped operations at the Yatela mine to focus on processing stockpiled ore. The government there is improving financing for artisanal mining, which is helping to drive up gold exports despite the decline in large scale efforts.
In South Africa, the continent’s leading gold and platinum producer, extractives firms are struggling with the impact of labour unrest in the mining sector, and harder to reach deposits. “They have mined the easy stuff already, so they are mining more difficult stuff [now], and it is expensive,” says Bruce Shapiro, president of business development firm MineAfrica.
“It is not a pretty picture anywhere, and the less stable the country, the less pretty it is.”
However, analysts are optimistic that limited production will reduce supply enough to trigger an increase in global bullion prices. Commodity prices are cyclical, Mr Shapiro points out. “As the commodity becomes unavailable and it is required, mines that are marginal will suddenly become profitable again.”
In Obuasi, Calliscus Nuamah hopes for the same turn of events. Mr Nuamah, 27, got a geological engineering degree he thought would guarantee a good job, and moved to the town in December. Reality dashed his ambitions.
“It will take some time before they take some people,” says Mr Nuamah. “The opportunity is not there.”
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