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Illegal mining scares away AngloGold’s investors

Mar 02
15:03 2016

AngloGold Ashanti is working with the police to prevent the expansion of illegal mining beyond the northern part of its mining lease at its Obuasi mines.

The recent incursions into the company’s mines area had scared away potential investors that Anglogold urgently required to fix the Obuasi mines.

AngloGold Ashanti’s Executive Vice President, Mr Graham Ehm, said the company’s priority was a “safe and peaceful resolution to the current situation”.

“We are hopeful of a resolution very soon, but at this stage, we are working with the police to prevent the expansion of the galamsey beyond the north,” Mr Ehm said on the sidelines of the just-ended mining Indaba Conference in Cape Town, South Africa.

Chamber of Mines

Through the Chamber of Mines, the mining industry in the country entered into an agreement with the government to provide ongoing security support to supplement the mining company’s efforts to secure property and mining leases.
On January 13, incursions into the northern part of AngloGold’s Obuasi operating footprint were turned back by security forces.

The Ghana Chamber of Mines is urging the government of Ghana to urgently turn its attention to the perennial incidents of illegal miners invading concessions of large scale mining companies, particularly during election years. The situation has arisen again with the advent of illegal miners encroaching the bona fide concessions of large-scale mining companies.

“The country stands to lose heavily if the activities of the illegal miners are allowed to fester ahead of the election in November 2016.

There is clear and presents danger to our environment and to Ghana’s economy as illegal miners fight large-scale mining companies for concessions the latter have obtained legally. This in itself breeds a sense of insecurity and fear among investors which will cause a slowdown in investment in the country’s minerals sectors” says the Chief Executive Officer of the Chamber, Mr Sulemanu Koney.

All the efforts instituted by the Minerals Commission complemented by that of the chamber to attract investment into the minerals sector would come to naught if government does not put in place security measures to prevent an imminent loss of investor confidence in the country with its attendant risk of some companies cutting investments.

This incursion of several hundred illegal miners in the northern part of the mine comes against the background of illegal mining causing considerable disruption to mining operations across Ghana for some time.

The biggest problem it, however, faces is the depleting quality of the mined ore from its deep underground resources which though is above grade six, involves higher production cost and less profitability in processing.

Withdrawal of critical staff

As a consequence, AngloGold has removed all non-critical staff from the mine while keeping government stakeholders updated and engaging with the authorities at the highest levels for the re-establishment of law and order and the removing of illegal miners from the site.

At the same time, the company is undertaking a feasibility to redevelop the stalled Obuasi, which involves refocusing its efforts on decreasing upfront redevelopment capital, cutting operating costs and improving recoveries based on recent test work and engineering – work that it expects to complete by mid-year.

The environmental review process for the mine’s redevelopment, which is being undertaken in conjunction with Ghana’s environmental protection agency, will likely extend into the second half of this year.

Companies such as AngloGold Ashanti - Obuasi Mine in recent weeks and Perseus Mining at Ayanfuri in recent months, have seen an escalation of activities of illegal miners on their concessions.

These companies who employ thousands of Ghanaians are compelled to use all legal means to eject the illegal miners from their concessions with the help of the security apparatus. This has often resulted in violent confrontations leading to injuries and destruction of property.

AngloGold Ashanti has particularly been inundated by illegal miners contributing to its inability to attract investors to partner it to revamp the mine. The recent surge in illegal mining activities at the Obuasi mine.

With those elements in place, AngloGold would have a full investment package to offer any prospective development partner, which is being sought following the withdrawal from a potential joint venture agreement by Randgold Resources.

The company had, in September 2015, entered into an agreement with fellow gold miner Randgold Resources, with the latter expected to lead and fund a development plan to rebuild the mine into a viable mining business.

However, after completing a due diligence process, Randgold in December pulled out of the deal, stating that the development plan would not satisfy its internal investment requirements.


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