The Ghana Chamber of Mines is confident gold production by its members will increase by over 15 percent in 2021 after declining by about 5 percent in 2020 due to the impact of COVID-19.
Overall gold production in Ghana declined by 12.1% in 2020, the highest year-on-year decline since 2004.
During his presentation at the recently held 93rd Annual general meeting of the Chamber of Mines held virtually the President of the Chamber, Eric Asubonteng, noted that the easing of COVID-19 restrictions bodes well for the entire sector.
“Overall, we project that global supply of gold in 2021 will exceed the corresponding output in 2020. In 2021, the Chamber expects most of its gold producing member companies to recover from the drags that characterized their operations in the preceding year. Overall, the gold output of producing member companies for 2021 is forecasted to range between 3 million to 3.3 million ounces,” he noted.
Mr. Asubonteng further highlighted the contribution of the Chamber to the revenue of the central government as well as their contribution to the local economy.
“Producing member companies of the Chamber returned $3.67 billion out of the mineral revenue of $5.14 billion to the country. This represents 71 percent of the revenue of producing member companies. The Chamber and its producing member companies prioritize the sourcing of inputs from manufacturers and suppliers in Ghana. This is a direct way to retain minerals value in the country and to stimulate broad-based linkages across different sectors.”
He continued, “Pursuant to this, producing member companies of the Chamber spent $4.387 billion in Ghana through payments to manufacturers and suppliers of goods and services, taxes, and financing of social investment projects. In essence, 85.7 percent of producing member companies’ expenditure was retained in
The COVID-19 pandemic has affected the commodity markets in a variety of ways. Company operations have been affected through isolated outbreaks and government-mandated shutdowns and the demand for many commodities remain low with a lower near-term demand on the horizon.
One mineral that has benefitted from the fears and uncertainty associated with the pandemic was gold. In 2020 the price of gold shot up around the period when the COVID-19 infection was declared a pandemic by the World Health Organisation.
After that declaration, many investors sought to convert their assets into bullion and its related assets, which directly provided the needed momentum for a sustained rise in the price of gold which jumped up by about 5 percent from April 2020 to April 2021, moving from $1,681 per ounce to $1,759 per ounce.
Production on the other hand didn’t perform so well. Output by the large-scale sub-sector which captures members of the Chamber of mines dropped by 4.8 percent to 2.847 million ounces last year.
Below is the full report of the performance of the Chamber of Mines presented by its President, Eric Asubonteng.
The performance of Ghana’s minerals sector was muted in 2020 compared to the preceding year. The total volume of gold produced in the country declined from 4.577 million ounces in 2019 to 4.023 million ounces in 2020. Ghana continued to hold on to its position as the largest producer of gold in Africa and the sixth in the
world even though the country recorded a decline in output by 12.1 per cent. Ghana’s closest rival and long-term leading producer, South Africa, also recorded a 13.7 per cent decline in production at 91 tonnes and remained
in second place on the continent and tenth globally.
It was not all gloomy on the continent, as Ghana’s West Africa neighbours, Burkina Faso, recorded a 19 per cent increase in production to 74 tonnes on the back of increased production levels by that country’s leading gold producers. Permit me to state that whereas the decline in Ghana’s production was because of a combination of domestic issues and COVID-19-related factors, that of South Africa was mainly due to structural problems related to declining grades, curtailment in the supply of electricity and the high cost of accessing ore bodies in deep mines. Africa’s production accounted for 21 percent of global mine production in 2020 (according to S&P).
The 12.1% decline in production in Ghana is the highest year-on-year decline since 2004. While the large-scale sub-sector dropped by 4.8 percent to 2.847 million ounces in 2020, the small scale sector fell by 26 per cent from 1.588 million ounces in 2019 to 1.175 million ounces in 2020. A positive note, however, was the commencement of production at the Obuasi Mine of AngloGold Ashanti and growth in the output at Gold Fields’ operations as well as the Wassa Mine of Golden Star Resources.
In a marked departure from past years, the volume of manganese produced by Ghana’s sole producer, Ghana Manganese Company, declined from 5.383 million tonnes in 2019 to 2.358 million tonnes in 2020. The 56.2 percent drop in production was primarily due to the government’s directive to stop the company’s operation in the year under review, resulting in the suspension of manganese production in the first quarter of 2020. For diamonds, the downward trend in the purchases continued unabated due to the suspension of production by
the only large-scale producer, Great Consolidated Diamond Company. In essence, diamond purchases in 2020 reduced by 25.1 percent to 25,292 carats from 33,789 carats in 2019. Additionally, Ghana’s sole producer of
bauxite, the Ghana Bauxite Company, recorded a 4.1 per cent improvement in its output. The expansion in the shipment of bauxite from 1.116 million tonnes in 2019 to 1.162 million tonnes in 2020 was principally due to an improvement in its operational activities.
In terms of exploration expenditure in Africa, planned investments in gold exploration projects took a dip to USD 590 million in 2020 compared to the USD 615.9 million in 2019. Ghana dropped from second position to fourth in
2020 behind her West Africa counterparts – Cote D’Ivoire, Burkina Faso and Mali – in planned exploration expenditure on account of a significant increase in budgetary allocation for exploration in Cote D’Ivoire and Mali. Cote D’Ivoire’s planned expenditure stood at USD 105 million in 2020 displacing Burkina Faso as the largest recipient of gold exploration capital in Africa.
Direct Fiscal Contribution
Figures from the Ghana Revenue Authority showed that the mining and quarrying sector regained its position as the leading source of direct domestic revenue in 2020. The sector’s contribution to the national fiscal purse increased from GH4.013 billion in 2019 to GH4.172 billion in 2020. The 3.97 percent increase in fiscal revenue was primarily due to the increase in mineral royalty receipts, which partially made up for the reduction in the other
sources of revenue from the sector. The significant appreciation in the price of gold during the year under review increased mineral royalty revenue by 38.20 percent from GH1.007 billion in 2019 to GH1.391 billion in 2020. Corporate income tax however declined from GH2.269 billion in 2019 to GH2.269 billion in 2019 to GH2.139 billion in 2020. Similarly, employee income tax (PAYE) also fell from GH736.256 million to GH641.868 million over the same period.
Other revenue sources from the sector also dropped from GH674,312 in 2019 to GH557.868 in 2020. The share of mining and quarrying in total direct domestic fiscal receipts was 18.1 per cent in 2020, which is not significantly different from the 18.3 percent recorded in 2019.
The mining industry remained the main anchor of Ghana’s trade balance as data from the Bank of Ghana showed that the mining sector was the foremost source of foreign exchange receipts in 2020. The mineral sector alone accounted for 48.4 percent of gross merchandise exports in 2020. This compares favourably with the 42.6 percent recorded in 2019 and far outstripped the combined contribution of crude oil and cocoa in 2020 by more than 12 percentage points. The mining industry continued to support the economy by reducing the pressure on the local currency and its resultant impact on prices and other parameters. Proceeds from export of minerals increased from USD6.678 billion in 2019 to USD6.998 billion in 2020, representing a growth rate of 4.8 per cent.
Producing member companies of the Chamber returned USD 3.67 billion out of the mineral revenue of USD 5.14 billion to the country. This represents 71 per cent of the revenue of producing member companies. The proportion of mineral revenue returned exclusively through commercial banks was more than the statutory
threshold prescribed in the various the various Development Agreements as well as the Minerals and Mining Act 2006 (Act 703). This further emphasizes the Chamber’s commitment to supporting the growth of Ghana’s economy.
Expenditure of Mineral Revenue
The Chamber and its producing member companies prioritize the sourcing of inputs from manufacturers and suppliers in Ghana. This is a direct way to retain minerals value in the country and to stimulate broad-based linkages across different sectors. Pursuant to this, producing member companies of the Chamber spent USD4.387 billion in Ghana through payments to manufacturers and suppliers of goods and services, taxes, and financing of social investment projects. In essence, 85.7 per cent of producing member companies’ expenditure was retained in Ghana. As a Chamber, we will continue to stimulate local participation in the inputs market to create jobs and increase value to grow the economy.
It is important to indicate that in real terms, the gross value added by the mining and quarrying sub-sector to Ghana’s GDP declined from GH13.6 billion in 2019 to GH11.8 billion in 2020. In percentage terms, the share
of mining and quarrying in GDP reduced from 8.6 per cent to 7.5 per cent in 2020. At the end of 2020, the mining and quarrying sub-sector was the third and fifth largest economic activity in the industrial sector and the entire
economy, respectively. As many of you are aware, in 2020 the price of gold shot up around the period when the COVID-19 infection was declared a pandemic by the World Health Organisation. After that declaration, many
investors sought to convert their assets into bullion and its related assets, which directly provided the needed momentum for a sustained rise in the price of gold. The increased demand for gold and other related assets also pushed the price upward to USD2,067 per ounce on 6th August. It is pleasing to note that the increases also went a long way to boost government revenue from gold production.’
The Chamber, Collaborations and the COVID-19 pandemic
At the onset of the COVID-19 pandemic in Ghana, the Chamber and its producing member companies rolled out initiatives to support the government to curb the negative impact of the pandemic. Producing member companies supported the national effort with USD$ 2 million. This constituted a donation of:
- Twenty (20) ventilators and accessories to the Ministry of Health for distribution to hospitals across the country;
- PPEs for frontline health workers;
- Logistics to test 25,000 COVID-19 cases at three public testing laboratories, namely
- Noguchi Medical Research Institute
- Kumasi Centre for Collaborative Research in Tropical Medicine (KCCR)
- National Public Health Reference Laboratory of the Korle-bu Teaching Hospital
Individual member companies of the Chamber instituted stringent measures to protect employees, contractors, and host communities from the pandemic to keep the mines running. These included extensive
internal COVID-19 protocols at mine sites, as well as donations to health facilities, traditional authorities, local government institutions and community groups. As good corporate citizens, the Chamber and its members identify with progressive national efforts to protect the people and institutions in our host communities and the nation at large. We will continue to play that crucial role in support of efforts to keep the citizens of the country safe.
In 2020, the Chamber’s commitment to bridge the gap between the mining industry and academia continued to bear fruits as the Secretariat worked with a team of researchers from the University of Mines and Technology
(UMaT), led by then Vice-Chancellor, Prof. J.S.Y. Kuma, who is the immediate-past occupant of the Chamber’s chair on Environmental Studies, to undertake a study on the linkages between the minerals and non-mining sectors. The overarching objective of the study is to inform policy formulation on ways to maximize the potential of the mining sector’s supply chain for national development. I am expecting a productive outcome that can be transformed into actionable items not only to support the growth of the value chain of the mining industry but to also harness the linkage opportunities between the mining and the non-minerals sector to ultimately build a resilient economy.
Closely linked to this, is the operationalization of the Chamber’s Tertiary Education Fund (TEF) which is set to revolutionize training and research to support Ghana’s mining industry. In the year under review, the Chamber approved the construction of a USD $1.2 million ultramodern Ghana Chamber of Mines’ Mining and Mineral Resources Block. Additionally, fourteen (14) lecturers from UMaT were seconded to mining companies as a means to create the needed synergy between academia and industry. This was critical to enable the cross-fertilization of ideas between lecturers and the mining companies for better mine operational outcomes and more rounded products from the university. We will continue to support our institutions of higher learning to
produce the best human resources that can hold their own in Ghana and anywhere in the world.
2020 was certainly a difficult year for almost all sectors of the economy, given the serious ramifications of the pandemic. As such it only served to deepen the woes of the mining industry which was only tempered by the price of gold. The sector continued to grapple with perennial challenges which required urgent attention from the government. We have taken the liberty to outline a few as the full range of issues are reflected in the 2020 Annual Report under the section, Performance of the Mining Industry in Ghana. I must admit that most of the
issues are not new, and our expectation is that going forward, we will not have to enumerate them in the hope that we would have made progress in working constructively with our stakeholders in government to continue to
– Security of Mining Companies
We are pleased to note that following extensive deliberations on the challenges with security on mine sites with the withdrawal of the military, it was agreed that a specialized unit of the Police Service would be set up to provide the much needed preventive security support to the mining companies. In 2020, the government
approved the recommendation with a first batch of personnel expected to have been deployed by the end of the first quarter of 2021. The aftermath of the 2020 elections stalled the planned deployment. We are however pleased to note that with the active support and leadership of the Hon. Minister for Lands and Natural Resources, the Ghana Police Service has now trained and deployed this specialized unit of the police to the respective mines. It is our expectation that this arrangement will be sustained, to give comfort and assurance to current and would-be investors (local or foreign) of the security of investments in Ghana.
– Development of Host Communities and Utilization of Royalties
The poor state of mining communities is largely a function of the development status of the country as well as an outcome of the mechanism for allocating and utilising fiscal revenues realized from the extraction of mineral
resources. Apart from the statutory proportion of mineral royalty that is returned to the host mining communities, all the other streams of fiscal revenue originating from the mining sector accrue to the central government. Even in the case of mineral royalty, only 13 percent of the mineral royalty is returned to the communities where mining takes place. Out of this amount, 4.95 per cent accrues to the respective District Assemblies while the Mining Community Development Scheme (MCDS) set up under the Minerals Development Fund Act, 2016 (Act 912) receives 4 percent. The remaining amount is disbursed to traditional authorities and stools in the host mining communities. In essence, the share of mineral royalty that is used to support development in mining communities is negligible. Obviously, this is woefully inadequate to address the infrastructure shortfalls in the hosts of the country’s mineral wealth. It is on this premise that the Chamber
continues to urge government to increase the host communities’ share of royalties to 30 percent and earmark same for specific sustainable infrastructure projects in the host communities.
– Incentives for Exploration Companies
Exploration is the single most critical activity that guarantees continuous production of minerals and discovery of new mineral resources to supplement production from existing mines or replace output of mines whose economic ore body is exhausted. However, minerals exploration investment in Ghana has declined significantly in recent years. This is alarming for a country to which mining is critical for forex and fiscal revenue generation. It is
therefore crucial to put in place an incentive scheme that will reduce the cost associated with exploration and attract the required critical investments into this high-risk business of mineral exploration. As a first step, we urge government to exempt exploration companies from payment of VAT on big ticket cost items such as drilling and laboratory services.
Effectively, the extent of actual exploration activity is diminished by upfront costs such as VAT on inputs and landholding costs. Thus, relieving the usually illiquid exploration companies from the payment of VAT as well as
reducing the cost of landholding would not only improve their cash flow and reduce their operational costs but also enhance the Ghana’s image as a competitive destination for exploration investment. In the long run, this will
guarantee continuous mineral production and flow of fiscal and forex receipts as well as other benefits from the minerals sector.
– Deplorable State of Railway Infrastructure
The western railway line, which was the primary mode of hauling bulk minerals to the Takoradi port, has deteriorated over the years due to obsolescence and limited investments. Consequently, bulk mining companies, like the other producers of bulk export commodities, have had to make use of the more expensive road haulage option, which is estimated to be 50% more expensive than rail. Successive Budget Statements and Economic Policies consistently point out the intention of government to rehabilitate the western rail network. As an industry association, we believe that the benefits of a well-functioning railway system will not be a preserve of our industry but the entire economy. It will also serve as an alternative means of transporting people, foodstuff, and other commodities across the country. The Chamber is therefore pleased at government’s efforts to rehabilitate the country’s railway network, particularly, the western railway line. We urge government to expedite action in that regard since it has the inherent potential to generate revenue to pay back the initial investment cost.
In 2021, increase in production from existing mines and easing of the COVID-19 restrictions signals good prospects for the mining industry. Similarly, the expected relatively high price of gold is likely to support growth in recycled gold and producer de-hedging. Overall, we project that global supply of gold in 2021 will exceed
corresponding output in 2020.
In 2021, the Chamber expects most of its gold producing member companies to recover from the drags that characterized their operations in the preceding year. Overall, the gold output of producing member companies for 2021 is forecasted to range between 3.0 million to 3.3 million ounces. The industry also expects production of manganese by Ghana Manganese Company to increase with a sustained full year of production in 2021.