Mining in Ghana
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Ghana's mineral sector had started to recover by the early 1990s after its severe decline throughout the 1970s. One indicator of the scale of decline was that by 1987, only four gold mines were operating in Ghana, compared with eighty in 1938. Throughout the 1970s, the output of gold, as well as bauxite, manganese, and diamonds, fell steadily. Foreign exchange shortages inhibited mine maintenance, new exploration, and development investment. The overvalued cedi and spiraling inflation exacerbated mining companies' problems, as did smuggling and the deteriorating infrastructure. Energy supplies failed to meet the industry's growing needs; foreign exchange shortages constrained oil imports, and domestically generated hydroelectricity was unable to make up the shortfall.[1]
After 1983, however, the government implemented a series of measures to enhance the sector's appeal. In 1986 new mining legislation for the gold and diamond sectors replaced the previous complex and obsolete regulations, and a generous incentives system was established that allowed for external foreign exchange retention accounts, capital allowances, and a flexible royalties payment system. Since then the sector has benefited from a wave of fresh investment totaling US$540 million since 1986, and by the early 1990s mining was the country's second highest foreign exchange earner.[1]
Under legislation passed after 1983, the government liberalized and regularized the mining industry. For the first time, the government made small claim-holding feasible, with the result that individual miners sold increasing amounts of gold and diamonds to the state-operated Precious Minerals Marketing Company. In 1990 the company bought 490,000 carats of diamonds and 20,000 ounces of gold and earned a total of US$20.4 million through sales, 70 percent of it from diamond sales and 30 percent from gold bought from smallscale operators. Diamond output totaled 688,000 carats in 1991 and 694,000 carats in 1992, while gold production amounted to 843,000 fine ounces in 1991 and 1,004,000 fine ounces in 1992. Furthermore, the government succeeded in attracting significant foreign investment into the sector and, by early 1991, had signed over sixty mining licenses granting prospecting rights to international companies. To forestall domestic criticism of large-scale foreign control of the sector, the government announced in mid-1991 the establishment of a state-controlled holding company to buy shares in mines on behalf of private, that is, foreign, investors.[1]
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[edit] Gold
Ghana has produced and exported gold for centuries. In precolonial times, present-day Ghana was one source of the gold that reached Europe via trans-Saharan trade routes. In the fifteenth century, Portuguese sailors tried to locate and to control gold mining from the coast but soon turned to more easily obtained slaves for the Atlantic slave trade. Most gold mining before the mid-nineteenth century was alluvial, miners recovering the gold from streams. Modern gold mining that plumbs the rich ore deposits below the earth's surface began about 1860, when European concessionaires imported heavy machinery and began working in the western areas of present-day Ghana. The richest deposit, the Obuasi mine, was discovered by a group of Europeans who sold their rights to E.A. Cade, the founder of Ashanti Goldfields Corporation (AGC). Since the beginning of the twentieth century, modern mining in the Gold Coast has been pursued as a large-scale venture, necessitating significant capital investment from European investors.[1]
Under British colonial rule, the government controlled gold mining to protect the profits of European companies. The colonial government also restricted possession of gold as well as of mercury, essential in recovering gold from the ore in which it is embedded. Following independence, foreign control of the sector was tempered by increasing government involvement under the Nkrumah regime; however, production began to decline in the late 1960s and did not recover for almost twenty years. In the mid-1960s, many mines began to hit poorer gold reefs. Despite the floating of the international gold price in the late 1960s, few investors were willing to invest, and the government failed to provide the capital necessary to expand production into new reefs. Of the two major gold mining enterprises, neither the State Gold Mining Corporation nor AGC (40 percent controlled by the government) expanded or even maintained production.[1]
Under the ERP, the mining sector was targeted as a potential source of foreign exchange, and since 1984, the government has successfully encouraged the rejuvenation of gold mining. To offer incentives to the mining industry, the Minerals and Mining Law was passed in 1986. Among its provisions were generous capital allowances and reduced income taxes. The corporate tax rate was set at 45 percent, and mining companies could write off 75 percent of capital investment against taxes in the first year and 50 percent of the remainder thereafter. The government permitted companies to use offshore bank accounts for service of loans, dividend payments, and expatriate staff remuneration.[1]
Companies are permitted to retain a minimum of 25 percent of gross foreign exchange earnings from minerals sales in the accounts, a level that can be negotiated up to 45 percent. Reconnaissance licenses are issued for one-year renewable periods, prospecting licenses are valid for three years, and mining licenses are in force for up to thirty years. The government has the right to 10 percent participation in all prospecting and to extend its share if commercial quantities of a mineral are discovered. In response, between 1985 and 1990 eleven companies became active with foreign participation, representing investments totaling US$541 million. Since 1986 there has been a gradual recovery in overall production.[1]
More than 90 percent of gold production in the early 1990s came from underground mines in western Ashanti Region, with the remainder coming from river beds in Ashanti Region and Central Region. AGC, the country's largest producer, mined 62,100 fine ounces in January 1992, the highest monthly production ever recorded since the company began operation in 1897. The company also lowered its costs in relation to production during the last quarter of 1991 from 0.26 percent in October to 0.24 percent in December. Production during the company's fiscal year of October 1990 to September 1991 was 569,475 fine ounces, 42 percent more than the previous year's figure of 400,757 fine ounces and the largest amount ever produced by the mine. The second largest amount produced was 533,000 fine ounces, produced in 1972.[1]
AGC planned major expansions in the early 1990s funded by World Bank loans. In early 1991, the corporation announced the discovery of new reserves estimated at more than 8 million ounces, in addition to its known reserves of 22.3 million ounces. The new reserves include lower-grade and remnant ores that the corporation had been unwilling to mine because of high costs. AGC planned to lower costs through capital-intensive operations and a sharp reduction of labor costs. It also planned then to raise output from a projected 670,000 fine ounces for 1992 to more than 1 million fine ounces a year in 1995. The expansion was to be funded by an International Finance Corporation loan package totaling US$140 million. AGC was to put up the balance, estimated to exceed US$200 million.[1]
AGC was not the only company to benefit from an upsurge in production. Despite its increased production, the company's overall share of the domestic gold market declined from 80 percent to 60 percent in the same period that other operators entered the industry. Provisional figures for 1991 showed that two new mines, Teberebie and Billiton Bogoso, produced 100,000 fine ounces each, while other companies, including State Gold Mining Corporation, Southern Cross Mining Company, Goldenrae, Bonte, and Okumpreko, were stepping up production.[1]
Several other enterprises were on the drawing board or were about to open by mid-1992. The British company Cluff Resources had raised US$10.2 million to finance a new mine at Ayanfuri. The company had been involved in exploration since 1987 and planned to produce as much as 50,000 ounces of gold annually. A CanadianGhanaian joint-venture gold mine and associated processing facilities was commissioned in mid-1991 in Bogoso, western Ghana. Finally, in May 1992, a joint-venture company was created to prospect for gold in the Aowin Suamang district in Western Region. Shareholders in the new company included the Chinese government (32.68 percent), private investors in Hong Kong (32 percent), the Ghanaian government (10 percent) and private Ghanaian interests.[1]
In 1992, Ghana's gold production surpassed 1 million fine ounces, up from 327,000 fine ounces in 1987. In March 1994, the Ghanaian government announced that it would sell half of its 55 percent stake in AGC for an estimated US$250 million, which would then be spent on development projects. The authorities also plan to use some of the capital from the stock sale to promote local business and to boost national reserves. The minister of mines and energy dispelled fears that the stock sale would result in foreign ownership of the country's gold mines by saying that the government would have final say in all major stock acquisitions.[1]
[edit] Diamonds
The government also is trying to expand Ghana's diamond mining industry, which has produced primarily industrial grade gems from alluvial gravels since the 1920s. More than 11 million carats of proven and probable reserves are located about seventy miles northwest of Accra. The main producer is the state-owned Ghana Consolidated Diamonds (GCD), which operates in the Birim River Basin. In the 1960s, the company mined 2 million carats of diamonds a year, but annual production in 1991 amounted to only 146,000 carats. This downturn resulted from technical problems and GCD's weak financial position. Production from all mines came to 688,000 carats in 1991 and to 694,000 carats in 1992.[1]
[edit] Manganese
Ghana is one of the world's leading exporters of manganese; however, only 279,000 tons were produced in 1992, compared with the all-time high of 638,000 tons in 1974-75. Ghana has reserves exceeding 60 million tons, and considerable rehabilitation of the sector took place in the 1980s. Ghana National Manganese Corporation's mine and the surrounding infrastructure were repaired, helping to raise production from a low of 159,000 tons in 1983 to 284,000 tons in 1989 and 247,000 tons in 1990. The corporation earned US$20 million from its exports in 1991, up from US$11.6 million in 1989 and US$14.2 million in 1990. Approximately US$85 million was also invested by private investors at the newly explored Kwesikrom deposit.[1]
In the early 1990s, the government announced plans to privatize its diamond-mining operations and to expand production. At Accra's invitation, De Beers of South Africa agreed to undertake an eighteen-month feasibility study to determine the extent of the Birim River Basin diamond reserves. The survey was to cost US$1 million. A De Beers subsidiary will be the operator and manager of GCD, while Lazare Kaplan International, a New York-based diamond polishing and trading company, will produce and market the diamonds.[1]
In 1989 the government established the Precious Minerals Marketing Corporation (PMMC) to purchase minerals from small producers in an effort to stem diamond smuggling. Estimates suggested that as much as 70 percent of Ghana's diamonds were being smuggled out of the country in the mid-1980s. In its first sixteen months of operation, the PMMC bought 382,423 carats of diamonds and 20,365 ounces of gold and sold 230,000 carats of diamonds worth US$8 million. The corporation also earned ¢130 million in 1991 on its jewelry operations, up 48 percent from the previous year, and it planned to establish joint marketing ventures with foreign firms to boost sales abroad. Nevertheless, because of new complaints over raw gem sales, the government in March 1992 ordered an investigation into the operations of the state agency and suspended its managing director.[1]
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