Mining Industry in Ghana: Gold Fields Limited, A Globally Diversified Gold Producer

Interview with Alfred Baku, Executive Vice President and Head of West Africa Region at Gold Fields

What is your assessment of the sector in 2018? What are the latest trends?

Currently, the mining sector is still leading the pack in terms of our domestic revenue. Last year, for instance, we had over 16% of the total revenue that the GRA, Ghana Revenue Authority, accrued. The mining and coring sector is still leading in terms of exports as well. Our contribution to export is about 43%. If you combine oil and gold together, we are also doing very well. Oil is at about 23% compared to our 43%, and cocoa is about 19%. In terms of the corporate taxes that we pay, we are also leading the pack. Last year, we contributed almost 1 billion Ghana cedis in corporate tax. On the royalties front, it is in excess of 700 million. So, our sector is in good shape and the outlook is good. Gold Fields has just started an alliance with Asanko and there are a lot of exploration activities in the country. So, the future looks quite bright.

However, some people say that the government is not giving enough incentive for the mining companies and the mining companies could be more interested in going somewhere where they have better advantages. Do you agree with this?

I tend to agree with the people who are saying that because, particularly with exploration, gold is finite. You need to do the exploration to be able to actually discover more so that as you deplete, you will be able to replace. If you look at the exploration front, the current fiscal regime that we have for exploration in terms of taxes is quite high in Ghana compared to the countries around us. If the government can do a little bit in that front, we will be able to have a lot of investors coming into the country to actually invest in the exploration front. Gold Fields is a global company and we operate in four different regions around the world. We are in Australia, Peru, and South Africa. If you compare the corporate tax that we pay here in Ghana with all these other countries that we operate in, Ghana is slightly higher. I agree that we are taxing the companies a lot more.

What are you doing that is different from the competition? What are your key competitive advantages?

One of our values is responsibility. We are responsible for the environment within which we operate, the community, the state, and our shareholders. So, we make sure that we look after our environment.

In Ghana, Gold Fields currently has an operation in Tarkwa, Damang, and we just entered into a joint venture with Asanko mine. The Tarkwa mine is a low-grade mine, but we have actually been able to make it our flagship. It is a volume mine, so we need to really mine in large quantities to be able to make revenue and profit out of it. As a result of that, we are optimizing the business and bringing our cost down. The plant that we have at Tarkwa is in the top five in the whole world, which shows the scale of the operation that we have there. Damang mine was actually on the verge of collapsing and we managed to do a study, we got approval from our Board and we are currently reinvesting about 1.4 billion back into it. The capital portion is about 350 million and the rest is the operating portion. These two operations, if you put them together, will give us around 700,000 ounces. The Asanko partnership that we just started is going to give us a 50% of the total Asanko mine. Their production outlook for this year is about 200 to 250. Our vision is to grow this region to one million ounces yearly.

How do you assess your social impact?

First and foremost, in every country, unemployment has always been a challenge. Gold Fields in Ghana is actually generating an excess of 7,000 plus jobs, which is quite a huge contribution. If you look at the dependency ratio in Ghana, people here depend on each other a lot. So, if you come to the mining industry, you have a miner who is in fact looking after ten people. So, the multiplier effect of that 7,000 is close to 70,000 people. We are the first ever company in this country to set up the Gold Fields Foundation. For every ounce of gold that we produce, the Foundation sets aside a dollar, and in addition to that we add 1% pretax profit. We just received approval to take that 1% pretax profit to 1.5%. Through this Foundation, we do a lot of shared value projects in our community. Currently, we are rehabilitating the road between Tarkwa and Damang, which is about 33 km. It is going to cost in excess of 20 million USD. We are going to give it an asphalt finish which will have a life span of about 20 years. That to us is a shared value project because the communities within which we operate are going to have a first-class road to drive on and we are also going to use it to transport our people. Out of the Foundation, we have scholarships and bursaries, and through these we are getting accountants, medical officers, mining engineers, etc. In addition, we are going to rehabilitate the oldest hospital in the country, the Tarkwa Nsuaem Hospital. We are also going to modernize TNA Park, which is the stadium near the Tarkwa area.

The perception of the general public is that mining companies are often looked at as bad for the environment. What do you do for environmental efforts?

Those people saying that are probably mixing up the large-scale mining and the small scale or the illegal mining. It is true, if you drive around and look at many of our water bodies, our environment, there is so much pollution. But with the large-scale mining, including Gold Fields, we have what we call progressive rehabilitation. When we finish a waste dump, we give it back to our environmental department and they will come in and start the rehabilitation work. They flatten the slopes, put on top oxide material, top soil, and then they start planting grass. At our Damang mine, we had an old tillings dump that we have reclaimed. If I take you there now and tell you we were dumping and depositing our tillings at that site, you would not believe it. It is all green with a lot of coconut and oil palm trees. One of our values is responsibility. We are responsible for the environment within which we operate, the community, the state, and our shareholders. So we make sure that we look after our environment.

You just had your 25-year anniversary. What projects are you proud of?

When Gold Fields entered into Ghana, it was around the same time that Ghana moved into a democratic government. A lot of our colleagues or investors were not too sure which direction the state was going to go as far as politics or democracy. Therefore, they were quite reserved. But we believed in Ghana and we actually came across. Since we have been here, it is proving right. If you look at the continent, Ghana is up there in terms of politics and democracy. In terms of what we have done that we are proud of, the Tarkwa mine is a very low-grade mine. If you saw it, you might not think we are serious. The grades we mine there are other people’s waste dump grades. But we have turned it into a flagship mine. The Damang mine was on the verge of collapsing and we injected life into it. If you look at the state here, soccer is the passion of the nation and Gold Fields’ involvement with the Black Stars aided them to qualify for the World Cup for the first time in Germany in 2006. Four years later, in South Africa, we came very close to breaking the jinx where no African country has qualified for the semi-final, but we missed a penalty. We have also created jobs for the state.

What is your vision for the medium term? How do you see the company in two to three years’ time? What do you want people to remember?

For Gold Fields, this region is quite important because, in terms of production, we have contributed about 32-35%. Our vision is to grow this region to one million ounces per annum. We are currently around 700,000. We have about 300,000 ounces to go. Not only that, but we also want to bring our cost base down below 900 all in costs, dollar per ounce. We also want to make sure that we can operate a whole year, 365 days, without making any lost time or injury. We want to achieve this in terms of cash generation as well. The joint venture with Asanko mine will take us a step closer to where we would like to be. We will optimize the two operations we currently have using technology and innovation to be able to do more.

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