RE: Gold Fields To Abandon $1 Billon Investment Projects In Ghana

REUTERS: 8 DECEMBER 2011 GHANAIAN TIMES: 7 DECEMBER 2011

Those of us, who have been watching and researching the transnational gold mining corporations, like Gold Fields’ behaviour in the developing countries for a long time, are not surprised to hear the nonsense that comes from Mr Nick Holland, the Chief Executive Officer of Gold Fields. Mr Holland should remember, (and that applies to any other chief executives of gold mining companies operating in the country who want to apply the same usual scare tactics), once and for all that his company is mining gold in Ghana. It is not operating a soap factory or whiskey distillery, which it can move tomorrow to South Korea or Philippines and bring the finished product back to sell in Ghana.

For once that Ghana is to benefit from the exploitation of its vast gold resources, the big guns like Gold Fields (the largest gold producer in the country and the biggest polluter of the land, water and the air), starts the usual scare tactics. From its boardroom the usual, ‘Don’t let the country get away with the tax increase, other countries will follow suite. Threaten it in public with the serious consequences of its action, to soften I it down. Then ask for appointment to negotiate in private’. Hence CEO like Mr Holland came out with the outburst threatening of withdrawing GFL’s investments. If private talks with Ghana Government probably to urge it to desist from the tax increases, “had been promising”, what is the need for the public outburst from Mr Holland? Habits die hard!

How often will the developing countries be subjected to this same cheap old trick? Well, it has always worked so they will continue with it until they are stopped. The time has come for it to be stopped. We have had enough of that! As I can see, Gold Fields has just shot itself on the foot if not on the heart.

Ghana Government is carefully advised, NOT to start any private negotiations behind the scene with the mining companies in order to reduce the taxes the country more than duly deserves and needs. Besides, it does not need me to remind it that for the second time, to promise to take action on the mining industry and fail to fulfil it will portray it as weak, indecisive and not working in the interest of the people of this country. The first was to raise royalty from the supposedly 3% to 5% which as pointed out below, even the meagre 3% has still from 2000 up to 2010 never been achieved. The government must remember the consequences of its action. It once again does not need me, a non-party politician to remind it that next year which is around the corner is 2012 and the country will hold it to account for the budget statement it made to the nation and the world. It is not accountable to Mr Nick Holland or Mr. Mark Cutifani, CEO of AngloGold Ashanti or to Mr Gary Goldberg, the newly appointed Executive Vice President and Chief Operating Officer of Newmont. It is accountable to us, Ghanaians. The above named gentlemen are accountable to their shareholders who have been enjoying ten years of continuously high profitable dividends. Something in which the owners of the minerals are not lucky or rather not privileged to partake.

I have just written a book on properties and uses of gold entitled: THE METAL GOLD: PROPERTIES, WORLD PRODUCTION STATISTICS BC 3900 – AD 2009, UNITS OF MEASUREMENT & TRADING AND THE USES. So I know what gold is, it entails and its role in the modern world of technology, medicine, science, chemical industries, etc. now and in the future. The over four-fold rise in price of gold in the past 10 years is not all due to the vulgarity of the economic system of the West and growth of prosperity in China and India, but also due to the exponential increase of research and development and functional uses of the metal.

Gold Fields returned to Ghana in 1993 on collapse of its supporting role as the second pillar on which South Africa’s Apartheid rested. The declared Pillar of Apartheid was Anglo American Corporation of South Africa of which AngloGold was part break up on collapse of apartheid. Gold Fields first came to Ghana in 1902 to start gold mining.

It generated the mines abandonment problem for Dr Nkrumah and the CPP Government in 1961 leading to the creation of State Gold Mining Corporation (SGMC) to takeover the gold mines and Gold Fields among the other gold mining companies got handsomely paid off. Amalgamated Banket Areas Ltd (ABA) in Tarkwa which became Tarkwa Goldfields Ltd within SGMC was one of the companies GFL operated. Tarkwa Gold Fields Ltd’s property is what Gold Fields has returned to operate and is operating now.

Gold in Tarkwa can only be mined in Tarkwa, not in suburb of London or Paris, not even in Takoradi. This led to the old adage: The mine is where the mineral is found. Gold Fields can close down its operations in Ghana tomorrow. Ghana will remain Ghana, even hardly poorer. Gold Fields will hardly remain the same or even be a viable company if it dares close its operation in Ghana. The country is its second major operating centre next to South Africa. It is currently responsible for about 30% to a third of its worldwide production and increasing. The cheap threat is just that and it must cease. Besides, Harmony Gold and probably other gold mining companies are lurking around and watching its every move. The least wrong step will result in it to be gobbled up. Please do not threaten Ghana! You need Ghana far more than Ghana needs you, if any at all. You need Ghana for your very survival.

Mr Holland also made the threat of halting expansion of Tarkwa and Damang Mines (the two mines) Gold Fields operates in the country, in the Mining Journal on 5 December 2011, to tell the world that as the 4th largest producer of gold, it can dictate to Ghana. He will have to eat his words or sink! Some of us have to draw the line on the sand over this type of bullying and it starts now.

Average gold price from 2001 to 2010 has increased more than four-fold (actual value was 4.52 times). Ghana so far has not benefited from these increases; so the government should not listen to any humbug from the mining companies. How much bonus has Mr Holland or whoever has been the chief executive received in past 10 years due to increases in gold price? In honesty, is it not far more than $10million with share options? Mr Holland, please leave Tarkwa gold in the ground; we are not going to feed it. It has been there for some 100s of million years. Let us leave it for posterity! People in Tarkwa and suburbs may have sound sleep in the night, go to their farms in safety and breathe clean and fresh air for the change.

LBMA AVERAGE GOLD PRICE ($): 2001-2010
YEAR 2001 2002 2003 2004 2005
PRICE 271.04 309.68 363.32 409.17 444.50
YEAR 2006 2007 2008 2009 2010
PRICE 625.00 696.43 871.96 972.35 1,224.53

In 2010 Gold Fields produced 944,722 troy ounces of gold (29.4tonnes) from its two mines in Tarkwa area with estimated revenue of $1.2 billion, producing ore and waste of over 146.5 million tonnes and waste alone in excess of 120 million tonnes. Even the 25.5million tonnes of ore are more than 99.5% wastes. All the wastes produced are permanently for Ghana and that is for just one year. Go and look at piles of waste and your heart will sink.

In fact from 1993 to 2010, Gold Fields has produced over 251 tonnes of gold (some 9,035,000 troy ounces) of estimated value of $5.54billon on investment of $1billion in 18 years. Suddenly, GFL has abandoned its $1billion investment project in Ghana. Why does it not close down its whole operations in the country altogether? It dares not; the CEO and the board clearly know that. It will be prey for the vultures tomorrow. The mining companies keep telling us Ghanaians over and over what they have invested in the country and in the industry, but have collective amnesia when it comes to tell us what they have raked out from this country and the industry.

You will soon know more of what is actually happening in the country’s gold industry from my forthcoming book late this year: Ghana’s Gold Industry: The Untold Truth, Volume 1. You will see detailed statistics of how Ghana’s gold industry has been looted and far more. Even the meagre 3% royalty has never been paid and see by how much the country has been cheated year-on-year. Payment in 2010 when some companies were supposed to have paid 5% was only 2.74%. In 2009 alone Ghana lost $23,193,144 from underpayment of royalty to the state. That is, from payment of 2.21% instead of 3%.

I have seen elsewhere in the news papers of Ghana’s professional accountants complaining that the tax increases and the windfall profits tax will dry up investment in the mining industry. This assertion is most unfortunate to say the least. All I can tell the accounting fraternity now is that it is time they move beyond the Balance Sheet and dividends. If they want to venture into the real mining industry, they are welcomed but they must know what they are talking about – get their facts and figures right first. Extraction of minerals is far more than balance sheet and dividends. Minerals extraction especially gold extraction is a serious business, it is emotional, especially when your country’s non-renewable gold resources are being taking away for virtually free. Worse still, the very people who loot the gold today to enrich themselves, will be the same people pontificating tomorrow why Ghana has nothing to show for the extraction of its vast gold deposits. The usual culprit is the corruption in the country and in the industry, not that they have created the corruption in order to loot the gold from the country with impunity in the first place.

It is also worth noting by the accounting fraternity that they are part of the problems in the mining industry and elsewhere. If they really want to contribute to improve what is happening in the mining especially gold mining industry in the country, they should first of all examine their own conducts and behaviours. I challenge them to stop their unethical creative accounting principles and practices and to make sure that:

1. Their members working in the mining firms calculate royalties and other taxes correctly and pay them promptly;
2. Stop the disgraceful fiddling with accounts (accounts are to reflect fair honest state of a business) using the so-called transfer pricing techniques to increase costs of imports and services and reduce revenues as means of reducing profits and hence pay minimal taxes or nothing at all.

They cannot talk of tax increases in isolation from their own behaviours in contributing to the problem of the transnational corporations not paying or paying very little taxes. Even in the payment of meagre 3% royalty on minerals revenue, they are cheating and have never paid the full 3% at least between 2000 and 2010, as I comprehensively documented in my book. In 2009, for example, the mining companies paid only 2.21% of the royalty, depriving the state of $23,192,144

I do not for a second deny there is corruption in the country and in the industry in abundance. It is however not for those who rape the country of its natural non-renewable precious resources should be the accusers of others. This is not the first time. We remember, those who enriched themselves and their countries, and created empires from the obnoxious slave trade, are those who sit in judgement of us today.

It is gratifying to note that some African countries like Zambia and Zimbabwe are beginning to stand up against the-free-for-all injustice of taking of the continent’s non-renewable precious resources for too long time. Worse still, they (the mining companies) behave like they are doing you favours by investing 10% and take away 100%, and that you must be grateful to them.

Even in the colonial days things were far better – at least they constructed some form of infrastructure – railway lines, roads and some buildings both in the railway stations on route and in the mining areas. At least they did not bombard your eardrums with lies and unfettered lies. Today, they use spin doctors (public relation gurus) to tell you: the toxic sludge is good for you. So you must cheer up!

Ghanaians are reminded that, in Minerals and Mining Act, 2006 – Act 703, the mining companies operating in the country have the legal right to take off shore 80% of the gross minerals revenue annually and use as they please. This used to be 75% but was raised to 80%

Lawrence M K Akakpo
Mining & Research Engineer
Retired as Senior Lecturer in Mathematics & Computer Applications in U K

GOLD FIELDS TO ABANDON $1BILLION INVESTMENT PROJECTS IN GHANA


From: Reuters Last Updated: December 8, 2011, 6:30 pm


Gold Fields Chief Executive, Nick Holland, says planned projects that can bring $1 billion in investment to Ghana were at risk because of looming tax changes outlined in the 2012 budget last month.

Ghana plans to raise the corporate mining tax to 35 per cent from 25 per cent and introduce a 10 per cent windfall tax as well.

Mr. Holland's comments at a presentation to investors in Johannesburg on Monday were the strongest to date by a mining company on the issue and came amidst a wave of resource nationalism across Africa.

Gold Fields is the world's fourth-largest gold producer and regards West Africa as key to its global growth strategy.

In response to a question about planned expansion of the group's Damang operation in the Western Region, Mr. Holland said: "The tax situation is a big concern to us, and frankly, unless we are going to see some flexibility on the tax situation, I don't think we will be building the project in the form that is being described today, if at all.

The miner also has a major expansion planned for its Tarkwa mine, also in the Western Region.

Mr. Holland said a $1 billion project pipeline in Ghana was now uncertain.

"Both of those projects represent incremental investment of $1 billion into the country...There needs to be a better dispensation for us to proceed," he contended and said the playing field in Ghana was unfair.

"There isn't a level playing field of taxes and royalties. We are paying higher royalties than the other major producers n that country. That's not sustainable."

"And we will be subject to these taxes despite the fact that we have had a stability agreement in draft form with the government for many years. So that’s also not sustainable. There has to be a level playing field created," he said.

Mr. Holland said company executives visited Ghana last Thursday to raise their concerns and that the government had agreed to enter a dialogue with Gold Fields.

Peet van Schalkwyk, the company’s head of the West Africa region, earlier said talks had been promising.

But there is uncertainty in other areas and he said in his presentation that there was still no mechanism to work out how the windfall tax would be imposed.

Other mineral-rich African states that have recently raised mining taxes or royalties include the region’s top copper producer - Zambia and Zimbabwe - which has the second-largest known platinum reserves in the world.

Several analysts have said the wave of resource nationalism, which coincides with sky-high commodity prices, is one of the biggest political risks to the mining sector.

For Gold Fields, the stakes are high.
In 2010, about 20 per cent of the company’s production of around 3.5 million ounces came from Ghana, and that percentage is rising as it has since bought out minority stakes in its operations there.

The group is targeting an increase in its output in West Africa to 1.25 million ounces in 2015 from just under one million now, making the region key to its goal of raising the amount in development or production to five million ounces by 2015.