Alfred Baku, Senior Vice President and Head of West Africa, Gold Fields Ghana Limited

Ghana’s largest mine scales back to focus on more profitable ounces.

Alfred_Baku-BLOG-1Please could you provide us with an update on Gold Fields’ operations here in Ghana and any major milestones achieved over the last few years?

AB: Gold Fields West Africa has two operations in Ghana: Tarkwa and Damang. Tarkwa is a very large surface operation which has multiple open pits spread across the entire lease. In terms of mining volume, it has about 135 million tonnes and two processing units. The gold production profile is about 600,000 ounces annually. Damang is relatively small, with production being just short of 180,000 ounces.

In terms of milestones achieved over the last two years, we have begun a business process reengineering program. Following the global market downturn, with increasing operating costs and decreasing gold prices, we decided to see how we could improve our margins. This program has been quite successful so far; in 2011 and 2012 we were able to bring down our operating costs quite substantially, saving approximately $50 million USD

2012 was a record-breaking year for gold production in Ghana. Gold Fields, for its part, had a production profile of nearly 800,000 mtpa across both mines. How do you see Gold Fields’ outlook changing in the face of a challenging market in 2013, and what can we expect to see in 2014?

AB: Unfortunately, 2013 has been tough for the global mining industry, not just for Gold Fields or Ghana. At Tarkwa, we are busy with the latter stages of halting the heap leach operations. This is being done for two reasons; the material sent to the heap leach needs to be softer, but as we go deeper into the pits, it is becoming harder. The recovery rate comes down to just 45% from nearly 70% which is not efficient and cost effective at the moment. The second reason is a lower gold price and escalating operating costs. The production outlook at Tarkwa for 2013 is 630,000 ounces and will be scaled back to 500,000 ounces as a result of halting the heap leach operations, but these will be much more profitable ounces.

What sort of cash cost per ounce are we seeing at Gold Fields’ CIL plant?

AB: In order for us to remain in operation with the current lower gold prices, our aim and objective is to ensure that we can be in the region of $1,000 per ounce, all-in cost. We are currently at $1,200 at Tarkwa but we are adjusting our operations to meet this goal. Damang has a different geology and has recently lost its higher grade pit, which puts pressure on us to do more stripping and expose the ore. We are weighing the options there to see if we need to put the brakes on operations there for a while to go on a care and maintenance, or if we can meet the cost per ounce that we are seeking. There is a dedicated project team assessing the different options for the future economic viability of the project.

In addition to your introduction of a new water treatment plant, how is Gold Fields looking to introduce initiatives to minimalize the environmental impact of its operations in Ghana?

AB: We have a bond with the EPA and have made a deal with them to rehabilitate the areas we are operating in. This plan is mandatory as part of the conditions for being granted an EPA permit, and we are working diligently to meet the terms of this plan. Concurrent rehabilitation is built into our short to medium term mine planning. Piezometer holes are drilled around all Tailings Storage Facilities to monitor any potential seepage of tailings into the external environmental.

As the mining sector becomes more sophisticated and increasingly present across the region, expectations from communities are being raised. What is Gold Fields doing to ensure that Ghanaians benefit from your operations here?

AB: We have set up the Gold Fields Ghana Foundation, which is a major part of our CSR initiatives. We have a simple formula that we use to calculate income for the foundation; for every ounce of gold that we produce, we set aside a dollar for the foundation. Additionally, we put aside 0.5% of profits before tax and use this for a host of projects. We have funds dedicated to electrification, school buildings, scholarships, road construction, hospitals and many more. We are looking at restructuring this to put more money into fewer projects, making each one more effective. This should have more of an impact than scattering funds across a handful of projects. We would also like to engage in capacity building for communities so that they can generate their own commercial activities as a result of our operations.

What sort of potential do you see for Ghana as a mining jurisdiction in the face of increased regional competition?

AB: Ghana still has an incredibly bright outlook for gold. We are hopeful that the gold price will recover again, and that the government will continue to play a key role in promoting and increasing mining activities in the country by maintaining competitive fiscal policies. We are glad to see the government establishing investor agreements with mining companies, which adds a sense of stability to operating here. Once these are in place, the investor feels safer and secured about moving into the country. From a political point of view, Ghana is very peaceful and stable, and all that remain is for the gold price to recover and there is a level playing fields across the mining industry in terms of stability agreement in order for us to pick up where we dropped off last year.

What sort of role do you see Ghana playing for the Gold Fields group as a whole as we look to the near-term future?

AB: At this stage, our aim is to improve our cash generation contribution to the group. Gold Fields’ focus now is not about how many ounces we produce or bring to the table, but about how much cash we bring. By streamlining our processes and adjusting to current market conditions, Gold Fields Ghana can maintain its position as a key player for the Group.

This interview was conducted as part of the research conducted on African mining jurisdictions by Global Business Reports (GBR) as part of our partnership with African Mining Indaba LLC. The aim of this partnership is the production of the single most comprehensive intelligence report on the continent’s mineral sector. The Official Mining in Africa Country Investment Guide, will be launched next February 2014, as the only official publication providing country-specific information at Africa’s top mining event, the 2014 Investing in Africa Mining Indaba™ held in Cape Town, South Africa.

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