Ghana tensions complicate Gold Fields, AngloGold joint venture

Ghana tensions complicate Gold Fields, AngloGold joint venture

On paper concluding a proposed joint venture in Ghana with AngloGold Ashanti looks like an early ‘easy win’ for Mike Fraser in his first few months as CEO of Gold Fields. He acknowledges, however a final agreement could be complicated by elections in the West African country.

The joint venture, which was announced ten months ago, sees Gold Fields ‘merge’ its Tarkwa mine with neighbouring Iduapriem, an AngloGold mine. As a single mining complex, the mines would produce 600,000 ounces a year.

Dropping farm boundaries between the two properties is a more efficient use of gold resources, extending the mine life of the complex beyond the life either mine could achieve single-handedly.

Gold Fields will control the joint venture (60%) with the parties offering a 10% share to Ghana. The government has a 10% stake in Tarkwa currently. AngloGold owns 100% of Iduapriem.

While Fraser is confident a deal will be cut, he acknowledged in an interview this month that politics may have an influence on discussions. “What is a little bit difficult is that it’s an election year in Ghana and as you get closer to that decisions become politicised and people get more reluctant,” said Fraser. “We will continue to progress it with the government. I think there is general support for it but it’s how to get an agreement that makes sense and is equitable for everyone.”

The Ghanaian government is under huge pressure after defaulting on $20bn in international bonds and loans in 2022. While the International Monetary Fund agreed this month to a $600m second tranche as part of a three-year bailout programme, Ghana has to prove it can keep spending in check. All in all, the government is revamping some $47bn in debt, according to a report by Bloomberg News.

Fiscal discipline fiscal may be tested by upcoming general elections in December. “One of the weaknesses in Ghana over the years has been these election-related spending cycles,” Abebe Aemro Selassie, who heads the IMF’s Africa Department told Bloomberg News in a June 2023 article. “That I think has done a lot to undermine confidence in public accounts in Ghana,” he said.

Set against this broad economic tension the government will be keen to secure as much of the Gold Fields/AngloGold joint venture as it can.

Gold Fields was one of the better performing gold stocks last year as it recovered from the shock administered by its unsuccessful $6bn tilt at Yamana Gold in 2022. In addition to the joint venture with AngloGold, Fraser is faced with the more immediate task of fully commissioning the firm’s Salares Norte project in Chile.

The group announced in December it would again delay first production. Output from Salares Norte in 2024 would be half that anticipated in revised guidance while the project’s capital costs increased to just over $1bn from an initial target of about $850m.