Ghana: Gold production to record 4% growth this year – Fitch Solutions
Fitch Solutions, the research arm of Fitch Ratings, has projected a 4 percentage points growth in gold production for this year.
The projected growth according to Fitch Solutions, is on the back of new gold mining projects to be carried out by mining firms as well as the integration of artisanal miners into the country’s formal gold mining sector.
Growth in the mining sector coupled with increment in gold prices due to the Russia-Ukraine war, Fitch Solutions asserts, is expected to widen the country’s trade surplus for 2022 with exports of the gold and oil to increase by a robust 26.9% this year over the 1.8% recorded in 2021.
Fitch Solutions however, assets that it expects Ghana’s oil output to decline by 1.3% this year.
“Elevated global commodity prices will cause Ghana’s trade surplus to widen in 2022. Supply disruptions and risk-off sentiment following Russia’s invasion of Ukraine have increased prices of crude oil and gold – Ghana’s two leading export commodities (together accounting for roughly a third of total exports) – and in turn Ghana’s export earnings,” it said.
“From a volume perspective, however, a projected decline of 1.3% in oil output in 2022 indicates that Ghana will not be able to reap the full benefits of elevated energy prices. In contrast, we expect gold production to expand by a healthy 4.0%, supported by the start of new gold mining projects and the integration of artisanal miners into Ghana’s formal gold mining sector. Taking these dynamics into account, we project merchandise exports to increase by a robust 26.9% over 2022, up from 1.8% in 2021,” it added.
Ghana losses position as Africa’s biggest gold producer
Ghana has lost its position as the continent’s biggest bullion (gold) producer to South Africa.
Ghana lost the prestigious position (previously held by South Africa) when its gold production declined by 29.9% to slightly over 2.8m ounces last year – 2021 – from 4.02m ounces in 2020.
Prior to 2020, gold production by Ghana dropped from 4.57m ounces in 2019.
The recorded gold production of 2.8m ounces for 2021 is the lowest since 2008.
The decline in the production of the precious metal was despite a 16% anticipated rebound in production for 2021 by the Ghana Chamber of Mines.
Mainly accounting for the decline in production, the Chamber asserts, is due to low investments in the sector coupled with taxes and levies imposed on mining firms.
According to the chamber, taxes and levies imposed on mining firms are making exploration investments into the country’s mining sector unattractive.
The Chamber asserts that mining exploration companies should be allowed by the State to use 100 percent of their exploration investment in mineral exploration – particularly gold – rather than being made to pay taxes and other levies before even breaking the ground to find the mineral.
“It’s one of the concerns we had and the need to provide a fertile and conducive environment for exploration companies to use practically 100 percent of their exploration investment into exploration, rather than paying taxes and other levies even before they break ground.”
“So we continue to advocate and engage with stakeholders for this to happen, and our expectation is that in the not too distant future, policy makers will hear our cry and will put in place the kind of policies that will allow exploration companies to operate competitively in the country,” stated the Chamber.
“Exploration is quite expensive and even uncertain that you make a commercial find, and yet we have a fiscal regime which requires companies to make some payment before even digging the ground.”
“And that’s the challenge we have, so when companies outsource for instance drilling services, it comes with VAT and we believe this is not good for exploration, it detracts from the competitiveness of Ghana as an investment destination for exploration investment. We think that exploration companies should be excused from paying levies and taxes before commencing exploration,” the Chamber added.
Ghana, in 2020 lost its position as the second-largest recipient of investments in gold exploration on the continent.
The country lost its position to Burkina Faso who in turn lost its enviable position as the largest recipient of investments in gold exploration on the African Continent.
In first and third place are Cote d’Ivoire and Mali respectively.
Cote d’Ivoire’s rise to first place, the Chamber notes is due to a significant increase in budgetary allocation for gold exploration in Cote D’Ivoire – around $105 million.
Total planned gold exploration expenditure in Africa for 2020, according to the Chamber amounted to $590 million.
A reduction by some $25.9 million when compared to the $615.9 million spent by gold mining firms in 2019.
