Business News of 2013-12-30

Why many of Ghana's gold miners are giving up

Kwaku Boham worries about the future. For years, he and his four fellow gold miners have scratched out a living on a tiny plot next to the roadside near Tarkwa in south-eastern Ghana.

All day in the tropical heat and humidity, they dig out the red soil and rocks and crush them in a noisy grinder, hoping to yield some small nuggets to cover their expenses and feed their families.

But they have no control over what they sell any nuggets for - that's set in markets in New York and London. And over the past year, the price of gold has been falling.

On 1 January this year, the spot price of gold was $1,687.22 an ounce, this month it has been trading around $1,240 an ounce - a loss of around 25%.

The outlook for 2014 is not much healthier.

The reason gold is losing its lustre is that global economies are looking a lot healthier than they did a year ago.

The US economy grew by 3.6% in the third quarter of 2013, its best performance in 18 months, while unemployment, which hit a 26-year high at 10% in 2009, dropped to 7% last month - a five-year low.

While interest rates remain at historic lows, inflation has stayed subdued.

And fears about inflation next year have been further quelled by the prospect that the Federal Reserve may begin to taper off its bond-buying stimulus programme, quantitative easing.

All of which has been pushing the gold price down and is expected to do so for some time.

The global gold mining companies have been complaining of squeezed profit margins for some time, but while they will be able to weather the falling gold price, Kwaku Boham and his partners have no hedging strategies or cost-cutting options. Cleaning sheds

"These days all the prices fall down," he says. "These days this job is not good, it's not like the olden days."

Dotted at intervals on the side of the road between the big mining towns of Obuasi and Tarkwa in Ghana are the cleaning sheds.

Little more than shacks, this is where Kwaku and his fellow workers bring the soil they've dug up for processing.

Kofi Osei runs one such cleaning shed and the methods he uses have barely changed in hundreds of years - he pans the soil with water and the heavier gold falls to the bottom.

He then uses mercury to bind the tiny gold deposits together and squeezes the combination through a cloth to leave a small, dull rock.

This is then roasted to remove the excess mercury - it's a dangerous process as the mercury fumes are highly toxic - and a shiny gold nugget is born.

But the falling gold price means many miners have given up, and a government crackdown on illegal gold mining has also affected Kofi's business.

The miners pay him a flat rate per bag of soil, so the fewer bags Kofi gets to process, the less money he makes.

"The gangs that used to bring the soil from the bush, these days they don't bring it because the government has cracked down on them. So, the amount of gold we get now is not enough," he says.

"The future for us is uncertain. We just hope that things will get better. We haven't been to school, so this is what we rely on for a living." Financially secure

Once Kwaku has his processed nuggets, he takes them to gold buyers like Kojo Owusu, based in a house just south of the town of Dunkwa.

Making a show of counting large bricks of cash and brandishing two small gold ingots, Kojo says he should be more financially secure next year than many others.

But he does worry about the prospects for the miners, his customers.

"People are not willing to enter into the mining business. A lot of them are leaving because the price is down. They are not investing."

He leans back on a table on his front porch and gestures to a digger standing idle across the road.

"The owner is a Ghanaian miner but because he went to take a loan from a bank and has not been able to repay, the bank has seized the machine."

As another truck rumbles past, Kojo frowns as he thinks of the year ahead.

"At the beginning of this year it was very great, very wholesome, but for the past two months it's been very bad. Very, very, very bad." Changing jobs

Back in Tarkwa, Kwaku Boham is also contemplating the future. He's come to the conclusion that small-scale gold mining is no longer an option for him and his partners.

Just a few years ago they made good money, but now with falling prices they have little to show for their years of toil, aside from an old rock crusher and generator.

"The prices are small, so we are planning to do another job," he says.

One plan now is to sell cosmetics. But like the future, even that is uncertain.

You can hear more on Ghana's gold miners in World Business Report on BBC World Service at 17:32, 19:32 and 22:32 GMT on Monday, 30 December 2013.