Business News of 2014-07-02

Mining companies want partnership

Alfred Baku, Executive Vice President of Gold Fields West Africa Operations says a collaborative partnership between mining companies, governments, labour and communities will help mitigate the many challenges facing the industry.

“Government must seek collaborative partnerships with miners who are better able to operate and develop ore bodies, and who are good social partners,” he said.

Speaking under the topic ‘Resource Nationalism’ during an interaction with members of the Institute of Financial and Economic Journalists (IFEJ) organised in collaboration with the German Agency for International Cooperation (GIZ) at Tarkwa in the Western Region, Mr. Baku said government needs to create a climate conducive to responsible investment and provide policy certainty whereby it will stick to the rules.

He explained that mining investments are under threat, as mining companies are cancelling new projects and closing mines due to pressure from price-dips, cost increases and higher taxes.

“Equity investors have become frustrated as miners have spent their money with little to show for it. “Returns just do not warrant the risk. In reality, margins and returns from mining are in decline while operating cash flows are not sufficient to cover investments.”

Gold has dropped 25 percent since the beginning of 2013, including a 2.7 percent drop to US$1,257 an ounce. Spot gold price decreased by 0.19 percent on Friday’s trading session on the back of rise in risk appetite on the global markets.

He urged government to: create a climate conducive to responsible investment that provides policy certainty; develop infrastructure and the broader economy; partner to manage input costs; and help miners to procure locally.

He again suggested a long-term commitments from government not to change the rules of the game. Mr. Baku explained that ‘Resource Nationalism’ is when countries make efforts to extract maximum value and developmental impact for their people from their finite natural resources.

He observed that countries like Chile, Peru, Botswana and Zambia are making strides in addressing resource nationalism, and have put in place strategies, programmes and measures to remodel their fiscal margins.

“Protecting investor rights will help countries make the most of their resources,” he said; “equity investors are frustrated,” he added.

The world’s biggest mining companies are cutting costs, selling assets and scrapping expansion plans to counter lower prices.

Presently, over US$87.5billion new mining projects worldwide have been delayed or cancelled He appealed to government to cut down on the country’s taxes regime to ensure a favourable mining investment destination.

“We are appealing to government to come to our aid and loosen the fiscal regime, because the current gold price doesn’t help us at all. We are really in a difficult situation,” he said. Gold Fields’s all-in cost of production in Ghana is US$1,200 an ounce, Baku said.

A study of 40 top mining companies in 2012 indicated that they were operating at a loss due to the general economic hardship -- with some closing down and making people lose their jobs, whereas everybody’s focus is on the resources in the sector.

Source: B&FT
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