Tax relief unattractive to mining investors?

Accra, (Greater Accra) 25 Feb. '99,

Accra, (Greater Accra) 25 Feb. '99, Ashanti Goldfields Company (AGC) Limited, Ghana's premiere gold mining company, on Thursday said Ghana has fallen behind in terms of tax relief for mining companies. Mr Mark Keatley, Chief Financial Officer of AGC, in an overview of the 1998 operations of AGC Group in Accra, said it now costs Ashanti less to produce gold per ounce in Tanzania, Guinea and Zimbabwe than in Ghana. Mr Keatley said in 1996, Ghana had a very favourable mining code tax. With time, however, other countries have established better tax systems that make gold production more cost effective. "Ashanti will thus look all over Africa for low cost production mines and other minerals along the line but gold will still remain our main focus. "The largest chunk will go to Geita in Tanzania, Obuasi in Ghana and Siguiri in Guinea. "Tanzania has the most unrivalled tax system in place in the world today". He said Ashanti's main focus this year and beyond is to beat down cost to the barest minimum and will be going out to places and countries where cost of production is lowest. "Ghana must maintain a more friendly tax relationship for manufacturing firms, especially in the mining industry". Mr Keatley said the power crisis that hit the nation in 1998 was costly to the Group. "It cost Obuasi 25,000 Ounces, Iduapriem 10,000 ounces and Bibiani 15,000 ounces. This resulted in a loss of revenue of 15 million dollars because the mine could not operate at installed capacity". The increase in the cost of power is also having an adverse effect on the company. This has caused a loss in revenue of about 14 per cent. Mr Keatley said Ashanti is now paying 7.2 dollars per kilowatt hour while that for North America, is 1.3 dollars and that of South Africa, 3.5 dollars. He said the company is having constructive discussions with the Volta River Authority and the Public Utilities Regulatory Commission (PURC) in order to help reduce the costs being incurred now. Ashanti is taking a further initiative to assist Ghana to diversify its sources of power through KMR Power Systems. The power generating company will be providing a 220- Megawatt power station, which will initially use crude oil and shift to gas from the West African Gas Pipeline Project. Ashanti is expected to use between 80 and 90 per cent of power from the KMR plant which will be sited at Tema. He said the Iduapriem, Ayanfuri and the surface mines in Obuasi will be closed down in the next two years. Mr Keatley said the company has decided to bring the cost of underground gold production to below 200 dollars an ounce. Ashanti would pay appropriate benefits and bear social responsibilities of staff who will be relocated at the underground mines at Obuasi.