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…but faces threat to fold up if new electricity tariff remains
Anglogold Ashanti Company Limited is set to inject US$174.4million in its operations in the Obuasi mine in the Ashanti Region of Ghana.
The investment volume is aimed at expanding and modernising the mine which forms part of the company’s turn around strategy to transform the mine into a world class category.
Out of the initial amount, $44.4million has been earmarked for the modernization and expansion project with the remaining $130million for capital consideration.
The company has however given indications that if government continues to stick to intention to increase power tariff by 100% on mining, steel and high voltage consuming companies, the transformation of the Obuasi mine project may not be a reality.
“Currently Obuasi mine is a loss entity because we don’t gain from the spot because of the hedge and cost of production in the country. Government should look at the situation which Obuasi is going through and review its policy towards the new power tariff”, said Anglogold Ashanti’s General Manager for Corporate and Community Relations, John Owusu in an interview with the paper in Accra over the weekend.
For him, “the situation is a delicate one, but the fact on the ground is that even at about $0.9cent per kilowatt per hour, power tariff is breaking our neck, we don’t have cash flow to talk about. So additional power cost will turn our cost structure and new projects asunder.”
As part of its full cost recovery programme, government announced a Bulk Generation Tariff of Gp 16.91 per kilowatt an hour for mining firms, steel mills and other high voltage consumers.
This translates into an End User Tariff of Gp 22.31per kilowatt per hour with immediate effect from July 1st, 2008.
This announcement did not go down well with the mining firms and thus resorted in series of discussions and deliberations on the issue with the Ghana Chamber of Mines, regulator of mining firms in the country.
According to John Owusu, Anglogold Ashanti is still talking to government on the issue and hopes something good would come out of it.
“Thanks to the government, the mining industry is talking to the Volta River Authority and other parties concerned, through the Ghana Chamber of Mines. We hope something good and acceptable to all parties will come out of these meetings in the near future”, he said.
Since the announcement of this increment by government, several companies including RedBack Mining Incorporated, operating in Ghana as Chirano Gold Mine have had cause to complain about its hefty implications on their operations.
Anglogold’s Obuasi underground gold mine is one of the richest in the world but the current gold rally on the market of $410 per ounce in 2004 to $900 plus this year, has led to a sudden decline in production and faces a challenge of folding up if the new power tariff announced by the government remains un-reviewed.
Since the year 2004 to date, Anglogold Ashanti has invested $220million in the Obuasi mine but its operations have not been successful due to cost of production which keeps increasing year after year, according to John Owusu.
Employees of the company (7,200) are likely to be affected if the company folds up.
This also has the tendency of affecting annual dividends paid to government.
Anglogold Ashanti Company Limited is set to inject US$174.4million in its operations in the Obuasi mine in the Ashanti Region of Ghana.
The investment volume is aimed at expanding and modernising the mine which forms part of the company’s turn around strategy to transform the mine into a world class category.
Out of the initial amount, $44.4million has been earmarked for the modernization and expansion project with the remaining $130million for capital consideration.
The company has however given indications that if government continues to stick to intention to increase power tariff by 100% on mining, steel and high voltage consuming companies, the transformation of the Obuasi mine project may not be a reality.
“Currently Obuasi mine is a loss entity because we don’t gain from the spot because of the hedge and cost of production in the country. Government should look at the situation which Obuasi is going through and review its policy towards the new power tariff”, said Anglogold Ashanti’s General Manager for Corporate and Community Relations, John Owusu in an interview with the paper in Accra over the weekend.
For him, “the situation is a delicate one, but the fact on the ground is that even at about $0.9cent per kilowatt per hour, power tariff is breaking our neck, we don’t have cash flow to talk about. So additional power cost will turn our cost structure and new projects asunder.”
As part of its full cost recovery programme, government announced a Bulk Generation Tariff of Gp 16.91 per kilowatt an hour for mining firms, steel mills and other high voltage consumers.
This translates into an End User Tariff of Gp 22.31per kilowatt per hour with immediate effect from July 1st, 2008.
This announcement did not go down well with the mining firms and thus resorted in series of discussions and deliberations on the issue with the Ghana Chamber of Mines, regulator of mining firms in the country.
According to John Owusu, Anglogold Ashanti is still talking to government on the issue and hopes something good would come out of it.
“Thanks to the government, the mining industry is talking to the Volta River Authority and other parties concerned, through the Ghana Chamber of Mines. We hope something good and acceptable to all parties will come out of these meetings in the near future”, he said.
Since the announcement of this increment by government, several companies including RedBack Mining Incorporated, operating in Ghana as Chirano Gold Mine have had cause to complain about its hefty implications on their operations.
Anglogold’s Obuasi underground gold mine is one of the richest in the world but the current gold rally on the market of $410 per ounce in 2004 to $900 plus this year, has led to a sudden decline in production and faces a challenge of folding up if the new power tariff announced by the government remains un-reviewed.
Since the year 2004 to date, Anglogold Ashanti has invested $220million in the Obuasi mine but its operations have not been successful due to cost of production which keeps increasing year after year, according to John Owusu.
Employees of the company (7,200) are likely to be affected if the company folds up.
This also has the tendency of affecting annual dividends paid to government.
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