For one year and counting, Alfred Brobbey has been relying on his cute Daewoo Matiz taxi cab to raise income to feed, clothe and shelter himself and his family.
He bought that cab out of the severance package he received from the current managers of the 117-year-old Obuasi gold mine, AngloGold Ashanti, AGA, when, together with others, he was laid off not quite long ago.
It will not be long – in fact, by close of September, 2014, every one of the 6,500 workers currently at post would join Brobbey at home save for a fortunate handful that would be required for a limited amount of mining, care and maintenance works. That number is not expected to exceed 700. It could actually be lower.
Finality would be brought to the matter in some 24 months time when all laid off workers would be given a chance to reapply, AGA has indicated.
Even so, one of the affected workers, who recently spoke to Weekend Sun on condition of anonymity, hinted that at least 2,000 of the current workforce have crossed age 50 and would not be offered the opportunity to reapply.
“We are about 6,500 and I know for sure they will not maintain more than 3,000 when they recall. I know also that those who have hit 50 years do not have a chance at all,” he begins. “I am more than 50 years and I am affected,” he said, while quickly opining that “I don’t even intend to come back because I would soon have gone on pension.”
He confessed that many workers were delighted because they would receive mouthwatering packages. Aside that, AGA is assuming utmost responsibility for health and other physical conditions contracted and suffered by the workers and would sanction their complete treatment at the cost of the company.
The company last May announced it had voted a whopping $220 million for the retrenchment exercise which is seen as a major step towards making the Obuasi Mine a profitable venture once more.
These have been welcomed by both workers and the Ghana Mineworkers Union. An obviously elated Srinivasan Venkatakrishnan, Chief Executive Officer of AGA, has said “we have now developed a good working partnership with the Government of Ghana, the Ghana Mineworkers Union and other key stakeholders to address the challenges facing Obuasi. We must do all we can to stop the current cash outflows at Obuasi and define a sustainable future – and we appreciate the support of our partners in taking the decisive action necessary to achieve this.”
What Venkatakrishnan failed to admit was that a grave mistake on the part of AGA within the last decade has become an albatross hanging around its neck.
A source close to senior management revealed that “we normally have something known as stopes (underground mining layers each consisting of 100 feet). That is where we mine the gold. The development of further stopes has to happen ahead of the exhaustion of existing stopes.”
“At the moment we are on 53 level. It is the same level we were when AGA took over. They should have gone down to level 75 but they did not do it. They thought they will get ore around and use the money to develop further down. It is capital intensive and they wanted to manoeuvre and get the capital from here without going to borrow for the deeps.”
The short-circuiting has not paid off because, now, AGA has had to contract an Australian company to develop the mine to the 75 level asserted by our source. The team, which has been working over the past six to eight months, will still require 18 to 24 months to complete the development works.
Mark Morcombe, Senior Vice President, AGA Ghana, has indicated that mining would stop in the main mine in the north, ‘the big house’, for redevelopment. The redevelopment process will last between 18 to 24 months. Within that period, mining will be done south of the current mining area, to keep production ongoing. Also, tailings will be processed using new technology to increase gold production.
Summarising measures to be taken, Morcombe mentioned that there would be substantial reduction in production to tailing re-treatment only as well as targeted mine development. In addition, there would be de-watering and water management, environment control, care and maintenance and commensurate reduction labour over the temporary shutdown period.
The retrenchment is occurring at a time the company’s financial performance demonstrates a decline in fortunes since AngloGold Ashanti took over the Obuasi Mine from Ashanti Goldfields Company, AGC, on April 24, 2004. AGA has not contested the fact that the Obuasi mine has suffered losses for every year since 2004 except for the three-year period of 2009 to 2011.
In 2013, the Mine made a total loss of $220 million. Indeed, since 2005, AGA has incurred over $600 million dollars losses at Obuasi but has invested about $500million dollars to improve the mine.
There have been attempts at blaming the company’s misfortunes on rising cost of energy which stands at $70 million a year. A senior company official has said that the company invests about $1,700 dollars to produce one ounce of gold but sells an ounce for between $1,390 and $1,400. Thus, it loses about $300 on each ounce and no company can run business like that.
Richard Ellimah, a resident of Obuasi and Executive Director of the Centre for Social Impact Studies, CeSIS, contends strongly that “this situation could have been prevented.”
According to him, “it is totally needless. And, I make this assertion based on the fact that if you look at 2004 when AngloGold came in they made some major promises like they were going to turn Obuasi around and inject as much as $1 billion into Obuasi mine and change the Obuasi local economy.”
He argued also that AngloGold was fully aware of the status of the Obuasi mine before its merger with AGC. “No serious multi-national investor will decide to acquire interest in another mine without doing any serious feasibility studies or doing their cash flow analysis to assess the viability of the mine. so I’m pretty sure they knew the challenges of Obuasi.
“The antidote to these challenges does not depend on shutting down. It depends on taking pragmatic steps from year one and phasing it over a period of time in order to achieve the ultimate objective. But they kept complaining from 2004 till last year about production going down and never did any serious thing about it.
“So for me if right from the beginning they had phased the solution to the problem over say a five-year period, they should have been able to address the problem straight ahead and avoided getting to the point where they need to shut down for two years, jeopardizing the livelihoods of these thousands of workers we are talking about.”
Ninety-plus year-old Ali Baba, who worked with the Obuasi mine between 1941 and 1986, also claims that the mine has been run down. According to him, the decision to offload the Ghana government’s interest to AngloGold was the genesis of the current debacle.