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Obuasi mine faces imminent shut down

anglo goldMore than 1,000 workers of Anglogold Ashanti’s Obuasi mine are likely to lose their jobs, if management endorses plans to shut down the mine.

Currently, management of the mine is in serious strategic talks with government over the issue and the mine could be shut down within the next 18-24 months.

Government has already requested management of mining giant to submit a comprehensive proposal on how it plans to cut costs at its Obuasi mine in the next few days.

Alhaji Inusah Fuseini Minister of Lands and Natural Resources last week held a discussion with the management of mine on the variouse ways of reviving the mine with an options include a “reasonable reduction of labor force.

The Obuasi mine has been struggling with overage equipment, poor security, inadequate power supply, and the activities of illegal miners.

The mine also needs massive capital injection to renew its antiquated infrastructure, improve underground transport and sharpen the skills of its employee.

Once the biggest gold mine in the country and the leading employer in the industry — with about 8,500 workers — Obuasi mine has in recent years become a high-cost producer, and not produced above 400,000 ounces since 2004. It has over 20 years of mine-life with 9 million ounces of gold reserves.

Already, with the persistent drops in gold price, mining companies are struggling to keep the cap on rising cost of operations.

The metal lost 25 percent of its value last year, and this came on the back of an increase in the mining sector’s corporate tax rate from 25 percent to 35 percent.

The company suspended its dividend last year, is laying off 40 percent of its 2,000 employees in corporate offices and is cutting spending on exploration.

“The Obuasi mine needed to be restrategised to help address the production challenges it was facing since the mine was not posting profit in its operations

“The Obuasi mine had tremendous potential and that all efforts should be made to make the mine profitable.

“It is an important mine in the country contributing to the improvement of communities and the nation at large”.

The illegal mining activities, he said posed huge problems to the environment with many water bodies being polluted.

“Government was committed to fighting the menace in the mining industry to bring sanity,” he stated.
Mr. Macombe, Senior Vice President of Anglogold Ashanti indicated that the mine was facing challenges including decline in production.

He said the meeting would consider a number of options to improve the situation in the mine which had potential mine-life of over 20 years.

Mr. Macombe has explained that “Although the mine is making progress in some areas, it is far from profitability as it is still making losses.

“The operation is currently undergoing ‘painful but necessary transformation’ at all levels to shore up gold production and reduce cost of production with a view to setting it on the road to profitability; citing declining gold production, increasing costs of power tariff, increasing activities of illegal mining and escalating costs.

“These challenges meant that the Obuasi mine is underperforming; it is not producing more gold to generate enough profit to improve its cash flow, hence forcing the operation to borrow unsustainably to keep it afloat.

“Obuasi is simply a loss making entity but this cannot go on forever.”

He said reversing these definitely needs strong and courageous decisions to address the challenges and fix the mine, which is one of the oldest mines in the world.

Mr. Morcombe said the company will be shirking its responsibility, if it fails to reverse the decline and address the fundamental challenges undermining the future of the ‘famous’ Obuasi mine, saying that ‘we are implementing painful but necessary measures to grow the company as a ‘lean and profitable operation’.

About 430 Obuasi employees have already been retrenched, and the signs are that more changes are being planned ahead.

The Morcombe explained that in spite of the changes made the mine is still not out of the woods, suggesting that more changes will be made in future to stabilize and secure the future of the Obuasi operation.

“The mine will continue to engage and update the stakeholders on ongoing activities to ensure their cooperation and continuous support,” he said.

The Chairman of the Ghana Mine Workers Union, Mr. Kwarko Mensah Gyakari, said the Union will scrutinize the proposal very well and ensure that workers get the best offer.

He added that the management had scheduled a meeting with the workforce where workers are expected to be informed of the latest development.

Source:B&FT

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Reporting Oil and Gas project was launched on 4th June 2009atTakoradi, Western Region, Ghana by Penplusbytes (PPB – www.penplusbytes.org) with the vision of providing a one stop online information and knowledge about Ghana’s oil and gas sector
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