Five years after commencing operations at its Ahafo mine, near Sunyani, Brong Ahafo Region's capital, Newmont Ghana is preparing to launch an expansion programme that could make it Ghana's biggest gold producer as early as 2013 and certainly by 2014. Currently the company produces between 500,000 and 550,000 ounces of gold annually through its surface mining operations from four pits and a processing plant spread across ten communities in Brong Ahafo. This makes it Ghana's third largest gold producer after South Africa's Goldffields Ghana and Anglogold Ashanti, a company that is the result of a merger in 2002 between South Africa's Anglogold and Ghana's Ashanti Goldfields.
Two new initiatives however are set to enable Newmont, an American multinational, overtake those two companies by tripling its gold production within the next two to three years.
The timing of Newmont Ghana's expansion initiatives is certainly befitting. This year its parent company which is headquartered in Denver, Colorado in the United States, is commemorating its 90th anniversary. Established in 1921 by Colonel Boyce Thompson, Newmont now operates across North America, South America, Asia, Australia and Africa. Instructively, Newmont has chosen Accra as its regional headquarters for its operations in Africa, where, apart from its Ghanaian operations it has exploration activities in both Cote d'Ivoire and Burkina Faso as well as a joint venture in Guinea.
Those countries only have to look to Newmont's activities in Ghana to take heart that their relationship with the company will generate major benefits. Newmont's Ahafo mine contributes 1.3% of Ghana's entire Gross Domestic Product (albeit this being computed prior to last year's rebasing of the GDP which increased it by some 60%), which is more than a fifth of the 6.33% of GDP generated by the country's entire mining industry. The company's US$582 million in gold exports in 2009 made up 9% of the country's entire merchandise exports for that year. Between 2006 and the end of last year, Newmont paid the Government of Ghana some US$62 million in royalties alone and during that period has injected about US$196 million into the Ghanaian economy, apart from its actual capital expenditure.
That capital expenditure itself amounts to over US$1 billion, of which US$882 million has been spent on developing the Ahafo mine. The company currently employs some 1,579 workers directly, and another 3,056 on contract basis. Based on the typical multiplier of four indirect jobs resulting from each direct job given, this means t6hat Newmont has created more than 10,000 indirect jobs.
Over the next two years, Newmont plans to increase these already huge contributions to the national economy in dramatic fashion as the company looks to triple its production to some 1.5 million ounces which would make it far and away Ghana's biggest gold producer, churning up more than one and a half times the gold produced by the current industry leader, Goldfields Ghana, whose production presently stands at just under a million ounces a year.
Currently Newmont mines about 56 million metric tonnes of ore every year from four pits ? Apensa and Subika, both of which were commenced in 2006, Awonsu, opened in March 2008 and Amana, opened in July 2010. Of this, about 7.5 million metric tonnes of ore is milled annually through the company's processing plant.
Now however, the company is looking to add underground mining to the Subika surface mining operation with already identified new gold resources deep under the existing pit holding the promise of doubling Newmont's entire gold production, thus bringing the Ahafo mine's total output to over one million ounces a year.
Even with exploration under the ground at Subika still ongoing the results assayed so far are leading Newmont towards making a crucial investment decision: the options are to either expand the existing throughput infrastructure available at the processing plant it already has at Ahafo to enable it handle double the ore currently being milled, or to build a second processing plant to handle the anticipated new volume of ore.
The second expansion initiative is even more ambitious ? Newmont has begun the process to build an entirely new gold mine at Akyem in the Eastern Region. This new mine received the approval of the company's Board of Directors last year, and a mining lease has been received. Initial production is expected to be about 400,000 ounces a year, this quickly rising to about 500,000, with a mine life of 20 years; this means the Akyem mine will have about the same capacity and lifespan of the Ahafo mine which has proceeded it.
Newmont is pulling out all the stops to get the Akyem mine up and running by 2013. Preliminary mine development has started and the company plans to spend about US$300 million in capital expenditure this year alone, with another US$500 million or so over the subsequent two or three years.
While both the planned Subika underground mining operations and a new mine at Akyem are moving into actual implementation phase, Newmont is also looking to increase its production even further if its Ahafo North Exploration Project proves successful. This new exploration is taking place 25 kilometers north of the Amoma pit, in the company's ongoing surface mining operations in the Brong Ahafo Region and the company is examining the potentials for seven new pits within the Ahafo North exploration territory.
Both government and Newmont's host communities will be praying that all of the company's expansion initiatives hit pay dirt. A new independent study by Professor Ethan Kapstein of the INSEAD Business School in Paris, due to be released next month, reveals that Newmont Ghana has spent about US$269 million, or 49% o9f its gross earnings in the country.
In 2009 alone, it also provided local Ahafo companies with nearly US$6 million in contracts, supporting more than 400 jobs.
There is a certain unfortunate irony to Newmont's contributions to the local economy of its host communities. The company is regularly criticized by some non-governmental organizations who claim that those host communities are suffering from Newmont's operations. The facts however show the opposite, which is why those local host communities themselves identify with Newmont rather than its urban-based critics.
Take employment: 35.53% of Newmont's workforce at the Ahafo mine are indigenes of the ten host communities. Another 60.48% are also Ghanaians, but not from the locality and only 4.05% of the company's workforce are expatriates. Indeed the company takes its efforts to build human resource capacity within its Ahafo host communities very seriously indeed. This is further illustrated by its IFAC apprenticeship programme through which it trains 15 people selected from among the ten host communities on merit, every year, through a four year period at a cost of US$17,000 per person leading to a city and guild professional diploma. Courses on offer include electrical process, mechanical process, mine maintenance, wielding and most lately, process operations.
To be sure Newmont's host communities are bemused by NGO allegations that they suffer rather than benefit from the company's activities, for lots of good reasons. When putting up the Ahafo mine, the company spent US$17 million on resettling over 1,7000 households, US$16 million on crop compensations and another US$22.3 million on livelihood re-establishment.
The latter involves a plethora of well-structured programmes comprising an Agriculture Improvement and Land Access Programme, a Vulnerable Peoples Programme, a LEAP to Skills Development for Income Improvement Programme, the Ahafo Linkages Programme and an Ahafo Agribusiness Growth Initiative.
Instructively, Newmont has created new frontiers with regards to getting its host communities involved in deciding what they want financed by the corporate social responsibility expenditure. When the company commenced actual operations at Ahafo in 2006 it established an Ahafo Social Responsibility Forum involving nine stakeholder groups which led to three key agreements with its host communities covering local employment, relationships and perhaps most importantly, the establishment of the Newmont Ahafo Development Foundation, NADeF.
NADeF is unique in that it allows the host communities themselves to decide on what they want funded. Since 2008, Newmont has contributed US$1 for every ounce of gold it produces, and another 1% of its annual net profit, to finance the foundation.
As at March 2011, this has translated into US$5.1 million in contributions of which US$1,939m743 has actually been spent on projects while another US$290,119 has gone into operational costs. Now the disbursement rate is accelerating as the host communities are becoming increasingly decided on what to do with the monies available through the foundation.
So far 37 key infrastructure and related projects have been financed across the ten host communities alongside scholarships to some 1,508 students in tertiary institutions and senior high schools. Importantly though 30% finances are lodged in investment instruments for use by future generations.
Which only goes to show how far ahead Newmont is looking, not only in its economic activities but also in its efforts to improve the lives of its host communities. Little wonder then that even as some activist NGOs cry foul against the company, its local hosts rather hope that its mine life will be extended, a hope which stands to be realized by new projects such as proposed underground mining at Subika and the Ahafo North Exploration Project. And little wonder then that the next set of host communities, at Akyem in the Eastern Region are waiting impatiently for Newmont to build its new mine there so they can enjoy similar benefits too.