Randgold ditches AngloGold JV in huge blow to Ghana mine

Firms fail to agree tax breaks

ACCRA, Dec 21, (RTRS): Gold producer Randgold Resources said on Monday it was pulling out of a joint venture with AngloGold Ashanti to redevelop AngloGold’s Obuasi mine in a decision that could spell closure for one of Ghana’s most important mines.

The announcement reflects the pressure on mining companies from the slump in the gold price as well as the cost of reviving a century-old mine that has not turned a profit for more than a decade and requires heavy investment.

“This is bad news. It’s a major blow given that the roadmap was to start operating in the course of next year,” Prince Ankrah, head of the Ghana Mineworkers’ Union, told Reuters.

AngloGold laid off thousands of workers at the mine in the central Ashanti region in 2014 but said it would step up investment with a view to reopening in 2016.

Africa-focused Randgold said in September the joint venture would not spend more than $1 billion on the redevelopment of Obuasi, which holds about 5 million ounces of gold reserves.

However, since 2014 the price of gold has fallen almost 20 percent to just above $1,000 an ounce.

Obuasi miners said the Randgold deal was their best hope but

Randgold said that after due diligence it had decided the proposed project did not meet its investment criteria.

Shares

in AngloGold Ashanti were up 4.89 percent at 108.89 rand 1226 GMT. Randgold shares traded in London were up 0.5 percent.

AngloGold said both companies tried to improve the project’s return and secure consent from Ghana’s government for a feasibility decision on redevelopment in early 2016.

One mining analyst, who did not want to be named, said the companies had been unable to secure sufficient tax breaks from the government. A government spokesman did not answer calls requesting comment.

“They (AngloGold) are very unlikely to develop the mine without a partner because they don’t have the capital,” the analyst said. “When they say they will talk about options one of those options has to be to close it fully.”

Ghana is Africa’s second biggest gold producer and gold is the main source of government revenue, ahead of oil and cocoa.

Its economy saw years of rapid growth through its exports but it has been hit hard by a slump in commodity prices. At the same time, a fiscal crisis has forced it into an aid deal with the International Monetary Fund.

Closure would be devastating for Obuasi, a town that grew prosperous on its mine. A local union leader, Samuel Dwamenah, said the situation was already “precarious” and most of the men who were employed there had left to seek new jobs.