Gold firms begin sales to BoG - 125,000 Ounces expected last quarter
Gold-producing companies in the country have started selling gold to the Bank of Ghana (BoG) under the Domestic Gold Purchase Programme.
The companies which are members of the Ghana Chamber of Mines will, between now and December this year, sell about 125,000 ounces of gold to the BoG.
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Last year, the central bank announced that it would begin to hold part of its reserves in gold as it sought to shore up its foreign reserves.
The sale is expected to strengthen the cedi and halt the rising inflation.
Meeting
This was the outcome of a meeting between the Vice President, Dr Mahamudu Bawumia, other members of the Economic Management Team, the Bank of Ghana, the Ministry of Lands and Natural Resources, the Minerals Commission and the Precious Minerals Marketing Company (PMMC) on one hand ,and the leadership of the Ghana Chamber of Mines on the other.
“It was agreed that to help shore up the foreign exchange reserves of the Bank of Ghana, starting September 1, the Bank of Ghana will purchase a portion of the output of the gold mining companies on a continuous basis at world market prices but payment will be made in Ghana cedis,” Dr Bawumia said after the meeting.
Mining firms
In all, there are 10 mining companies that will sell gold to the BoG under the deal.
The firms are Newmont Ghana Gold, which operates the Akyem and Ahafo mines, Gold Fields, which operates the Tarkwa and Abosso mines, AngloGold Ashanti Obuasi, AngloGold Ashanti Iduapriem, Perseus, Asanko, Golden Star Wassa and Adamus Gold Resources.
The central bank will buy the gold in cedis at $1,600 per ounce at the Bloomberg exchange rate of GH¢10.3 to the dollar.
According to the central bank it would pay market prices for the precious metal but make the payments in cedis.
Per the plan, the BoG wants to purchase about GH¢2.1 billion worth of gold by December this year.
Ahead of the meeting, Newmont Ghana had already sold 3,500 ounces of gold to the BoG as part of the deal.
Mutual benefits
The President of the Ghana Chamber of Mines, Joshua Mortoti, said in an interview with the Daily Graphic that the gold purchase programme was mutually beneficial to all the stakeholders.
“As good corporate citizens, the Chamber will support the BOG to ensure that the nation and mining companies benefit from the programme,” he said.
Also commenting on the deal, the Chief Executive Officer of the Chamber, Sulemanu Koney, stated that members of chamber would further engage the central bank to fast-track the implementation of the programme.
Foreign reserves
The BoG is the latest central bank to announce plans to increase its gold reserves.
A survey from the World Gold Council last year showed that out of 57 central banks, more than 20 planned to add more gold to their foreign reserves.
Most of the demand is coming from central banks of emerging markets.
Analysts have stated that the gold purchase deal was a significant boost to the country’s foreign exchange reserves, and would strengthen the country's balance of payments.
Ghana is Africa's top gold producer and the world’s sixth largest producer, producing more than 117 tonnes of gold last year.
Dollarisation trend
Market analysts see the central banks' growing appetite for gold as part of the general de-dollarisation trend that countries are trying to lower their exposure to the US dollar.
Ghana has been struggling to tame galloping inflation, reduce public debt and shore up the local currency.
Its balance-of-payments deficit swelled to nearly $2.5 billion by the end of June, this year, from around $935 million in March.
The government is also putting together a post COVID-19 economic programme that will form the basis for negotiations with the IMF.
The programme seeks to ensure debt and macroeconomic stability through key structural reforms and social protection.
Already in the country is an IMF team that is discussing policies and reforms with government officials and the central bank after the country requested a bailout from the Fund in July.
The BoG has therefore rescheduled its September 26 Monetary Policy Committee meeting to October 7 to coincide with the end of the negotiations between the government and the IMF.