Job cuts: Mining companies to trim operations by 3,500
Mining companies in the country will begin a massive downsizing of their operations from next month as renewed pressure to cut down on cost heightens with falling gold prices.
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More than 3,500 permanent jobs will be lost in an industry that has enjoyed a decade long boom as falling gold prices and rising cost blight the industry.
A highly placed source at the Ghana Chamber of Mines warns of imminent job losses if gold remains at current price levels of less than a US$1,200 an ounce.
Gold prices, which at the beginning of April, was hovering around US$1,600 an ounce has now crashed to low record price of below US$1,200.
“We are still compiling the figures as is being submitted to us by the mining companies and we can say that the numbers are close to 3,500 or little less,” the source said.
The job cuts according to the source will affect the major mining operators and those in the mining support services.
Elsewhere, several big companies like BHP Billiton Ltd. (BHP) have canceled or delayed projects, closed mines, and put assets up for sale and fired several workers as the outlook for major commodities worsened.
The fall in gold prices comes in spite of a rising price last year, pointing to an issue hitting many mining groups: investor concern at how production costs have risen inexorably and in Ghana, the government is introducing a windfall profit tax of 10 per cent in the industry as captured in the 2013 Budget Statement.
The main engine of Ghana’s economy that helped the nation staved off difficult times and returned about GH¢1.46 billion to the Ghana Revenue Authority (GRA) in 2012. This represents 27.04 per cent of GRA’s total direct taxes collected in that year. The mining sector in 2012 was the largest taxpayer in Ghana.
According to statistics from the Ghana Chamber of Mines (GCM), the mining industry paid GH¢ 893.77 million in respect of corporate tax to the GRA, representing 36.98 per cent of the total company tax collected by the authority in 2012.
That factor, which is normally wrapped in government accounting books, has often been subdued by the generally visible environmental impact of mining, thus dislocating the debate from an informed perspective.
In terms of corporate social responsibility towards host mining communities and the general public, the industry invested about GH¢26 million in 2012.
The statistics further indicate that mining companies returned about $3.2 billion, representing 73 per cent of their mineral revenue, into the local economy through the Bank of Ghana (BoG) and the commercial banks in 2012.
Even before the sharp fall in the price of gold this year, its miners were out of favour. Among the 40 largest mining groups by market capitalisation, two of the five companies that operate in Ghana, that have lost value since last year were, AngloGold Ashanti and Newmont – according to research by PwC.
The same PwC research shows that from 2010 to 2012, the gross margins earned by the same four gold miners fell from 49 per cent to 29 per cent. “While high gold prices are generally good news for gold miners, margins matter even more,” said PwC.
Gold prices have suffered their sharpest fall since the 1980s, heightening fears that the metal’s decade-long bull Run has ended.
But beyond the hard figures regarding the contribution of the mining sector to the national economy, there are other critical issues, such as investment, cost of production and the retention of profits in the local economy that have to be considered in the cost-benefit debate on mining.
“It is only when people are adequately informed about the nitty-gritty of the mining industry that they would be able to appreciate the cost-benefit imperatives of mining in a very thoughtful manner”, the source said.
With the revision of the mineral royalty rate from a range of 3 to 6 per cent to a flat rate of 5 per cent in 2011; increase of corporate tax from 25 per cent to 35 per cent in 2012; varying of capital allowances from 80 per cent in the first year and 50 per cent on declining balance to a flat rate of 20 per cent over five years, and abolishing of the five per cent investment allowance, the mining companies believe the industry is under a wave of ‘tax strangulation’.
By Suleiman Mustapha/Graphic Business/Ghana
