Gold Fields, AngloGold plan joint venture to create Africa’s biggest gold mine in Ghana

16 Mar 2023

Two JSE-listed mining companies with deep roots in South Africa are combining forces in Ghana to create Africa’s largest gold mine. The transaction makes good business sense as it is the same deposit and the two companies operate adjacent mines extracting gold from it. It is also emblematic of the decline of South Africa’s gold mining sector.

Gold Fields and AngloGold Ashanti said on Thursday that they had agreed to propose a joint venture (JV) in Ghana to create Africa’s biggest gold mine, with an estimated annual production of almost 900,000 ounces over the first five years.

The JV will combine Gold Fields’ Tarkwa and AngloGold’s neighbouring Iduapriem mines. AngloGold will contribute its 100% interest in Iduapriem to Gold Fields Ghana in return for a shareholding in that company.

“The proposed joint venture is an exciting opportunity to combine mining operations that are essentially part of the same mineral deposit and is something that Gold Fields and AngloGold Ashanti have discussed many times before over the years,” said Gold Fields’ interim CEO, Martin Preece.

So this was a JV long in the making. Excluding the stake held by the Ghanaian government, Gold Fields will have a two-thirds interest in the JV and will operate the mine, while AngloGold will have the remaining third.

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“Operational synergies will be achieved by optimising mining of the combined ore bodies and consolidating the infrastructure of the immediately adjacent mines,” the companies said in a joint press release.

“The proposed joint venture would create the largest gold mine in Africa and one of the largest in the world. It will be a high-quality operation, supported by a substantial mineral endowment and an initial life spanning almost two decades.”

No material capital injection is expected to be required to establish the JV. The operations are open-pit, which significantly reduces costs and is also a far safer environment than an underground mine.

“This combination puts together two parts of the same world-class ore body, allowing us to share skills and infrastructure to significantly enhance every aspect of this mining operation, from exploration and planning to mining and processing,” said AngloGold CEO Alberto Calderon.

The initiative is also perhaps emblematic of the decline of South Africa’s once towering gold mining industry, which has produced more than a third of the precious metal in recorded history.

Gold Fields and AngloGold were spawned on the dazzling reefs of the Witwatersrand, with deep roots in South Africa, both historically and geologically.

Diminished SA presence

Their presence in South Africa, where both retain primary stock market listings on the JSE, is now much diminished.

Gold Fields has only one operational asset left in South Africa, its mechanised South Deep mine in western Gauteng, which at least has turned a profitable corner after years of burning cash. AngloGold’s South African presence has been reduced to a head office in Rosebank.

South Africa, which once accounted for close to 80% of the world’s gold output at its peak, now barely figures in the top 10 among gold-producing countries. A number of factors explain this steep decline, including deeper depths and lower grades, which make much of the gold that still lies deep underground here uneconomical to extract — or impossible with current technologies.

But South Africa’s attraction as an investment destination for mining has also faded, and not just for gold. Soaring costs, notably for unreliable power; social and labour unrest, rising insecurity including zama zama incursions, Transnet’s ongoing train smash and policy bumbling by the government have all conspired to make South Africa an undesirable place for mining capital.

Some of this can be seen as history coming back to haunt the mining sector, as the orchestrated decline of a migrant labour force that was for decades subjected to ruthless exploitation has given rise to the zama zamas and illegal mining, along with associated violence and criminality.

Read more in Daily Maverick: “How the twilight of SA’s migrant labour system spawned a social apocalypse”

The government claims it wants mining investment by the truckload, and yet the Department of Mineral Resources and Energy continues to thwart it through its missteps. The ongoing cadastre disaster speaks to the dysfunction of a regulator that seems suspiciously allergic to transparency around the granting of mining rights.

Read more in Daily Maverick: “Another day, another mining cadastre procurement delay”

A decade ago, Gold Fields made a strategic shift to mechanised operations, mostly outside South Africa, while AngloGold eventually sold off all its working mines in the country.

Both see far greener pastures abroad, including in Ghana, where AngloGold’s Obuasi operation just a few years ago was invaded by an army of illegal miners, transforming an asset into a serious liability. It’s now one of the jewels in the company’s crown.

Ghana was once known as the Gold Coast, Johannesburg the City of Gold. For Ghana, the name still has resonance. For Johannesburg, not so much. DM/BM

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Diminished SA presence