Home BUSINESS Incentives are key to the mining industry- Gold Fields Ghana Ltd.
The Executive Vice President and Head of Gold Fields West Africa, Mr. Alfred Baku has argued that government’s incentives for the mining companies, particularly, multinationals, are key to the development of the mining industry and to a greater extent, enhancing economic gains from natural resources.
Reckoning developments from 1957 to 1983 with regards to gold mining in Ghana, a period where the state was largely engaged in mining operations, Mr. Baku disclosed that production capacity and expansion was deficient and continued to decline due to the lack of capital. Cumulatively, about three hundred thousand ounces of gold was produced by these state gold mines in that period.
Speaking at the sidelines of the maiden edition of the Ghana Gold Expo held in Takoradi, Mr. Baku explained that these short comings in the industry, motivated government to consider a more participatory mining regime.
“If we didn’t actually create that enabling environment, if we didn’t have that transformation to bring the multinationals to come in and reinvest these in operations, I think we were actually coming to a halt” he noted.
He justified that the onset of the multinational mining companies brought about huge capital investments in the industry, and that shot up production levels from the 300,000 to 4.8 million ounces of gold “we experiencing”.
“So without the capital we actually saw a decline and therefore if we actually create the environment, you will get the multinationals to come.
“When they came, they reinvested and the production that was going down to 300,000 is now 4.8 million” Mr Baku justified.
Mr. Baku continued that other countries such as Peru, Gabon, among others, have such a facility to support the mining industry. He emphasized based on these accounts that, government need to enhance its incentive schemes for mining companies, if it expect to earn more from its gold reserves.
He added that the country risk to bear the consequences of capital flight should it fail to create a right environment and incentives to support their operations.
“There is a huge competition for capital…and for countries that will create that environment for them to get a return, then you will bear with me that they will push the capital in there” he noted.
Exploration and ore reserves
Asked what need to be done differently to support the mining industry, Mr. Alfred Baku mentioned that industry players must concentrate substantial resources at its explorations, as that is the only way to sustain their operations.
“Exploration is going to ensure that your pipeline of ore reserve is always full. But if you don’t explore, because gold is finite, you continue to mine you will deplete the reserves to a point that there will be nothing” he added.
However, these explorations are with some constraints. Mr Baku intimated that the current tax regime in the country is a disincentive to industry players.
He prayed that some effort is taken by government to review the tax regime, especially the Value Added Tax component on exploration to ease their operation cost.
“Our current structure of exploration needs a bit of an adjustment or an intervention from government. The VAT we have around our exploration compared to what we have in our neighboring countries, is not that attractive enough.
“The consequence of which has resulted into the migration of most drill rigs to neighboring countries, and therefore we need to actually promote that side” he mentioned.