Gold Fields Extending Mine Life at Damang

Gold Fields has announced plans to extend the life of its Damang gold mine in Ghana by eight years from 2017 to 2024 through investment of $1.4 billion in capital and operating expenditures. Over the life of the mine, a total of 165 million metric tons (mt) of material will be mined and 32 million mt will be processed at a grade of 1.65 grams (g)/mt, resulting in total gold production of 1.56 million ounces (oz). All-in costs of production are forecast to average $950/oz.

The Damang gold mine is located in southwestern Ghana near the southern end of the Tarkwa Basin. The mine exploits oxide and fresh hydrothermal mineralization in addition to Witwatersrand-style palaeoplacer gold. (Photo: Gold Fields)

Since Damang started up in 1997, the mine has produced more than 4 million oz of gold, sourced from multiple open pits. Production from the Damang Pit Cutback (DPCB) came to an end in 2013, and since then mining has focused on the margins of the Damang pit, as well as lower-grade satellite deposits. A decline in production since 2013 has been exacerbated by variations in grade in the northern and southern extremities of the DPCB and the satellite pits, where grades have been lower than expected.

A strategic review initiated in 2015 indicated that Gold Fields should return to mining the higher-grade core of the main Damang orebody. This work was supported by a “development agreement” signed between Gold Fields and the government of Ghana in March.

Major cutbacks will be undertaken to the eastern and western walls of the DPCB, followed by a deepening of the pit by a further 76 meters (m). This work will ultimately provide access to the full Damang orebody, including high-grade Tarkwa Phyllite lithology. Planning for the Damang cutback has resulted in a 72% increase in Damang’s proven and probable reserves to 1.68 million oz of gold in 31.5 million mt at a grade 1.65 g/mt, compared to the December 2015 totals.

To provide short-term ore supply while the Damang pre-strip is in progress, mining will continue at satellite pits, and plant feed will be supplemented by low-grade surface stockpiles.

2017 Looks to Be Worse for South Africa

As bad as the past year was for South Africa’s embattled mines, industry executives have the glum foreboding that 2017 is likely to be even worse. New black empowerment regulations may be the final strike that drive many out of business altogether.

For some time now, the mines have been waiting for the latest iteration of the Mining Charter, a set of rules designed to prod the industry into increasing black participation. The idea is to redress apartheid-era ownership that was entirely white. At that time, blacks were prohibited by law from any participation in mining other than menial low level labor. They could not even qualify as artisans or technicians.

This changed with the advent of democracy in 1994, but the newly installed African National Congress administration felt it was not enough to simply do away with discriminating legislation. Also needed were corrective laws that would actively push mining houses to speedily redress past racial imbalances.

The Mining Charter was intended to
do just that. It lays out what companies must do to move toward black empowerment, if they want to retain their mineral rights. Unlike the U.S. where what is below the ground is the property of the landowner, South Africa vests mineral rights with the state.

Companies have generally gone along with empowerment rules, recognizing the need to become more inclusive. It includes, for instance, the requirement that all mining companies are 26% black owned. Targets are also set for black management positions, suppliers and contractors. Tweaks to the charter happen every four or five years and are seen as part of doing business in one of the most mineral rich countries on the planet.

In late November, the country’s Department of Mineral Resources (DMR) sent to parliament its latest draft of the charter. The difference this time is that unlike with previous adjustments to the charter, the DMR now has gone ahead on its own in redrawing it, blanking the mining industry out of the process.

When industry executives finally got to see it, they were alarmed at its contents. Roger Baxter, CEO of the Chamber of Mines, said if it goes ahead as planned, the consequences for the industry will be grave.

“The chamber is deeply concerned that the draft-reviewed Mining Charter contains ill-considered and/or unachievable targets,” Baxter said. “Its implementation in its current form will have dire consequences for the mining industry and the entire South African economy at a time when both are facing significant challenges.”

Among the concerns is that the DMR wants to set up a state agency to manage black transformation and development, paid for through a special levy on mining companies. Contributions will be calculated on revenue earned rather than profit, which means companies will have to cough up regardless of how well or badly they are doing.

“Simply stated, this proposal is yet another ‘royalty’ tax-equivalent that the DMR intends to impose on an already struggling industry, which made a loss of some 37 billion rand (US$2.7B) in 2015,” Baxter said.

The agency will cost most of the 5 billion rand a year the industry currently spends on developing skills. “That’s going into an agency of which we have no idea what the governance procedures are, what the money is going to be used for,” Baxter said.

Another bomb in the revised charter is the stipulation that 70% of all procurement for consumables and capital goods must be sourced from local suppliers. Previously this was 40%.

Local mines run on foreign-made equipment such as Caterpillar, Liebherr and many others. To retain South African custom, they would have to establish local factories—and take on black partners.

“This requirement would entail multinationals having to establish a manufacturing base in South Africa within three years to make this possible. Clearly this is something that needs to be investigated and researched in depth,” said Baxter.

Other prescriptions include a minimum of 30% of total goods and services procured from majority black-controlled companies and 5% of overall spend with black woman-owned or youth-controlled companies. How many such companies exist is unclear.

The issue comes as relations between the mining industry and the DMR are already at a low point. The chamber took the DMR to court a year ago over whether a company that took on a 26% black shareholding is still in compliance with the charter should the shareholder decide to cash out.

Earlier this year, both parties agreed to settle the matter out of court, but now that the new charter is lurking in the wings, the chamber may reinstitute the lawsuit.

Golden Star Receives Mining Lease for Mampon Deposit

Golden Star Resources has received a mining lease for the high-grade Mampon deposit about 80 km north of its Bogoso carbon-in-leach processing plant in Ghana. Mampon is an open-pit oxide deposit containing 45,000 oz of gold at a grade of 4.6 g/mt. An existing, good-quality road connects the deposit and the processing plant for the majority of the distance, so limited capital expenditures will be required to bring the deposit into production.

Higher-grade ore from Mampon will be blended with ore from the Golden Star’s Prestea open pits, which is expected to enhance the company’s cash flow in 2017. Following receipt of the mining lease, the next step for the company is to obtain an environmental permit. Golden Star expects to start mining Mampon in the first half of 2017.

Turkey Considers More Coal-fired Power

On November 7, Turkish Minister for Energy and Natural Resources Berat Albayrak, who is the son-in-law of Turkey’s powerful President Tayip Erdogan, announced that $5 billion had been invested in building 158 electricity generating plants during 2016. The government of Turkey is pursuing an aggressive industrial growth strategy that it is attempting to fuel local resource use, thus a large number of these plants are being built to run off indigenous coal. “As long as we use our renewable resources and our coal resources efficiently, we will be able to open new horizons for our country by closing the account deficit,” he said.

According to the 2016 Budget Presentation of the Ministry, Turkey can save around $7.2 billion from its annual energy bill as long as the country’s coal reserves are fully realized. The three state-owned coal companies in Turkey, together produce more than 90% of the country’s coal—though often using contractors—have embarked on an exploration program that has revealed 7 billion metric tons (mt) of reserves over the past 10 years. Most of this coal is, however, low quality lignite, and only 6% of reserves have a heat content of more than 3,000 Kcal/Kg.

Turkey must still, therefore, import considerable amounts of hard coal to supply its steel industry as well as those coal-fired power plants that rely on hard coal, more of which are currently being built. Imports of hard coal have been increasing and reached 17.6 million mt in 2015. Even as Turkey attempts to exploit its domestic resources, imports of hard coal are expected to continue to rise to reach 24 million mt by 2026.

A levy of $15/mt on imported coal was introduced in August of this year, only to be revised in October to a lower rate related to the ICE Rotterdam Futures Index. Imported coal currently covers 15% of Turkey’s energy requirements, while local lignite covers 13%. Gas is the principle energy source. Turkey imports gas from Russia and Iran, countries upon which Turks are determined not to depend. Turkey’s energy deficit stood at 6% of GDP in 2014. To curtail this, the government plans to increase electricity produced from lignite from 31 TWh to 57 TWh by 2018. There are currently 71 new projects for coal-fired power plants in Turkey, though many may never be realized.

The new fleet of lignite-fueled power stations is not without its critics. There have been numerous protests involving local communities in the areas of the proposed new coal mines and power plants, as well as objections from environmental groups. Their combined pressure forced the cancellation of a project led by the Azerbaijan National Energy Co. (SOCAR) to build a 672-MW integrated coal-fired power plant near Aliaga in Izmir province last year.

Such interference seems less likely to be tolerated following the controversial government decree, Article 80 of August 20, passed during the State of Emergency that was declared following the recent failed coup attempt and that remains in place. The decree aims to fast-track mining and energy projects by exempting them from various licenses and permissions, as well as allowing for appropriations where “strategic investments” are concerned—a clear sign of this government’s determination to develop its domestic resources, which is further backed by a suite of incentives particularly favoring coal miners, including cheap electricity and wage subsidies.

Turkey’s fast-stream coal mining development drive needs to be tempered with caution. Accidents in Turkish coal mines are much too frequent and the tragic loss of more than 300 lives at the Soma pit disaster of 2014 is still fresh in the collective memory.

In the short-term, enticing regulations and an enormous spend on constructing coal-fired power stations bodes well for Turkey’s coal sector, and both local producers and foreign imports will see growth. But whether or not this will prove sustainable depends on how tolerant Turkey’s population will be to the associated costs.

Mungo Smith is editorial director for Global Business Reports.

Impala Inaugurates New Port Facilities in Spain

Impala Terminals recently held an inauguration ceremony for its new logistics port facility for the storage and blending of minerals and metal concentrates located at the port of Huelva in Andalusia, on Spain’s southern coast. The new facility is the result of an ambitious construction project, creating a best-in-class facility for the reception, storage, blending, and export for minerals and metal concentrates in western Europe, as well as a strategic gateway for Spain’s mining industry. Impala Terminals invested more than 60 million euros in the facility, which has a storage capacity of approximately 240,000 tons. An additional 70,000 m2 of adjacent land is available for future expansion.