News / Africa

    Analysis: Gold Price Drop Jolts West Africa

    Laborers work at a mine believed to contain gold, Minna, Niger State, Nigeria, June 23, 2013.
    Laborers work at a mine believed to contain gold, Minna, Niger State, Nigeria, June 23, 2013.
    Reuters
    This year's drop in world gold prices has been deeply sobering for West African countries, from established producer Ghana to promising newcomer Ivory Coast, whose prospects of mineral wealth are being snatched away.
     
    As miners' stock prices plummet and they have to consider suspending or halting new projects, many fear the dream that inspired West Africa's gold rush may be gone for good and regional economies may be in for an abrupt awakening.
     
    Just a year ago, there was reason to believe in the golden future of a region that had long been handicapped by challenging terrain, underdeveloped infrastructure and political risk.
     
    Economic uncertainty was fueling demand for gold and traditional producers were struggling to keep up.
     
    Corrugated iron rusts beneath disused mine shaft at the Aurora gold mine, 50 km (31 miles) east of Johannesburg, Feb. 2, 2011.Corrugated iron rusts beneath disused mine shaft at the Aurora gold mine, 50 km (31 miles) east of Johannesburg, Feb. 2, 2011.
    x
    Corrugated iron rusts beneath disused mine shaft at the Aurora gold mine, 50 km (31 miles) east of Johannesburg, Feb. 2, 2011.
    Corrugated iron rusts beneath disused mine shaft at the Aurora gold mine, 50 km (31 miles) east of Johannesburg, Feb. 2, 2011.
    Until July, South Africa — Africa's largest gold producer and the world's number five exporter — had seen output decline for 27 consecutive months.
     
    West Africa appeared destined take up some of the slack. From 6.7 million ounces — around 8 percent of the global supply — in 2012, output was expected to rise to 11 million ounces by 2015, mostly from production in the region's top exporter Ghana.
     
    Investors pumped money into companies — many of them junior miners vulnerable even at high gold prices — that had a toehold in the region.
     
    “The mining industry was in a state of over-exuberance before the correction,” Randgold Resources CEO Mark Bristow told Reuters. “In my mind, it wasn't sustainable ... There has been a lot of mining development that hasn't given value to shareholders or the host governments.”
     
    Though gold prices had steadily risen, so too had the industry-wide costs of mining lower and lower ore grades. In West Africa, added factors like high energy prices further inflated costs.
     
    Gold prices rallied from around $250 an ounce in 2001 to a record $1,920.30 an ounce a decade later but are set to snap 12 years of gains in 2013 after falling by more than a fifth in the year to date.
     
    When the bubble burst, miners large and small were hit hard.
     
    Bursting bubble
     
    Africa's biggest gold producer, AngloGold Ashanti, said in August its cost structure in Ghana was unsustainable and it would make cutbacks. It suspended excavation last month at the Yatela Mine in Mali, which it owns with Canadian mid-tier miner IAMGOLD.
     
    Canada's Kinross Gold Corp recorded a net loss in the fourth quarter of 2012 due to two mines in Mauritania and Ghana. It now plans to cut 300 jobs and has frozen expansion in Mauritania until at least 2015.
     
    Endeavor Mining, which has three gold mines producing more than 300,000 ounces per year in Mali, Ghana and Burkina Faso, has also planned cuts.
     
    “There's no way around it but to suck it in and hold your breath,” Neil Woodyer, the company's CEO, told Reuters.
     
    While miners already in production may be able to survive by tightening their belts and praying prices don't fall further, the scores of juniors who bet on West Africa in the past few years won't get off so easily.
     
    Nearly 12 percent of all new gold discoveries over the last two decades have been in West Africa, a fact that has helped small miners raise exploration funds in Toronto, Sydney and London's junior AIM market.
     
    Nowhere was this more true than in Ivory Coast, which had long neglected mining in favor of agricultural commodities like cocoa and has only three producing mines. Its untapped gold potential fueled a wave of interest after the end of a decade-long political crisis in 2011.
     
    But with gold stocks losing on average 40-50 percent of their value since January, financing has dried up and work under Ivory Coast's 81 exploration permits has slowed to a trickle.
     
    “There are very few that are now active. I don't know if it is even 10 percent,” said Nouho Kone, president of the Professional Grouping of Ivory Coast Miners.
     
    “Most projects are so little advanced that practically nothing is proven. They're so far from being able to estimate their reserves that the risks for investors are big.”
     
    Exploration is in a similar holding pattern across the region.
     
    Pain ahead
     
    With the U.S. Federal Reserve expected to roll back its quantitative easing program, many analysts believe gold prices may fall further as investors switch to assets offering better returns.
     
    For mining-dependent regional economies, the consequences could be dire.
     
    Although Ghana's current economic boom is often chalked up to its new oil wealth, its gold exports were worth $5.6 billion last year, nearly as much as oil and cocoa combined.
     
    Gold contributed 27 percent of the country's foreign exchange and furnished more than $700 million to government coffers, according to data from Ghana Chamber of Mines (GCM).
     
    “We are not going to repeat that feat this year. Payment to the GRA (Ghana Revenue Authority) is going to shrink,” said Toni Aubynn, GCM chief executive.
     
    The impact on Africa's third biggest producer, Mali, where gold accounts for 75 percent of export receipts and 25 percent of GDP, is potentially even worse. Just two mines, Sadiola and Morila, historically accounted for 80 percent of Mali's output.
     
    Global interest in Africa's economic boom is rising but critics argue growth relies too heavily on natural resources, leaving it vulnerable to price fluctuations. Anyone looking at West Africa's gold industry might share those concerns.

    You May Like

    Rubio Looks to Surge in New Hampshire

    Republican presidential candidate has moved into second place in several recent surveys and appears to be gaining ground on longtime frontrunner Donald Trump

    UN Calls for Global Ban on Female Genital Mutilation

    Recent UNICEF report finds at least 200 million girls and women alive today have undergone female genital mutilation in 30 countries

    UN Pilots New Peace Approach in CAR

    Approach launched in northern town of Kaga Bandoro, where former combatants of mainly Muslim Seleka armed group and Christian and animist anti-Balaka movement are being paid to do community work

    This forum has been closed.
    Comments
         
    There are no comments in this forum. Be first and add one

    By the Numbers

    Featured Videos

    Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
    German Artists to Memorialize Refugees With Life Jacket Exhibiti
    X
    Hamada Elsaram
    February 05, 2016 4:30 PM
    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video German Artists to Memorialize Refugees With Life Jacket Exhibit

    Sold in every kind of shop in some Turkish port towns, life jackets have become a symbol of the refugee crisis that brought a million people to Europe in 2015.  On the shores of Lesbos, Greece, German artists collect discarded life jackets as they prepare an art installation they plan to display in Germany.  For VOA, Hamada Elrasam has this report from Lesbos, Greece.
    Video

    Video E-readers Help Ease Africa's Book Shortage

    Millions of people in Africa can't read, and there's a chronic shortage of books. A non-profit organization called Worldreader is trying to help change all that one e-reader at a time. VOA’s Deborah Block tells us about a girls' school in Nairobi, Kenya where Worldreader is making a difference.
    Video

    Video Genius Lets World Share Its Knowledge

    Inspired by crowdsourcing companies like Wikipedia, Genius allows anyone to edit anything on the web, using its web annotation tool
    Video

    Video Former Drug CEO Martin Shkreli Angers US Lawmakers

    A former U.S. pharmaceutical business executive has angered lawmakers by refusing to explain why he raised the price of a life-saving pill by 5,000 percent. Martin Shkreli was removed from a congressional hearing on Thursday after citing his Fifth Amendment right to stay silent. Zlatica Hoke has more.
    Video

    Video Super Bowl TV Commercials are Super Business for Advertisers

    The Super Bowl, the championship clash between the two top teams in American Football, is the most-watched sporting event of the year, and advertisers are lining up and paying big bucks to get their commercials on the air. In fact, the TV commercials during the Super Bowl have become one of the most anticipated and popular features of the event. VOA's Brian Allen has a sneak peek of what you can expect to see when the big game goes to commercial break, and the real entertainment begins.
    Video

    Video In Philippines, Mixed Feelings About Greater US Military Presence

    In the Philippines, some who will be directly affected by a recent Supreme Court decision clearing the way for more United States troop visits are having mixed reactions.  The increased rotations come at a time when the Philippines is trying to build up its military in the face of growing maritime assertiveness from China.  From Bahile, Palawan on the coast of the South China Sea, Simone Orendain has this story.
    Video

    Video Microcephaly's Connection to Zika: Guilty Until Proven Innocent

    The Zika virus rarely causes problems for the people who get it, but it seems to be having a devastating impact on babies whose mothers are infected with Zika. VOA's Carol Pearson has more.
    Video

    Video Solar Innovation Provides Cheap, Clean Energy to Kenya Residents

    In Kenya, a company called M-Kopa Solar is providing clean energy to more than 300,000 homes across East Africa by allowing customers to "pay-as-you-go" via their cell phones. As Lenny Ruvaga reports from Kangemi, customers pay a small deposit for a solar unit and then pay less than a dollar a day to get clean energy to light up their homes or businesses.
    Video

    Video Stunning Artworks Attract Record Crowds, Thanks to Social Media

    A new exhibit at the oldest art museum in America is shattering attendance records. Thousands of visitors are lining up to see nine giant works of art that have gotten a much-deserved shot of viral marketing. The 150-year-old Smithsonian American Art Museum has never had a response quite like this. VOA's Julie Taboh reports.
    Video

    Video Apprenticeships Put Americans on Path Back to Work

    Trying to get more people into the U.S. workforce, the Obama administration last year announced $175 million in grants towards apprenticeship programs. VOA White House correspondent Aru Pande went inside one training center outside of Washington that has gained national recognition for helping put people on the path to employment.
    Video

    Video New Material May Reduce Concussion Effects

    As the 2016 National Football League season reaches its summit at the Super Bowl this coming Sunday (2/7), scientists are trying to learn how to more effectively protect football players from dangerous and damaging concussions. Researchers at Cardiff and Cambridge Universities say their origami-based material may solve the problem. VOA’s George Putic reports.
    Video

    Video Saudi Arabian Women's Sports Chip Away at Stereotypes

    Saudi Arabian female athletes say that sports are on the front line of busting traditions that quash women’s voices, both locally and internationally. In their hometown of Jeddah, a group of basketball players say that by connecting sports to health issues, they are encouraging women and girls to get out of their homes and participate in public life. VOA’s Heather Murdock reports.
    Video

    Video A Year Later, Fortunes Mixed for Syrians Forging New Lives in Berlin

    In April of last year, VOA followed the progress of six young Syrian refugees -- four brothers and their two friends -- as they made their way from Libya to Italy by boat, and eventually to Germany. Reporter Henry Ridgwell caught up with the refugees again in Berlin, as they struggle to forge new lives amid the turmoil of Europe's refugee crisis.
    Video

    Video Zika Virus May be Hard to Stop

    With the Zika virus spreading rapidly, the World Health Organization Monday declared Zika a global health emergency. As Alberto Pimienta reports, for many governments and experts, the worst is yet to come.