By Ciaran Ryan.
They’ve been staring at each other over the fences for decades in Ghana’s gold-rich Tarkwa district. Now those fences are coming down, as Gold Fields and AngloGold Ashanti announce a joint venture (JV) that will create Africa’s largest gold mine.
The two mines – Gold Fields’s Tarkwa and AngloGold Ashanti’s Iduapriem – envelop the town of Tarkwa but have forever remained separated by fences.
It was therefore logical to explore the possibility of a JV, and it is a giant. Excluding the Ghana government’s share of the combined operation, Gold Fields will have two-thirds and AngloGold Ashanti a third of the enlarged mine.
These are some of the juiciest gold deposits in West Africa, and the enlarged mine will produce 900 000 ounces (oz) of gold a year for the first five years on an expected 18-year life. That output will likely average 600 000oz over the life of mine.
This also makes it one of the world’s largest gold mines, coming in ahead of Barrick’s Pueblo Viejo mine in the Dominican Republic, but behind the likes of Nevada Gold (also run by Barrick) and Muruntau in Uzbekistan, both of which produce more than three million ounces a year.
“This (JV) gives sustainable returns for years to come. It gives us life and scale that neither company will achieve on their own, “said Gold Fields interim CEO Martin Preece in a press briefing on Thursday.
Reserves will also be larger than that of two standalone mines. Gold Fields, the larger of the two operations, will be the operator of the JV. It’s a deal that makes sense for the two mining companies and the government of Ghana, added Preece.
There are obvious operational efficiencies since both mines run independent mining processing facilities that can now be combined and optimised for grade and scale.
West Africa is Gold Fields’s second largest regional producer (after Australia), with Tarkwa accounting for 531 600oz in 2022 at an all-in cost of $1 220/oz. AngloGold Ashanti’s Iduapriem mine produced 248 000oz at an all-in cost of $1 299/oz.
The all-in sustaining cost (which excludes certain external costs not related to current operations) will likely come in under $1 000/oz over the first five years, which gives some indication of the margin potential with the gold price currently above $1 900/oz.
Gold Fields expects to produce 2.4 million ounces by 2024, and this latest deal will certainly help in reaching that target.
Last year Gold Fields lost out in its $6.7 billion bid to acquire Yamana Gold, which went instead to Pan American Silver Corp and Agnico Eagle Mines. The group is under pressure to beef up production, which was expected to start declining within the next three to four years. Then Gold Fields CEO Chris Griffith resigned in December last year, along with several other senior executives, for reasons many thought were linked to the failed Yamana bid. Griffith lasted less than two years on the job, having replaced retiring CEO Nick Holland in April 2021.
The Ghana JV was already under discussion while the Yamana deal was on the table, said Preece, adding that future collaborations with AngloGold Ashanti may follow.
The proposed deal still needs fleshing out with teams from both sides thrashing out details on the optimised operational plan. The government of Ghana also has to give its agreement. Preece says the operations can be combined without significant capital injection, which was music to the ears of investors, giving a bounce to the Gold Fields share price this week.