Gold

By Dave Brown – Exclusive to Gold Investing News

The Gold Coast Crown colony was formally named in 1874 by the British, and on March 6, 1957, Ghana became the first sub-Saharan African nation to achieve independence from the United Kingdom. The country may be best known as the second largest producer of cocoa in the world or as the home of the largest artificial lake in the world by surface area, Lake Volta.  However, Ghana is also Africa’s second biggest producer of gold, and hosts more estimated reserves than such prolific gold producing nations as Peru and Papua New Guinea.

Last year, production rose more than 12 percent, with output at the country’s two biggest mines increasing. The annual increase in rate of production for last year was second in the world only to Indonesia. The top producing nation of South Africa and the United States both demonstrated declines,  with the former dropping 1 percent and the latter almost 10 percent.

Economic and Geopolitical Conditions

Ghana has recently been classified as a middle income economy as the country is well endowed with natural resources, and has achieved twice the per capita output of poorer neighbor states in West Africa.  Aside from exports such as cocoa and gold, other natural resources of oil, timber, electricity, diamond, bauxite, and manganese are major sources of foreign revenues.

John Atta Mills took over as head of state in early 2009, the country’s third leader since 1981, following a long series of coups and instability.  The domestic economy continues to revolve around agriculture, which accounts for more than a third of GDP and employs more than half of the work force, mainly small landholders. Ghana signed a Millennium Challenge Corporation (MCC) Compact in 2006, which aims to assist in transforming Ghana’s agricultural sector. Ghana opted for debt relief under the Heavily Indebted Poor Country (HIPC) program in 2002, and is also benefiting from the Multilateral Debt Relief Initiative that took effect in 2006. Thematic priorities under its current Growth and Poverty Reduction Strategy, which also provides the framework for development partner assistance, are: private sector competitiveness; macroeconomic stability; human resource development; and good governance and civic responsibility.

Mining and Exploration Opportunities

Ghana’s largest mine is Tarkwa, located in south-western Ghana, about 300 kilometers west of the capital city Accra, and operated by Gold Fields Ltd. (NYSE:GFI). The project consists of 6 open pits, 2 heap leach facilities and a carbon-in-leach (CIL) plant. Tarkwa has a Mineral Resource of 15.3 million gold ounces and a Mineral Reserve of 9.9 million ounces. During the most recent fiscal year Tarkwa produced 720,700 ounces of gold and for the 12 months to end-June 2011 the expectation is to produce between 720,000 and 760,000 ounces of gold. Gold Fields also owns the Damang mine with a Mineral Resource of 4.7 million gold ounces and a Mineral Reserve of 2.1 million ounces.

Newmont Mining Corporation’s (TSE:NMC) (NYSE:NEM) Ahafo mine produced 531,470 ounces of gold in 2009, an increase from 524,000 a year earlier.  The mine is located approximately 300 kilometers northwest of Accra and currently consists of 3 open pits and has expansion potential with reserves contained across 17 pits.  With its origins as a greenfield operation beginning production in 2006 it produced its 1 millionth ounce in 2008.  The company also has an exploration stage project, Akyem, in the Brim North Eastern region of Ghana located 180 kilometers northwest of Accra.

AngloGold Ashanti ‘s (NYSE:AU) Obuasi operation produced 383,000 ounces last year. AngloGold Ashanti expects its Obuasi mine to produce around 400,000 ounces of gold per year by 2012.  The company also owns the Iduapriem mine, which produces an average 190,000 ounces of gold per year.

Bibiani gold mine, owned by Noble Mineral Resources (ASX:NMG), is located in western Ghana, 250 kilometres north-west of Accra. The open-pit mine, which was commissioned in 1998, is in the Sefwi-Bibiani belt, and contains more than 17 million ounces of gold. The Sefwi-Bibiani belt is considered to be the second most significant gold belt in Ghana after the Ashanti Belt to the east. Noble Resources plans a $9 million drilling program over the next three years.

Golden Star Resources (TSE:GSC) has two operating mines in Ghana and poured its 2 millionth ounce of gold from its Bogoso/Pretea and Wassa mines last year. The Bogoso/Pretea project, in which Golden Star has a 90 percent interest (The government of Ghana owns the remaining 10 percent), consists of approximately 85 kilometers of mining and exploration concessions along the Ashanti trend in south-west Ghana. Bogoso/Presteas’s forecast for 2010 is production of 200,000 ounces. The Wassa gold mine (also 90 percent owned by Golden Star), is located in the southwestern region of Ghana approximately 35 kilometers east of Bogoso/Prestea. Last year mining operations at Hwini-Butre commenced and provided even higher grade ore relative to the Wassa mill.

Keegan Resources (TSE:KGN) has two premier gold assets in Ghana. Keegan’s flagship property is the Esaase gold deposit. Updated resource calculations indicate a 2.025 million ounce indicated and 1.451 million ounce inferred resources  averaging 1.5 grams per tonne and 1.6 grams per tonne, respectively. The company reports that development studies are currently underway that will enable the project to be brought to production stage. Keegan is also exploring a second project, the Asumura gold property, located along one of Ghana’s largest and most productive gold structures.

Adamus Resources Limited (ASX:ADU) is focused on advancing the Nzema gold project  which consists of a contiguous block of tenements and options covering approximately 665 square kilometers. Adamus’ area hosts both the Salman and Anwia deposits.  The company reports that current project estimates indicate a minimum life of 10 years and average production potential of 100,000 ounces of gold per year.

Castle Minerals Limited (ASX:CDT) is a gold exploration company focused on 6 main projects and is the largest landholder among mineral explorers with over 12,000 square kilometers. It made 2 greenfield gold discoveries in 2008, Akoko and Julie West, and defined an initial gold resource in 2009. The Akoko Project consists of 2 granted prospecting licenses and is located 10 kilometers east of Adamus Resources’ Salman gold project. Each of the projects is considered prospective for gold mineralization except for Opon Mansi, which hosts an iron ore deposit. The Opon Mansi Project is located 260 kilometers west of Accra, centered about 40 kilometers north of Tarkwa.

Perseus Mining Limited (ASX:PRU) is engaged in gold exploration and development in Ghana with additional exposure to prospects in Cote d’Ivoire. The Central Ashanti Gold Project is located on the Ayanfuri and Nanankaw mining leases. Two 15-year mining leases covering a total area of 93 square kilometers were granted last December and more recently in June.  A definitive feasibility study suggests the company could be producing 450,000 ounces per year by 2013, costing an average cost of approximately $450 per ounce, with earliest first production beginning next fall.