Government at the beginning of this month increased electricity _ tariffs by 79%, and this is expected to cripple industrial consumers.
The mining industry is already faced with a confidence crisis over whether costs can be controlled, return on capital will improve or commodity prices will not further collapse.
Newmont Ghana has already announced it will terminate the appointment of approximately 300 of its miners by the end of the fourth quarter of 2013, as part of the mine’s ongoing operations to streamline costs and improve business efficiency.
Mining giant AngloGold Ashanti’s (AGA) Obuasi mine has as well announced imminent job-cuts of approximately 430 of its miners, partly due to a falling gold price on the global commodity market and its broader revival strategy.
The increasing production cost and dwindling gold prices have been a bane in the Ghanaian mining industry,challenging the survival of the industry after the price of gold fell by over 25 percent.
“Electricity is a key input in mining operations so any increase has a direct impact on your operating cost,” said AngloGold Ashanti’s Vice President for Sustainability, Fred Attakuma, in an interview with B&FT.
He added: “It is something that hits your bottom-line directly, so any increase has a direct repercussion on operating cost. “If you compare Ghana to many of the mining jurisdictions around the world, with the exception of those running on diesel-powered generators, power tariffs are already high for mining industries.
“So any additional increase only makes our situation even much direr given the issues around price, etc. So the increases will have a major impact and will throw us into a more difficult financial situation.”
Mr. Attakuma ‘explained that already the industry’s revenue is significantly reduced and capital programmes have also been significantly reduced, “so we are left with limited options for consideration.”
He proposed a comprehensive industry engagement with government and the utility regulators to find a solution to the industry’s issues.