The mining and quarrying sector posted a positive growth performance in Q4 2021, owing to the rise in output at major mines during the period, thereby yielding a positive growth for the industry sector.
The mining sub-sector registered a 0.5 per cent year-on-year growth in Q4 2021, reflecting a jump in growth, after contracting in the previous quarter. Following this, the industry sector posted a 4.8 per cent growth in the fourth quarter, according to the Ghana Statistical Service (GSS).
Relative to Q4 2021 figures, the contraction experienced in the mining and quarrying sector for Q3 2021 triggered a downward growth in the industry sector, shrinking by 4.3 per cent, but building on the prospects of an increased demand for gold, the sector rebounded in the subsequent quarter.
Whereas production stalled in some major mines in the country, due to temporary mine shutdowns such as occurred at AngloGold Ashanti’s Obuasi mine, others took advantage of the favorable market for the commodity due to positive investor sentiments, to increase capital expenditure and subsequently production.
During the fourth quarter of 2021, when crude prices experienced increasing volatility, amid rising inflation pressures, investors increased demand for gold to hedge against speculative interest-bearing assets.
Several miners especially, in the gold mining sub-sector met their production guidance set for the fourth quarter of 2021. In the course of the year, Fitch Solutions projected a 6 per cent growth in gold output for 2021, reflecting elevated growth in the commodity.
The phenomenon of increased production in major commodities is not only reflected in the yellow metal but also other metals which saw favorable prices over the year and for which production had only begun picking up.
Major Mining Firms Meet Production Guidance
In the fourth quarter of 2021, Perseus Mining, a West-Africa gold miner recorded increased production at its Edikan mine, registering 35,124 ounces of gold (9% more than in the Q3 2021). Output produced for the quarter yielded a production cost of US$1,327 per ounce and an AISC of US$1,450 per ounce. Gold sales of 34,196 ounces were 17 per cent more than in the prior quarter, at a weighted average realised gold price of US$1,613 per ounce.
“Business development activities continued to deliver encouraging results, demonstrating potential to materially increase Perseus’s Ore Reserves inventory and extend the economic mine lives of its operation”.
Perseus Q4 Report
Galiano Gold, the Joint Venture (JV) Partner with Gold Fields Ltd. and operator of the Asanko Gold Mine posted an increase in gold production for Q4 2021 (50,278 ounces) compared to 49,543 ounces of gold for Q3 2021.
The company sold 51,368 ounces of gold in Q4 2021 at an average realized gold price of $1,771/oz, compared with 48,435 ounces of gold in Q3 2021 at an average realized gold price of $1,758/oz.
However, AngloGold Ashanti’s production was halted throughout Q3 2021, after suspending underground mining activities following a sill pillar incident in May 18, 2021. From October 15, 2021, underground mining resumed but not towards production, “it only replenished the run-of-mine stockpile without corresponding gold production”.
This significantly reduced the company’s potential to increase its overall output at its Ghana mines, though its Iduapriem gold mine continued production throughout the year. However, the company indicated that gold output at full year declined due to lower grades from the depletion of ores.
Goldfields and Newmont Corporation recorded increased production at their corresponding mine fields. Production from these major producers is most likely to have triggered the come-back in growth of the mining sector.
Rising Gold Prices to Increase Mining Activities in 2022
In its full-year 2021 results, Gold Fields said a production increase by 1 per cent to 871koz from 862koz in 2020, was primarily driven by the increased production at Damang.
At Damang, managed gold produced and sold increased by 14% from 223,000oz in 2020 to 254,400oz in 2021. Gold produced at Tarkwa, however, decreased slightly by 1 per cent from 526,300oz in 2020 to 521,700oz in 2021.
There is a strong bullish pattern for the gold mining sector for 2022. This is mainly buoyed by the impact of the Russia-Ukraine crisis, which in turn reflects rising uncertainties, as well as rising inflationary pressures. This has moved investors to increase demand for gold, considering its safe-haven nature to hedge against the volatilities in the market.
Given the fact that these uncertainties are deteriorating further as negotiations between Russia and Ukraine breakdown, gold producing companies in the country will benefit from these skyrocketing prices and those who are able to strike more ores this year will likely surpass projected profits for the year.
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