Gold Fields has been dealt a blow by Ghanaian authorities, with the country’s Minerals Commission rejecting the group’s application to extend the mining lease of its Damang operation.
After the decision, Gold Fields will be forced to wind down operations at Damang by the end of this week.
The miner on Monday said it was preparing to “safely and responsibly cease operations and ensure the safety and security of our people and high-risk operations”.
Damang’s lease extension application was initially rejected in March, with Gold Fields saying in its latest annual results that it was “pursuing all avenues” to reverse the decision, including through “international arbitration, if required”.
Despite its efforts, the group said that it had received another rejection letter.
It has now been ordered by the Ghanaian government to halt operations at Damang and vacate the area by April 18, when the lease is set to expire.
Gold Fields holds a 90% stake in Damang, which recently transitioned to processing stockpiles after it reached the end of its active mining lifespan last year. The remaining 10% owned is by the Ghanaian government.
While Damang’s gold production volumes have steadily declined in recent years, the group said in its latest annual results that the operation continued to contribute strong cash flow.
However, there were no funds earmarked to expand the mine life at Damang, and in its latest results Gold Field flagged that it was “assessing ways to optimise value for stakeholders, including options to realise the value of the remaining resource”.
The news comes at a time when Gold Fields has been considering selling Damang, as well as its Peruvian Cerro Corona mine, both of which are at the tail-end of their lifespans.
Business Day reported that CEO Mike Fraser has been altering the company’s growth trajectory with small, bolt-on acquisitions of high-calibre, long-life assets under a strategic pivot adopted after the sting of a failed R120bn tie-up with Canada’s Yamana Gold in recent years.
Gold Fields is under pressure to add a number of work mines, as well as a pipeline of development projects and exploration properties to solve ageing mine problems.
Gold Fields assured investors that it has “engaged extensively with the relevant authorities since receiving the rejection notice to confirm that its lease extension application has fulfilled all the statutory requirements”.
“The company continues to seek ongoing stakeholder engagement with the government to secure the best outcome for all stakeholders,” it said, adding that it would update the market of any material developments going forward.
Fortunately for Gold Fields, the development does not affect its other operations in the country — namely the Tarkwa gold mine, which produced 488,000oz of gold in the year to end-December, compared with Damang’s 85,000oz contribution.
Additionally, the hiccup comes at a time when gold miners continue to ride the waves of record bullion prices and Gold Fields’ footprint across multiple continents provides the group with a hedge against country-specific setbacks.
The miner has eight operating mines in Australia, Ghana, Peru and SA and two gold projects in Canada and Chile.
Gold Fields’ share price on the JSE was down 5.85% to R447 at market close on Monday.
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