Gold Fields secures tax concessions
Government has granted Gold Fields Ghana tax and royalty concessions that would have netted its savings of US$33m at its two mines last year, and will feed into its deliberations of the future of its Damang mine.
Gold Fields bore the brunt of upward tax revisions a number of years ago, with the bulk of mining companies operating in Ghana shielded by stability agreements.
About three years ago, the JSE-listed gold miner started talks with the government to ease its tax burden.
As of March 17, Gold Fields’ corporate tax was lowered to 32.5 per cent from 35 per cent, and it will pay royalties on a sliding rate, depending on the gold price in dollars, with a three per cent - five per cent range, a change from the flat five per cent charge on revenue.
Based on the performance of its opencast Damang and Tarkwa mines in Ghana last year, this would have resulted in a US$45/oz reduction in all-in costs, translating to a US$33m saving.
The term of the tax cut, which began on March 17, is for a period of 11 years for Tarkwa and nine years for Damang, each renewable for an additional five years.
Reduced royalties
From the first day of 2017, reduced royalties will be levied on a sliding scale instead of the flat five per cent of revenue currently in force.
Gold Fields calculated there would be a five per cent saving on all-in costs at Tarkwa over a 15-year life of mine, spokesman Sven Lunsche said.
The reduced payments to the government would also feed into the review of Damang, which Gold Fields CEO, Mr Nick Holland, said late last year could either be put onto care and maintenance, or have an injection of capital to widen the 10-year-old pit and extend its life.
"The question is whether the gold price is actually high enough for us to have the guts to spend the money at this stage," Mr Holland said.
Commercial merits
Mr Holland said the technical and commercial merits of a push-back under and around Damang’s original pit were under evaluation.
Now the pragmatic approach of government has brought economic viability to the capital-intensive removal of waste that will provide access to Damang’s centrally located high-grade gold and extend its life by eight to 10 years.
The employment complement of Damang, which has reserves estimated at 10 million ounces of gold, is made up of 1,000 Gold Fields employees and 1,000 contractors.
The results of the review would be unveiled in May.
Fiscal regime
Asked what the revised fiscal regime entailed for Damang, Mr Lunsche said: "It could potentially have a positive impact on our deliberations."
The Ghanaian authorities would be loath to see another gold mine close after AngloGold Ashanti suspended its Obuasi mine last year as it develops a new plan at the perennially loss-making mine, and seeks a partner to restart the operation.
For the year ahead, and based on a forecast output of 560,000oz this year and a US$940/oz all-in cost, with a five per cent saving on the reduced taxes and royalties, it should produce savings of US$26m for the year.
Meanwhile, the full court of the federal court of Australia overturned a 2014 court decision that the regranting of St Ives tenements to Gold Fields in 2004 had not complied with the Native Title Act.
The court ruled the regranting was valid, but Gold Fields said it was uncertain whether the Ngadju People, who had brought the court action, would appeal.
The hydrothermal mineralisation is located in Tarkwaian sediments and is the only deposit of its kind, located on the eastern side of the Ashanti Belt in south-west Ghana.
Gold Fields has attributable mineral reserves of an estimated 48 million ounces and mineral resources of an estimated 108 million ounces. Attributable copper mineral reserves total 620 million pounds and mineral resources 6 873 million pounds. — GB