Obuasi remains the comeback kid in AngloGold’s portfolio. It’s simply, and improbably given its troubled recent history, shooting the lights out.  

“Obuasi will give us upwards of 400,000 ounces a year over more than two decades and costs at or near the lowest quartile. It’s a game-changer for an asset that was on the brink of closure a few years ago,” CEO Alberto Calderon said on a conference call with journalists after AngloGold unveiled its interim results on Friday. 

Gold production at the mine rose 29% for the six months ended 30 June 2023 to 117,000 ounces compared with 91,000 ounces in the corresponding period last year. Significantly, total cash costs also fell 7.5% to $1,020 an ounce from $1,102.   

“Gold production was higher year on year mainly due to a continued ramp-up of the mine with a 23% year-on-year increase in underground tonnes processed complemented by a 7% year-on-year increase in underground grades mined. Total cash costs per ounce were lower year on year mainly due to higher gold production and favourable ore stockpile inventory movements,” said AngloGold. 

To put this in context, AngloGold’s production overall spiked nicely in the second quarter (Q2) of the year compared with Q1 but was only marginally higher year on year for the full six months. 

And its headline earnings for the first half of 2023 fell to $140-million, or 33 US cents per share, from $300-million, or 71 US cents per share, in the same period last year, mostly because of higher operating costs. Total cash costs per ounce of gold overall rose 11% to $1,189. 

So Obuasi is bucking the trend, with production rising nicely and costs coming down. That is an asset that is delivering. 

And this was an operation that was all but written off a few years ago. The mine at one point was overrun and occupied by thousands of artisanal miners after it had been temporarily mothballed. In February 2016, John Owusu, the head of corporate affairs at AngloGold’s Ghana office, was killed during a riot at Obuasi. 

AngloGold managed to sell all of its operational assets in South Africa, where political and social risks remain sky high. But no one was going to step up to the plate and buy a mine that was being stripped by illegal miners against a backdrop of seething community discontent. The company couldn’t give it away.  

A subsequent change of government shook things up. In early 2017, AngloGold announced the Ghanaian army had “largely cleared” Obuasi of illegal mine workers, setting in motion plans to bring in fresh investment to revive the operation. 

While perhaps not quite a miracle, the reboot has been impressive. The mine poured its first gold bars in more than five years in December 2019, and with the exception of disruptions mostly related to the Covid-19 pandemic, it has been ramping up ever since. 

Asked by Daily Maverick during an interview how community relations had improved, Calderon said AngloGold had poured resources into areas such as education and health.

“Last time I visited Obuasi, I spent a lot of time on that issue, so I have seen it first hand. If you go to the school, and it’s called AngloGold school, it is the best school by far in the region. It is now self-sustainable but we gave it a push. Why is that? It’s obviously building the social licence to operate but also we want to be there for three decades. And you have an operation with 5,000 people and they are all Ghanaians, you really want to train the next generation. And we also help the university because you want good engineers to be graduating from there,” Calderon said. 

He also pointed to the company’s malaria-prevention programme, which is regarded as world class. According to a case study by Johns Hopkins University’s Private Sector Malaria Prevention project “… its success helped secure Ghana a scale up grant of US$138-million from the Global Fund. AngloGold Ashanti’s malaria control programme was the principal recipient of the grant’s fund, making it the first time a private company will perform a lead role for a Global Fund grant in Africa.”

Started in 2005 with an indoor spraying programme and the provision of bed nets to all homes – based on a detailed census and mapping of every household in the local community – the initiative has brought malaria rates down by over 90% in the region and now covers almost 1 million people. Work and school absenteeism have fallen by a similar percentage. 

“We do spend significant amounts of money in the community. There is a 10-year social development plan, we prioritise local employment, 98% of the workforce is Ghanaian and most are from Obuasi,” Calderon said. 

Pointedly, AngloGold’s social development plan is not a regulatory requirement in Ghana, a sharp contrast with South Africa, where mining companies are required to draw up and implement social and labour plans. 

It is one of the many things that the ANC-led government does not understand about the current world of business and its embrace of the environmental, social and governance agenda. Business does not have to be forced to do what it is doing anyway and often has to because of state failure. 

Recognition of such trends hardly absolves the mining and other extractive industries such as the oil sector of their ruthless and exploitative history in Africa. Nor does it mean that corporate malfeasance on the resource front has ended – there are plenty of skeletons, some of them fresh, no doubt rattling around in the boardrooms of mining and energy companies. 

But that also doesn’t mean that credit cannot be given where it is due.  

From an investment perspective, it is also worth noting the success of Obuasi in Ghana when compared with the wider region, which has shown itself to be coup prone among other things. This makes it in many ways an inspiring story that is still unfolding. DM