Gold Fields to abondon $1billion investment projects in Ghana
 
Posted on: 2011-Dec-07        Reuters
  Email to a Friend   Print Format
 
 
Gold Fields Chief Executive, Nick Holland, says planned projects that can bring $1 billion in investment to Ghana were at risk because of looming tax changes outlined in the 2012 budget last month.

Ghana plans to raise the corporate mining tax to 35 per cent from 25 per cent and introduce a 10 per cent windfall tax as well.

Mr. Holland's comments at a presentation to investors in Johannesburg on Monday were the strongest to date by a mining company on the issue and came amidst a wave of resource nationalism across Africa.

Gold Fields is the world's fourth-largest gold producer and regards West Africa as key to its global growth strategy.

In response to a question about planned expansion of the group's Damang operation in the Western Region, Mr. Holland said: "The tax situation is a big concern to us, and frankly, unless we are going to see some flexibility on the tax situation, I don't think we will be building the project in the form that is being described today, if at all."

The miner also has a major expansion planned for its Tarkwa mine, also in the Western Region.

Mr. Holland said a $1 billion project pipeline in Ghana was now uncertain.

"Both of those projects represent incremental investment of$1 billion into the country...There needs to be a better dispensation for us to proceed," he contended and said the playing field in Ghana was unfair.

"There isn't a level playing field of taxes and royalties. We are paying higher royalties than the other major producers n that country. That's not sustainable."

"And we will be subject to these taxes despite the fact that we have had a stability agreement in draft form with the government for many years. So thatís also not sustainable. There has to be a level playing field created," he said.

Mr. Holland said company executives visited Ghana last Thursday to raise their concerns and that the government had agreed to enter a dialogue with Gold Fields.

Peet van Schalkwyk, the companyís head of the West Africa region, earlier said talks had been promising.

But there is uncertainty in other areas and he said in his presentation that there was still no mechanism to work out how the windfall tax would be imposed.

Other mineral-rich African states that have recently raised mining taxes or royalties include the regionís top copper producer - Zambia and Zimbabwe - which has the second-largest known platinum reserves in the world.

Several analysts have said the wave of resource nationalism, which coincides with sky-high commodity prices, is one of the biggest political risks to the mining sector.

For Gold Fields, the stakes are high.

In 2010, about 20 per cent of the companyís production of around 3.5 million ounces came from Ghana, and that percentage is rising as it has since bought out minority stakes in its operations there.

The group is targeting an increase in its output in West Africa to 1.25 million ounces in 2015 from just under one million now, making the region key to its goal of raising the amount in development or production to five million ounces by 2015.