The contribution of the mining and quarrying sub-sector’s growth to GDP experienced its third consecutive contraction, as a result of subdued output growth at major mines in the third quarter of 2021.
According to the Ghana Statistical Service (GSS), industry sector’s growth contracted by 2.0 per cent, owing to the plunge in growth of the mining subsector. Compared with the second quarter performance, the industry sector shrank by 4.3 per cent. At the time, analysts attributed the stall in progress of the mining & quarrying sub-sector due to the impact of the COVID-19 pandemic on capital expenditure and subsequently production.
Despite elevated commodity prices all throughout the year, continued production declines experienced in some major gold mines across the country constrained the sector’s expected growth as they could not meet targets for their production guidance. This led to restrained export growth compared to the same period in 2020, nonetheless, the sector continued to remain the biggest contributor to the country’s GDP.
Meanwhile, Fitch Solutions projects a 6 per cent growth in gold output in 2021, but this may not materialize as expected. Besides, investor’s rush for gold to hedge against the impact of the spread of the omicron variant on volatile interest-bearing assets have been short-lived, unlikely to further shoot prices up as the year ends.
The phenomenon of subdued production in major commodities is not only reflected in the yellow metal but also other metals which have seen favorable prices over the year and for which production had only begun picking up with new projects coming online in some countries that were previously abandoned.
Therefore, these sentiments transcend local borders as GlobalData, a leading analytics company observed in the first half of the year, especially noting production target declines for some gold mining firms across the globe.
Major Mining Firms Keep Production Guidance Targets Lower
In the first half of the year, AngloGold Ashanti’s planned seizure of production in its Obuasi mine after a sill pillar at the underground mining site failed and continued to keep the company’s production targets lower.
The company said in a recent update that for the remainder of this year, underground ore will be used only to replenish its Run-of-Mine stockpile and that gold production from underground ore sources is therefore expected to recommence only in January 2022.
Furthermore, the company kept its full year gold production guidance below what was previously set in the first half of the year; the company’s production guidance was revised from 225,000- 245,000 ounces in the first half of the year to 215,000-220,000 ounces owing to lower mined grades at Esaase and the resulting impact on plant recovery, the report said.
Galiano Gold, the Joint Venture (JV) Partner with Gold Fields Ltd. and operator of the Asanko Gold Mine posted a decline in its gold production in its quarter three 2021 results.
The company sold 48,435 ounces of gold in Q3 2021 at an average realized gold price of $1,758/oz making up a total revenue of $85.3 million (including $0.1 million of by-product silver revenue).
However, compared to 2020 figures, this represented a decline of $15.4 million during the same period. The company, in its Q3 results said “the decrease in revenue quarter-on-quarter was a function of a 10% reduction in sales volumes and a 6% decrease in realized gold prices in Q3 2021.”
Of course, some major gold producing firms registered improved output such as Goldfields and Newmont Corporation, but production from these major producers was not enough to keep growth in the sector on the upside. Newmont, for instance has projected a rise in gold production for 2022 at 6.2 million ounces of gold.
Also, Kinross Gold Company, in its Q3 results indicated that it was on track to meet its revised production guidance of 2.1 million Au eq. oz. (+/- 5%) and continues to expect production to increase in 2022 and 2023 to 2.7 million and 2.9 million Au eq. oz. (+/- 5%), respectively.
Mining and Quarrying Sector’s contraction Improving
In an earlier report released by GlobalData, it indicated a 1.1 per cent decline in global production in the first half of 2021. The report further said that, despite the fact that a recovery was in sight in the second half of the year, “overall output for 2021 will remain relatively flat, around 27-28 million ounces.”
Most expectedly, industry’s sector’s contraction recorded in Q2 2021 (4.2%) has declined by 2% in Q3 2021, indicating progress in the sector and a sustained decline in the extent of the plunge in growth of the mining and quarrying sub-sector.
It is expected that the year-end 2021 contribution of the sector should improve compared to the previous quarters and more so, an even better 2022 growth is expected when AngloGold Ashanti, Galiano Gold and other underperforming mines increase output.