NKAWKAW, Ghana – Illegal gold mining is expanding at a rampant pace in this West Africa nation, leading to hundreds, if not thousands of injuries and deaths each year in the continent’s second largest producer.
Government environmental agencies and the mining commission are testing a supervised work program with one commercial prospector. In the meantime, the country’s approximately 20 publicly-traded exploration and mining companies must fend for themselves.
“It’s taken us years of negotiating to get (villagers) to agree not to go underground for the hard rock,” says Neil Macfarlane, seven-year country manager for PMI Gold (TSX: V.PMV, Stock Forum) in Ghana’s Asankrangwa Belt.
Mr. Macfarlane’s efforts almost certainly will lower injury and mortality rates for illegal miners hurtling down ancient “Ashanti” holes on the PMI property at Obotan.
Still, PMI and most gold mining companies and prospectors in Ghana, even the largest ones, must tolerate alluvial miners: those who use rivers and makeshift ponds of water to sift for gold. (Photo: Young woman at an illegal alluvial camp not far from the Birim River in Ghana – Thom Calandra photo)
“They are part of the culture of the country, of most mineral-producing countries,” says Sir Sam Jonah, who ran Ashanti Gold Fields and its Obuasi Mine for many years and now puts his name and capital behind a private-equity bank in South Africa. (Photo below: Sam Jonah in Accra – Thom Calandra photo)
Alluvial miners can be women and men, young or old. They all are looking to earn the half-gram or better of gold per day that will help pay for food and clothing. Most work for a tribal chief or a pit boss who provides bulldozers and other equipment in exchange for a lion’s share of the daily “take” from an illegal work force of hundreds. Sometimes thousands.
Their bulldozed pits of muddy water are responsible for an increasing number of deaths in Ghana, Africa’s second largest gold producer after South Africa. In one accident a year ago, about 100 gold panners and sifters perished in the collapse of a pit in central Ghana. The year before, the largest accident caused 15 deaths.
“Higher gold prices are luring younger people,” says James Longshore, 44-year-old country manager for Xtra-Gold Resources in the Kibi Gold Belt. “The papers and TV carry stories of the biggest accidents.”
Deaths seem to be occurring daily. In all of my visits to this country, professional miners regularly recount stories of high-schoolers and young children playing near pits, falling as much as 10 feet into their filthy pools and drowning when they get stuck at the muddy bottoms.
Threats of violence also appear to be increasing. “The alluvial artisinals are always making headlines, people being shot … farmers protecting their land,” says Sam Torkornoo, 43-year-old geologist and country manager for Pelangio Exploration (TSX: V.PX, Stock Forum), one of the Canada-traded junior gold companies in Ghana.
At PMI’s Obotan, a makeshift village has gathered around a waste pit that last was used officially in 2001. PMI’s predecessor, Resolute Mining, took about 740,000 ounces of gold from the area before low gold prices and ill-fated business decisions shut down the operation.
When PMI took over the property and adjacent concessions not long ago, the illegal miners returned. There is a store for food. There are rudimentary huts. There are a lot of people panning for gold. (See photo here: Obotan – Thom Calandra photo)
As in Colombia, Mali and many other nations, wildcat miners in Ghana operate independent of legal and environmental regulations. They often use mercury to process their gold. They rarely drain the deep ponds of water and sludge, or restore the landscape, when they have exhausted a tract of land.
Xtra-Gold (TSX: T.XTG, Stock Forum and XTGR) is fresh off a sub-contracted alluvial operation near its Kwabeng base camp in the Kibi Gold Belt. After securing EPA (environmental) approvals and appropriate mining permits, Mr. Longshore hired sub-contractors to work the land.
Xtra-Gold, whose shares I own, keeps 10 percent of the take from the operations. The contractor supervises hundreds of workers and provides security and equipment. “We drain the pools after we are finished; we fill in the pits,” said Kate Jyamfug, the lead contractor for Xtra-Gold.
Mrs. Jyamfug is one of the country’s best known alluvial operators, serving as an organizer for the opposition NPP Party in a country where women voters far outnumber male voters. (Photo below: Mrs. Jyamfug and Mr. Longshore at Kwabeng – Thom Calandra photo)
Xtra-Gold since summer 2010 has booked about $2 million of net income from the supervised operations. In the first quarter of 2011, the net came to about $900,000 and helped pay for equipment and vehicles.
In addition to the income, Xtra-Gold books good will with the country’s mining and environmental officials in the capital of Accra. Xtra-Gold has five, fully-permitted gold concessions in Ghana. That’s more than any other traded company in Ghana, including Newmont Mining (NEM).
Once in a while, there is an added bonus. About a month ago, one of the supervised artisanal miners discovered a large nugget of gold containing about 33 ounces of the metal. She handed it over to the contractor, who brought it to Xtra-Gold and its Kwabeng compound. (Photo: Xtra-Gold VP of Exploration Yves Clement holding the large nugget outside the company’s safe room – Thom Calandra photo)
NOTES: I am in West Africa (Mali currently after a visit to a Sierra Leone diamond project and then several Ghana gold companies). (See articles.) I am traveling with a well-known geologist and a global asset manager. Later this week I will have more on drilling programs at Pelangio, at Midland Minerals (TSX: V.MEX, Stock Forum) and at African Gold Group (TSX: V.AGG, Stock Forum) and its Kobada gold project in Mali. Of these, I own only AGG.
Africa Speculation: On my travels, I have heard a lot of talk about looming takeover bids. Only one sounded likely: it involves copper producer First Quantum Minerals (TSX: T.FM, Stock Forum), which is active in the Congo (DRC), in Botswana, in Australia and in South America.
I also am hearing a lot about iron ore in West Africa. One company backed by banker Sam Jonah, above, is using a process called IMBS to recover the finest particles of the metal during processing. Sir Sam Jonah, knighted in England for his contributions to Ghana’s economy and its lustre as the former Gold Coast, is also backing Gulf Industrials, an Australia-listed company that is said to be the world’s largest producer of vermiculite, an ingredient in potting soil. “We bought it from RTZ. We raised $25 million to drill below the vermiculite, looking for copper and magnetite,” he said. Gulf operates in Uganda.
Finally, I am hearing that one Ghana prospector is looking to separate its Tanzania assets from its Ghana properties. A spin-off might allow the company to raise more money for its West and its East Africa operations if they were separately traded.
Thom Branches Out: I am adding professional outreach for natural resources companies to my log. I will continue to write free articles like this one for Stockhouse and its nearly one million users. Here is the press release about my new partner: Thom & Torrey Hills Capital.
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THOM CALANDRA of Ticker Trax helps his audience find value in a quagmire of investment choices. Thom was founding editor of MarketWatch, CBS MarketWatch and FT MarketWatch. He was the voice of Thom Calandra's StockWatch and The Calandra Report. Thom has been covering life-sciences and natural resources since 1988.