The fall in gold prices has sent shivers down the spines of major mining firms, forcing the Tanzania Chamber of Minerals and Energy (TCME) to call for joint efforts by the government and the private sector to ensure the record gains from the sector are not lost.The price the precious minerals is reported to have plummeted to around $1,200 an ounce as of June 2013 from up to $1,800 it commanded during the past two years.
According to the TCME executive secretary, Mr Emmanuel Jengo, the sharp drop in prices calls for joint efforts between miners and the government, with a view to saving jobs.
In his opinion piece published in this paper, Mr Jengo argues that the sector is already overburdened with a number of taxes as well as security and logistical bottlenecks. These factors, he argues, make it extremely expensive to produce gold in Africa and Tanzania in particular.
“With such overwhelming burdens shouldered by the miners, it is imperative for the powers-that-be to desist from doing anything that might worsen the situation and instead move to bring down production costs.
Bringing costs down would not be about protecting miners’ profits; crucially, it would be about protecting jobs, tax revenues and significant multiplier effects in the economy,” he says.
According to the TCME boss, the average costs of producing an ounce of gold in Tanzania currently stands at $957. This compares poorly with the situation in Asia, South America and North America where the production cost stands at $824, $710 and $598 respectively. Mr Jengo’s article comes at a time when some major mining firms are already planning job cuts as they seek to reduce operational costs in the wake of declining gold prices.
South Africa’s Business Day newspaper reported recently that AngloGold Ashanti [JSE:ANG] is set to shed a substantial number of jobs to cut costs.
According to the newspaper, the company will reduce its head count at its Johannesburg head office and other offices in Africa, from 1000 to 220.
AngloGold Ashanti has unveiled several measures as a rapid strategic re-evaluation in response to a sharply declined gold price accompanied with spiraling costs and declining production.
Geita Gold mine manager, Mr Stevens Robins, told The Citizen over the weekend in an exclusive interview, that the steps to be undertaken included a full review of its asset portfolio and all existing commitments to ensure there are viable cost optimisation and value creation.
And African Barrick Gold said in its results for the first six months of the current calendar year that it will work on measures that seek to reduce its cost base to a sustainable level as quickly as possible. The company hopes it will have implemented over $100 million of savings in 2013 and that over 90 per cent of all savings will be achieved by the end of 2014.
The issues to be worked on include improving maintenance performance and practices, reducing materials used through efficiencies, reducing working capital requirements as well as improving grade control mechanisms.
According to the TCME boss, the average costs of producing an ounce of gold in Tanzania currently stands at $957. This compares poorly with the situation in Asia, South America and North America where the production cost stands at $824, $710 and $598 respectively. Mr Jengo’s article comes at a time when some major mining firms are already planning job cuts as they seek to reduce operational costs in the wake of declining gold prices.
South Africa’s Business Day newspaper reported recently that AngloGold Ashanti [JSE:ANG] is set to shed a substantial number of jobs to cut costs.
According to the newspaper, the company will reduce its head count at its Johannesburg head office and other offices in Africa, from 1000 to 220.
AngloGold Ashanti has unveiled several measures as a rapid strategic re-evaluation in response to a sharply declined gold price accompanied with spiraling costs and declining production.
Geita Gold mine manager, Mr Stevens Robins, told The Citizen over the weekend in an exclusive interview, that the steps to be undertaken included a full review of its asset portfolio and all existing commitments to ensure there are viable cost optimisation and value creation.
And African Barrick Gold said in its results for the first six months of the current calendar year that it will work on measures that seek to reduce its cost base to a sustainable level as quickly as possible. The company hopes it will have implemented over $100 million of savings in 2013 and that over 90 per cent of all savings will be achieved by the end of 2014.
The issues to be worked on include improving maintenance performance and practices, reducing materials used through efficiencies, reducing working capital requirements as well as improving grade control mechanisms.
Other factors geared at reducing costs are reducing aviation, travel and camp costs, renegotiating material supply contracts, optimising asset security as well as improving labour structures at mines and corporate offices.
But reacting to this scenario, the National Union of Mines and Energy Workers of Tanzania (Numet), says things are not as bad as the mining companies would want the public to believe and therefore, there shouldn’t be any job cuts.
“While we agree that prices have gone down, we don’t buy the idea of job cuts because things are not as serious as portrayed by mining firms,” said the Numet general secretary, Mr Nicomedes Kajungu.
He said a recent report by Geita Gold Mine indicates that the company spent $653 to produce one ounce between September and December 2012. In that report, it says the costs had during that period gone up by 18 per cent, meaning that before September 2012, costs were much lower.
“This in short means that prior to that period, operational costs were anything between $500 and $550 and therefore, if you consider that the price now stands at between $1,200 and $1,300, then it is correct to say that costs are still very low and mining firms are still operating at super profits,” he said.
Gold and tourism are major sources of foreign exchange in Tanzania and analysts say a serious blow on prices would have some far-reaching ramifications on the value of the Tanzanian shilling.
“The first victim of low earnings from gold will be the value of Tanzanian shilling,” said the Shadow Finance Minister, Mr Zitto Kabwe.
According to Bank of Tanzania figures, export earnings from gold fell from $2.252 billion during the year ending May 2012 to $1.971 billion during the year to May 2013.
The Geita-based AngloGold Ashanti, however, said it would explore a number of measures with a view to making sure that it retains 3,594 workers – 96 per cent of whom are Tanzanians.
Source: The Citizen, reported from Dar es Salaam and Mwanza, Tanzania
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