Record world gold prices, but local miners struggle — Chamber of Mines

Despite gold prices hitting record highs on the international market, several mining companies in Ghana are struggling to remain profitable due to rising costs, wage pressures and operational challenges, the President of the Ghana Chamber of Mines, Michael Edem Akafia, has disclosed.

Gold surged to about USD3,650 per ounce last Friday, its fourth consecutive weekly gain, amid growing expectations of interest rate cuts in the United States and increasing geopolitical tensions.

According to analysts, the rally has been supported by safe-haven demand as conflicts escalate in the Middle East and Ukraine, coupled with slowing US economic indicators such as steady inflation, weaker producer prices and rising jobless claims.

Ordinarily, such favourable conditions would be expected to boost the earnings of Ghana’s gold producers, leading to higher revenues, stronger foreign exchange inflows and improved government receipts.

However, Mr Akafia has cautioned against assuming that the price rally directly translates into higher profitability for local firms.

“I want to establish that it has not been all that rosy for all mining firms despite this development,” he said in a media interview.

According to Mr Akafia, the surge in global prices has coincided with a sharp rise in operational costs.

Imported mining equipment, critical supplies and other inputs have all become more expensive, while workers are pressing for higher wages and enhanced benefits.

These pressures, he explained, have eroded much of the windfall that companies could have reaped from the record prices.

“As the price of the precious metal has reached record levels, most of their supplies have also increased their prices, while workers are also demanding more,” he noted.

The Chamber of Mines has revealed that some companies are even running at a loss despite the bullish gold market.

In response, certain firms have intensified exploration efforts in order to raise output and take advantage of the favourable international environment.

Mr Akafia stressed the need for a broader understanding of the sector’s dynamics, emphasising that the international spot price of gold does not tell the full story of the challenges mining companies face locally.

“We should not just focus on the price but sometimes the bigger picture when it comes to gold prices on the international market,” he cautioned.

Ghana, Africa’s leading gold producer, continues to rely heavily on the sector for export earnings and foreign exchange.

But the Chamber’s warning underscores the complex interplay of global and domestic factors shaping the industry’s fortunes, even in times of record market prices.