The Ghanaian government has refused to extend Gold Fields’ mining lease for the Damang gold mine and is insisting the group cease operations by April 18 when the lease expires.
The refusal to extend was first reported in the group’s recently published annual report for the year to end-December 2024 but that report indicated Gold Fields was still negotiating with the Ghanaian government over the mine.
The development will have little impact on Gold Fields’ production levels because mining operations ceased at the mine last year which has since only been treating surface stockpiles. Damang produced 135,000oz of gold in 2024.
According to Noah Capital analyst Rene Hochreiter the loss of Damang “is not a train smash because Gold Fields is still our best value gold share even without Damang. Our target price drops by 10% to R793 per share from R882 per share.”
Of greater significance is what the decision by the Ghanaian government might imply for the proposed merger of Gold Fields’ Tarkwa mine in Ghana with AngloGold Ashanti’s Iduapriem mine.
That was announced in March 2023 but negotiations with the Ghanaian government were affected by the run-up to elections held in the country at the end of 2024.
Gold Fields has provided little detail on those negotiations but CEO Mike Fraser confirmed in August that one of the issues concerned the Ghanaian government’s final equity stake in the new joint venture.
Gold Fields said in a statement released today that it applied for an extension to the Damang mining lease but had now received notification from the Minerals Commission of Ghana that the application had been rejected.
In the group’s 2024 annual report Gold Fields said it had applied for the extension “in accordance with the applicable law”. The report stated “Gold Fields is pursuing all avenues to seek reversal of this decision and, to ultimately, obtain an extension of the Damang mining lease, including through international arbitration, if required.”
It seems Gold Fields management has decided not to go the international arbitration route because today’s notice says “The Government has instructed Gold Fields to cease operations and vacate the lease area by April 18 on expiry of the lease.
“Gold Fields is therefore preparing to safely and responsibly cease operations and ensure the safety and security of our people and high-risk operations. The company continues to seek ongoing engagement with the Government to secure the best outcome for all stakeholders.”
Gold Fields added “these developments at Damang do not affect operations at Tarkwa which remain ongoing.”
The decision not to go for arbitration may well have to do with avoiding undue confrontation with the Ghanaian government while a decision on the Tarkwa/Iduapriem merger is pending.
Regarding the merger the 2024 annual report stated, “following the recent national elections, Gold Fields and AngloGold Ashanti are working to engage the new government on progressing the potential JV.”
