Mining Sector Needs More Attention

As a price taker, the health of Ghana’s gold-dominated mineral sector is largely compromised given the recent decline in gold prices on the world market. As at Tuesday, August 4, 2015, gold prices ranged between US$ 1,088.90 and US$ 1,089.7 per ounce, still below the US$1,100 per ounce recorded last week.

This new development is expected to further worsen the plight of mining firms that are already battling with the high energy costs associated with the unending power crisis, continuous depreciation of the cedi against its major trading currencies, external shocks and improper regulatory framework.

The latest statistics released by the Bank of Ghana also depicts a drastic fall in gold earnings from US$1.88 billion recorded for the first five months of 2014 to US$1.36 billion for the same period in 2015. This was largely responsible for the rapid deterioration of the country’s international reserves as well as the persistent depreciation of the domestic currency within the first half of the year.

Given the negative outlook expounded by most commodity analysts about the future of gold prices, we expect the decline in gold prices (which represents the strengthening of the US dollar) to fuel marginal depreciation in the cedi and increase fiscal and balance of payment pressures in the third quarter.