Gold Fields extends operations of its Ghana mine by eight years

Gold Fields, a South African mining company has said it intends to extend the life of its Damang mine in Ghana by eight years, investing $1.4 billion to facilitate this.

When releasing its quarterly output update, the company also said it expects to produce 1,56 million ounces of gold.

Gold Fields signed an agreement with Ghana's government in March, linking royalties payments to the bullion price and lowering the corporate tax rate to 32,5 per cent from 35 per cent.

“Damang reinvestment was planned at a gold price of US$1 200 an ounce, so we have some headroom and, importantly, the breakeven price at Damang is US$1 050 an ounce, so we have a US$200 ounce cushion before the project starts becoming uneconomic,” chief executive Nick Holland said.

Gold was trading at around US$1 265 per ounce when the company released the results.

Since 1997, the Damang mine has produced more than 4 million ounces from multiple open pits, but production has declined since 2013 as ore grades have been lower than expected.

The firm started a strategic review of the mine last year and mulled mothballing or even closing it, but ultimately decided to invest to deepen the main pit to get access to the full ore body.

Gold Fields also retains the option of expanding the operation at Damang, should the gold price strengthen sustainably to above US$1 400 per ounce, it said in a statement.

The company yesterday reported its total gold production in the three months to 30 September was 537 000 ounces, 4% lower than in the corresponding period a year earlier.

Gold Fields maintained its guidance for attributable equivalent gold production for 2016 at between 2,10 million and 2,15 million ounces.