Can you give us some background information on Ashanti Goldfields here in Tanzania, when it started etc?
Ashanti Goldfields' first interest occurred in Tanzania in 1996 when it acquired Cluff Resources, to buy what we call now the Geita Leases. The Geita Leases then contained about 400,000 ounces of resource. This acquisition,which cost about 80 million dollars, primarily included the Geita Leases in Tanzania and a gold mine in Zimbabwe called Freda Rebecca. . From that point Ashanti pursued an aggressive exploration program within the Geita Leases, and by early in 1998 increased those resources to about 3 million ounces.
In August 1998 Ashanti conducted a feasibility study to build a 150,000 ounce a year mine called Geita. During this time, Samax Resources, a junior exploration company, had also been exploring on leases adjacent to the Geita Leases. Ashanti recognizing the synergies associated with combining the Samax leases with the Geita leases acquired Samax in October 1998.,This and the additional exploration carried out in Geita increased the resource base to over 6 million ounces. Through this acquisition of 135 million dollars Ashanti also earned a 50% ownership of the Golden Pride or Nzega Project in Tanzania. But our primary focus was that of expanding Geita . Rapidly the focus or scope of the project changed. From a 150,000 oz per year project Geita had now turned into a 400,000 oz a year project . In December of 1998 another feasibility study was conducted, and the results of that in January 1999, were presented for board approval.
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Who are the shareholders of Ashanti Goldfields Tanzania?
Ashanti Goldfields Tanzania, at that point in time (January 1999) was ultimately a wholly owned subsidiary, of Ashanti Goldfields Company. However Ashanti faced some fairly serious liquidity problems, around September last year and after many months of negotiations with various parties the result of that was the sale of 50% of the Geita project to the best suitor AngloGold.. Ashanti Goldfields Tanzania will by September this year be 50%owned by Anglogold. and effectively be managed by both companies, and that is the way the project is being structured right now. It will take effect by the end of September, once the transaction has been made.
Going back to January, when the Board approval was given, construction commenced on site in May of 1999, where we first "broke ground", as they say in the construction industry, with the first concrete pour occurring in June of 1999. A lot hard work and throughout Ashanti financial crises , we in spite of all the difficulties pour our first gold on the 8th of June.,That is we were able to go from first concrete pour to first gold pour in less that 12 months. Internationally, whether we were building this projectin America, Australia or Europe, that is a fairly big achievement. To do it in Tanzania is a reflection of the caliber of the management team and the support of the people and Government of Tanzania.
To what extent has the new Mining Act helped you in establishing the gold mine here?
Not just the Mining Act but a combination of factors including the revamp of the Mining Act, the new fiscal policies associated with investment in general - and in particular, mining investment, has helped a lot. That is the fundamental aspect that attracts investorsparticularly Mining investors. There has got to be a number of key factors that draws such a huge capital investment the geological prospectivity, the rocks have got to have the potential to host the minerals - that's got to be one. Political stability or country stability, and an attractive fiscal policy. For us in Africa, these factors are fundamental. For instance in the DRC or Angola, the geological prospectivity is probably higher than what is even in Tanzania is, but nobody is exploring or developing too many new mines there, because of the political instability. Tanzania has got all those three things well balanced, which make it so attractive now, to a foreign mining investor, and probably even to other investors. Tanzania historically, has not had any modern exploration techniques applied to it, particularly for gold exploration, but also for a lot of other minerals. In our region, the geological formations s here, called greenstone belts, are very similar in their nature, to other countries such as the western part of Australia, and the northern part of Canada, where there are some major gold mines that have been discovered over the last 100 years. So that global geological aspect of how the rocks were formed, the lack of modern exploration techniques, make it very attractive for an investor to go in and at least explore.
You have got to have the political stability and fair fiscal terms, as well. It provides the certainty that the investors need when making large investments. All those things have meant that Tanzania has obviously become a very attractive place even in a declining gold price environment. It has become an exciting place particularly for the gold mining investor, and I think in time, for other mineral investors as well. Typically, all things being equal geologically, the gold mining investors tend to go in first in countries with infrastructure that is still developing because the transportation of the product is usually the simplest. It is put into a plane, if the country does not really have a good infrastructure, it is not as critical as it might be to say a coal producer who has large volumes of product to transport.. If a modern investor has a bar of gold he can stick it in a plane, take it to South Africa, or to Europe. The coal producer has got to have good railway lines, ports and roads and a low transporting cost, to be able to get the economics for a reasonable return. When the gold miners come in, the Government has the opportunity to improve infrastructure through the, government receiving the injection of cash through royalties and taxes and as a result the economy gets a huge boost.
We started our construction activities in Geita, around this time last year. Geita had a township population of about 20,000 people. Now it has a population of 60,000 people. Even during the construction phase, we had employed a lot of people and were using over 90 Tanzanian companies on average. So the boost to the economy, locally and for employment, is huge. Even though we are a capital intensive industry, we create usually about two and a half to three and a half times its direct employment. The mining industry has a huge multiplier effect . For example we're employing about 700 people now. This means that there are up to three times that amount of people in Tanzania that would directly depend on our business, and their families. One of the things we are also getting involved in Geita is Microfinancing Projects, lease capital for business investment in the Geita district. It is not our business but we believe it is part of our social responsibility to look at those areas. So we bring the experts in, and we have been interviewing a number of NGOs to try and see which NGO fits the best with what we are trying to achieve in the aims of business development. That's part of the impact that miners have, it is phenomenal, but from our point of view, no matter how good the geological prospectivity is in any area, mining is a finite resource at a particular location.
Even though now we have a 10 year mine life, and we can confidently expect a 20 year mine life with the prospectivity that we have. But sooner or later, the resource will be depleted, so as part of our responsibility we want to try and develop businesses, that perhaps are not dependant on us, so that when we can at the end of our stay have contributed to sustainable businesses who would remain, generating additional wealth. That is why we want to bring in these micro-finance projects. Wealso focus on community donations - although I don't like the word donations - there is a lot the communities can do to help themselves. It is important that we help communities help themselves and not become dependant on us. There is a strong focus on schools, hospitals, etc. Reasonable health care and education, is obviously critical, so those are the areas we try to focus on, including infrastructure. We built a 65 km road, which again allows a link, if we do help to develop down the track some businesses that would benefit from the improved infrastructure to make such businesses competitive.
| How much has been invested so far? In the infrastructure, social areas, and in total?
Well there's the investment from the acquisitions, that Ashanti has put in from 1996, including the construction program, Ashanti would have invested about 400 million dollars.. You can't invest 400 million dollars without having confidence that the government is going to be supportive of your business. . This is 400 million dollars invested in the country before the first ounce of gold is produced. There are very few occasions that any business in Africa can stand up and say that a project of this magnitude has been built on budget and ahead of schedule. This makes Tanzania very special. We completed Geita three months ahead of schedule. Again that is a very positive signal to send externally and for Tanzania to say "Isn't this a great place to invest". Because here is an investor that has come in, not only have they achieved their goals, but done it under the budget that they said, and done it faster than they thought they could do it. It is a good signal for more foreign investment to come in.
What are your comments on the production costs here in Tanzania which are said to be very high?
In places like South Africa, Ghana, US and Australia, the cost to produce power c is about a third of what it is in Tanzania. The government has recognized that, and I think they have made some commitments to cut it by half, which I think will bring them closer, to what the world is paying for power.
There was a World Research Institute that condemned the project because of chemicals that will be used and that could pollute the Lake Victoria. What are your comments on that and how would you describe your environmental policy?
We have committed to build the Geita Project, to international standards from the outset.. At the time we were aware that the Tanzanian legislation was in a state of change. We knew the government was in the process of getting this legislation to an international standard. Regardless of this state of change, Ashantistill brought in independent internationally recognized environmental consultants, SRK out of South Africa and SGS out of Ghana to conduct an independent Environmental Impact Assessment, for the entire project. Both those assessments , were carried out and benchmarked to international standards and requirements. The results of the SRK study indicated that the Geita project would have minimal long term environment impact. The management of this impact the company undertook to carry outis following world standards, and the monitoring that we are putting in place is again, to international standards and quite appropriate. We are also developing environmental and safety management systems, because we have a workforce to protect and train, as well which complies with ISO 14001 which is effectively one of the highest quality and most stringent environmental management systems in the world, and is internationally recognized. . It is true we do use various chemicals on the project one of them being Sodium Cyanide. We are carrying out stringent training programs with all our employees on the use and handling of all materials on our project. The sodium cyanide is being used and stored in an internationally approved manner. It is a chemical that is used in many places around the world and in many other industries other than just the mining industry. We do not take it outside our immediate working environment and in fact we re-cycle any solution containing traces of this chemical. The most appropriate thing is to ask, is if the risk in the use of such chemicals is well managed, is following appropriate standards and procedures at an international level, and do the benefits outweigh these minimal risks involved.
A question on your future outlook, since the gold mining business is booming in Tanzania, and you are one of the biggest players here, where do you see Ashanti Goldfields in the next couple of years and what contribution are you going to make to Tanzania's economy?
We believe Ashanti has a special relationship with the government, in comparison with the other mining companies. I think the advantage that we have had, is that we are African producers, and that is part of the reason why Ashanti chose Anglogold as its partner in Geita. Both Ashanti and Anglogold are African producers and are focused on gold. There is no one better that knows the challenges that face Africa, from communities, governments, and the changes that some these governments are trying to make as well as the more technical challenges such as logistics and skills base of the host countries. I think this understanding tends to put us on a better footing and provide us with more common ground on what government concerns are, and what community concerns are. Like we talked about hospitals, schools, we're bringing water from Lake Victoria. It is a 25 kms pipeline for our process plant yet we are providing 11 off-takes from that pipeline for local community use. Sometimes it is small things like that, but all of a sudden now the farming and irrigation there in the last three months increased. So people now have a constant all year access to a water supply. When before it was 8 kms away, and it was only available for 7 months a year, now they can turn a tap, and there is water flow. Which means their crops can now grow 12 months a year. These are the kind of contributions we make and will make to the society and communities around us..
Beeing a successful investor here in Tanzania, could you give one business tip for investors who are planning to come to Tanzania to invest here?
For a typical American or European company, you need to learn patience and understanding of other peoples situations and the pressures they face. They may think that if people do not get excited then nothing is being done But do not underestimate what people are actually doing and how they are doing it. What do they say - Still waters run deep - you must try and understand what real activitiy there is under the surface.. It is good to get an understanding of what is happening in the country and in the government. Tanzania has effectively had no mining industry, or a relatively low mining industry, but this has now rapidly changed i in a matter of a few years. It is doing remarkably well as a government, as a public service and as population with this in mind.. Has it been frustrating for us? At times, sure, when it comes to doing certain things. Is it understandable at the public servant level, because the education of the people on what the government is trying to achieve is not there yet or if it is it is not well understood This is understandable, but we have still managed to achieve our goals. It's a government that you can do business with, it's a government you can trust, and you can believe in what they are trying to do. If they can't change something usually, you can see their point of view. But they are not there to be ripped off, by the foreign investors. What they have provided the investor is fair for all parties. |
