The Richest Square Mile in Africa – Part II

Randgold’s investment in AngloGold Ashanti’s Obuasi gold mine is worth watching. Mark Bristow must move because he sees beauty in this old lady. A new team with fresh eyes and hopefully starting a new chapter in the long history of this wonderful gold mine which just keeps on giving. It is such an extraordinary gold deposit.

Marcel Proust said it well: the real voyage of discovery consists not in seeking new landscapes, but in having new eyes.

My travel to Ghana and Obuasi in 1990 was part of my first gold exploration assignment to Africa. It was my first campaign of prospecting in the Birimian goldfields of West Africa. I was spent three months prospecting around the old Antubia gold mine without onsite communication with the outside world. It was a long way from Tara to here. A long way from drilling for zinc in the patchwork shades of green just north of the Navan mine in County Meath.

In following years I returned and migrated further north into the Birimian. There was always the push to get an edge and prospect in the less explored frontiers. To try and be a first mover or at least with the leading pack into remote districts like the Siguiri Basin.

Exploration took me prospecting into southern Burkina Faso east of Bobo Dioulasso and to discovery and unlocking of gold resources in Mali (Yanfolila 2003). Exploration took me across the Sankarani River into eastern Guinea (Mandiana 2009) and the Buré Goldfields. There was a prolonged interlude in the mid 1990’s in the Lake Victoria Goldfields of Tanzania (discovery of Nyanzaga 1996). The Mandiana gold property in Guinea was where I stumbled across the second largest colony of orpailleurs that I have ever seen in Africa. Bulyanhulu in the Lake Victoria Goldfields of Tanzania in 1994 was the largest congregation of small scale miners which I had ever seen. I returned to Ghana in 2000 with a small junior gold explorer called Moydow Mines just in time to help with the fleshing out of a major gold discovery. The Ntotoroso gold deposit along the Yamfo-Sefwi gold belt became the core of the world class Ahafo gold mine. But that is another story and I have broken the thread of the golden yarn I am trying to spin.

The gold price spiked in January 1980 at US$850 per ounce. In Ghana in 1982 there was the “second coming” of Flight Lieutenant Jerry John Rawlings. Rawlings overthrew the Limann government citing economic mismanagement. Actually economic mismanagement was a euphemism for hunger in the streets. Rawling’s was the son of a Ghanaian mother and a Scots chemist born in 1907 in southwest Scotland. Over the next few years the gold price had plummeted back to a range between $300 and $400 per ounce. But in 1985 the price had started to rise again. The economy had started to improve after the launch of an Economic Recover y Programme in 1983. The Programme was backed by the IMF, the World Bank and Western aid donors. It was recovery from a low base. Ghana’s economy was still on its knees.

In 1985 AGC got a much needed shot in the arm. The loan for $159 million from the IFC was for an ambitious five year expansion and improvement plan. It was also around this time that my former boss Noel Kiernan first arrived in Ghana. He was only equipped with a suitcase of personal possessions, belief and an idea. He was 52 years old at the time. The rising gold price and I suspect that Noel needed a new frontier and challenge. He was also attracted by the fact that the government of Ghana had passed a new Minerals and Mining Law. The new mining law copied the successful Chilean model. A consequence of the new Law was that the state allowed AGC to keep 45 percent of its export earnings. This provided a vital source of capital to repay its loans and invest for future expansion.

Noel Kiernan was involved with the development of three gold mines in Ghana. Two gold mines in the Birimian greenstones were Konongo and Wassa. The largest of the three mines was Teberebie in the Tarwaian Banket. Noel later founded another junior gold company called Moydow Mines International which discovered the Ntotoroso gold deposit in Ghana and which made lots of money for its shareholders.

We had to drill test the main ore shoot at Ntotoroso at least below 300 metres to see if it had legs. We had over one million ounces of an inferred resource above this level along a one kilometre strike. The fillet mignon containing most of the gold had a strike of only a couple of hundred metres. It was a peculiar gold deposit because it was not where it should be. It was in a granodiorite intrusion about one kilometre east of the main break. The main break was a regional shear zone. There were Birimian metavolcanics on one side and metasediments on the other. The country rocks hosting the gold system had been in a pressure cooker on a low heat for a few million years. That happened during the Eburnean orogeny and why the rocks metamorphosed. The granodiorite intruded into dilational zones within the shear while it was moving. The clue was the foliation. Ntotoroso should have been on a secondary structure running off the Sefwi shear zone.

Two Russian geologists called Victor Litvinov and Yury Deryugin discovered Ntotroso. They would never have made the initial discovery if they had not moved outside of the agreed programme. And if Noel Kiernan had not backed his team with a bet that they would succeed make a discovery.

So the discovery became world class. Where it should have been was on the large scale. It was a challenge about where to look. On the project scale we had to pierce the ore-shoot at depth below the fillet mignon. Was there control by the intersection of a cross structure? Maybe the target was a dilational kink along this subsidiary structure? Maybe a mega slickenside or striation which controlled the plunge of the high-grade mineralisation? There is a motif in the modelling of these Birimian orogenic gold deposits. Obuasi or Ntotoroso, they are all different in their own way but there is a common theme to unlock. It is more of an art than a science: a creative application of the science.

We argued long about where to collar for first hole. There was passion and conviction. Joe anticipated that the shoot plunged to the south. The Russians had a simpler interpretation based on what had gone before. I agreed. We were as sure as can be that the shoot was vertical. The second hole cut ten metres averaging 15g/t gold at about 350 metres below surface. Happy days!

In 1994 the Ghana government sold 20-25 percent of its equity interest in AGC. This was a sell into a share floatation of AGC on the London and Ghana stock exchanges. Two years later AGC listed on the New York Stock Exchange. It was the first African company to appear on Wall Street. Its CEO was Sam Jonah.

Sam Jonah joined AGC as a labourer in 1969 straight from high school. That was the same year that Lonrho ambushed AGC. The following year he won a company sponsorship to study at Cambourne School of Mines. Later he went on to study at London University’s Imperial College. At the age of only 36 he became the first African Chief Executive of AGC.

In 1998, Ashanti Gold was the third largest gold mining company in the world. In May 1999 the Treasury of the United Kingdom decided to sell off 415 tons of its gold reserves. By August 1999 the gold price had fallen to $252 per ounce. Even quality high gold projects like Ntotoroso moved to the back burner.

The slide spooked AGC like many other big gold producers. There was palpable fear of further slides in the gold price. It scrambled for some kind of insurance policy. Goldman Sachs AGC’s financial advisers recommended that Ashanti buy large hedge contracts on the price of gold.  Hedging was very popular with gold companies at the time.  Advice is one thing but taking it is the reponsibility of the client.

In September 1999 fifteen European Banks with links to Goldman made a surprise announcement. Together these banks decided to reduce selling of gold on world markets for five years. The announcement immediately drove up gold prices and by October 6th it had risen to $362 per ounce.

Ashanti had no option now but to buy high and sell low to make good on the contracts. A few weeks later, Ashanti found itself sitting on $570 million worth of losses. Ashanti was on the brink of bankruptcy its stock price from an all time high of $25 per share to a just $4.62 per share. It was a near-death experience for the old lady.

Ashanti’s near collapse led finally to a buyout by its largest African competitor in 2004. AngloGold bought Ashanti for at a distressed price. The new “combo” became the world’s second largest gold producer. Incidentally Goldman Sachs was a financial advisor to AngloGold. All is fair in love and war and it seems in business too.

So how prolific mine was this gold mine? How easy did it surrender its riches? In 1990 management finally decided it was maybe a good idea to form an exploration division. That was the year of my first visit to Obuasi. It had all been quite easy up to that point. Poke the load ahead of the face with underground drilling. There was never more than a couple of years of inventory at best. Two post graduate geology students came from Leicester University. They would bring in new ideas and not be contaminated by any groupthink. It would start the process toward new discovery. One of these young men was Nick Laffoley. In his khaki shorts and knee length socks Nick cut a Kiplinesque figure even without the pith helmet. Nick’s appearance was almost a throwback to that a bygone time and the early history of the mine. I remember taking Nick and his American girlfriend to a Chinese restaurant in Kumasi. Even in those days in the heart of the Ashanti region you could find an outpost of oriental cuisine. Nick was to die young of natural causes only seven years later. He had been only a year as Vice President of Exploration at Nevsun Resources. He was just getting started.

Before I headed west and north Nick showed me a three dimensional Perspex model of the mine. It had sliding screens in two dimensional painstaking detail. The screens slide into position to create a three dimensional model. To create it was to know every little wrinkle in the beast. This now seems like light years from the modern computer models which can be changed in a nanosecond. The model showed the plunge of the gold mineralising system from surface to the north. The known strike of the system at that time was over a distance of five miles and to a depth of a mile. A week later I arrived in Antubia. My team of local recruits cut traverses with machetes through the jungle. They uncovered through the tangled overgrowth the rumps of the old colonial mine buildings. Not far from a riffle structure I discovered a fractured headstone with the name Keane. I suspect he must have been a miner or geologist of Irish descent. He died of malaria in this remote jungle in the early part of the last century. It made me think of Edwin Arthur Cade who also died in lonely sweats and shivers in 1903. Just 14 years before Tiny Rowland was born in India. Great mines do not just happen. Great mines are made.