It said as the Tarkwa mine matured, it had to contend with the following cost drivers: Deeper pit (meaning harder rocks, which translates into the higher blasting cost), longer hauling distances for its fleet (meaning more fuel burn), increasing cost of reagents and high cost of exploration.

In addition to the above operational cost, there are also the year-on-year escalations of union-negotiated wage increases, the need to replace the mine’s ageing fleet and the cost involved in extending the mine (mining) life. These factors make the current owner mining model unsustainable,” a statement issued by the GFGL said.

It explained that under the contract mining model, a third-party mining contractor, with a partially or fully paid-off equipment fleet, assumes the operational and financial responsibility for the most critical mining activities (blasting,hauling,engineering,etc), and that “this provides the mine with the needed flexibility to invest more in exploration and undertake the high cost waste stripping to expose more ore for operational sustainability. Only then can the life-of-mine be extended.”

A similar exercise (change to contract mining), it said at Gold Fields’ Damang mine in 2016 had since seen a significant turnaround in productivity and operational flexibility with a potential upside in terms of the mine’s longevity.

“The GFGL is taking this decision to sustain the Tarkwa operation. Several mines have been closed prematurely, partly because decisions needed to ensure a longer life-of-mine were not made. Management has the responsibility of balancing the needs and interest of all parties including government, communities, employees and shareholders. We believe that the contract mining model is the option that ensures that the business operates longer to deliver value for stakeholders,” it said.

The majority of Tarkwa employees (80-85), who will be affected by the change in the business model (from owner mining to contract mining), will be absorbed by the mining contractor, adding that “this was agreed with the contractor and was a prerequisite of the transaction. During Damang’s transition to contract mining in 2016, about 80 per cent of the affected employees were re-hired by the contractors.”

“All the affected workers, including those who will be re-engaged by the contractor, will be paid their full severance package as agreed with the employees through the Collective Bargaining Agreement. The severance package is substantial and includes three months’ salary for each year of service. Therefore, the longer the years  of service, the higher the severance package. Those who are not immediately engaged by the contractors will be the first port of contact for future job opportunities at the time.”