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Resource rush in this ‘rich’ African nation

Thom Calandra Thom Calandra, www.thomcalandra.com
0 Comments| September 17, 2009

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ACCRA, Ghana -- The Oregon-size nation of Ghana in West Africa is closing the decade with gold fever at a pitch.

The resource rush is drawing companies, cash and millions of emigres from surrounding nations.

The scrum for gold and other elements has led the Ghana Minerals Commission to survey and audit hiring practices and ownership disputes among mining and exploration companies in the richly-resourced nation. Click to enlarge

"Once there is a gold rush, everyone comes from Togo and Mali and Sierra Leone," a top mining official, Benjamin N.A. Aryee, said in an interview at the commission's headquarters.

The ministry, now in its 24th year, already has begun placing six-month reviews on all requests for expatriate work visas, including extensions. The powerful government body, developer of all mining rules, regulations and tax codes, is also looking at ownership issues over potentially valuable land.

KeeganResources (TSX: T.KGN, Stock Forum), (AMEX: KGN, Stock Forum), for example, is defending itself in a somewhat obscure lawsuit scheduled for a court date sometime this month. The dispute appears to involve whether two Ghanaian lawyers who sold the deed of trust on the promising Esaase property to Keegan’s representatives actually owned it. Little has been reported about the legal conflict.

"Our lawyers tell us this is entirely frivolous," Dan McCoy, Keegan’s president and CEO and a geologist, told me Thursday, whilst I was heading toward the Esaase District to tour the Keegan property, a potential five million-ounce resource. "This has been flagged in a prospectus for our most recent financing." (Keegan raised $19 million Canadian in the summer financing at $2.40 Canadian per share.)

Mr. Aryee, the commission's No.2 official as chief executive officer, said in a wide-ranging Stockhouse interview that he also is working with companies to identify illegal alluvial miners working riverbeds with work forces 1,000-strong and more. In the Kibi Gold Belt, I visited one of the largest at the headwaters of the Birim River. A Ghanaian said the place produces about two liters of gold daily, some 30 ounces.

These and other social and commercial challenges, such as corporate support for mine service industries (machine tools, definition drilling, drafting), come hand in hand with Ghana's success as a producer. Concerns about corporate behavior also coincide with sharp gains in the prices of gold and other commodities.

Ghana's gold, manganese, even salt and bauxite output this decade, accelerated rapidly. The abundance of identifiable resources is sparking envy in a native population of 24 million, where four or every five people are Roman Catholic, eager to work and ready to vote their pleasure or pain at the ballot box.

Click to enlargeOne radar screen issue for many Ghana-born miners: Many overseas companies from South Africa, Australia, the United Kingdom and North America are not coming close to the bar new Ghana corporate resident Newmont Mining (NYSE: NEM, Stock Forum) has raised in the areas of local hiring, salary levels, community ties and training, according to Mr. Aryee at the Minerals Commission.

Mr. Aryee said Newmont, Denver based and the world's second largest miner, is "setting the pace" for improved corporate behavior in the nation. He and top deputy Joseph Aboagye indicated South Africa's AngloGold Ashanti (NYSE: AU, Stock Forum) is falling short of Newmont’s reliance on natives for a good part of its work force.

Still, Mr. Aryee and his top deputy waved at least four red flags on the corporate front:

-- Few Ghanaian geologists, prospectors and foremen make it to the corporate rank of vice president or higher.

-- Local hiring, from the same community as the mine, averages only 11% of the work force.

-- Mining companies often contract out their exploration drilling and other specialized services to overseas giants with Ghana units, or border-crossers with backhoes and tractors.

-- Protesters are doing a better job at identifying social shortfalls "in the bush" and articulating their concerns than companies and trade groups are. For this article, for instance, Ghana's lobby for mining companies, Ghana Chamber of Mines, declined requests seeking an interview with its top official.

Newmont Mining, meanwhile, responded readily and armed with facts on hiring policies and other matters.

Ghana's gold output for 2009 will reach three million ounces, almost 10 times levels of the 1980s and a 6% slice of GDP, Mr. Aryee said.

Gold production in the West African democracy will rise about 10% this year from 2008.

Mr. Aryee said the 200 gold mining and exploration companies now operating in Ghana are contributing to a ''dramatic rush for properties'' in the country. The No. 2 government official for the mining industry has been at the commission since its inception in 1986. He reports to the commission chairman, who usually follows the recommendations of Mr. Aryee’s staff.

Amidst it all, China independent companies are searching for gold, aluminum and magnesium properties that might yield significant resources in democratic Ghana. China and Russian companies are also structuring financing that has built landmark structures in the capital of Accra and across the small nation's interiors, largely roads, bridges and other so-called infrastructure improvements.

Drill results and compliant assays from several companies active in Ghana are due out in coming weeks. In turn, speculative investors are starting to take positions in

Ghana companies that lease concessions which might yield one million or more ounces at a purchase metric of $100 to $200 an ounce.

"I have been at this many years," prospector J.K. Mine tells me as I chat with him in his front yard, just meters away from the entrance to the mining camp of his employer, tiny Xtra Gold Resources (OTC:BB: XTGR, Stock Forum ) of Nevadar. The company is drilling the Kibi Gold Belt in a search for granitoid-structure veins of gold.

Mr. Mine is credited with helping to extend the legendary Ashanti Belt with his discoveries.

As we talk, goats and chickens mill about the yard. Mr. Mine, a wiry 59-year-old Ghanaian, worked for 14 years for Ashanti before it was merged with AngloGold. He has fond memories of Samuel E. Jonah, the revered mining entrepreneur who rose through the ranks to occupy Ashanti's plantation estate at its flagship Obuasi Mine.

"You know, the big one is out there, maybe as a large structure, maybe as a shear zone," he says. "I think maybe here in the Kibi or the Ankaase. The outcroppings tell me so."

Thom Calandra will continue his reports on Ghana in coming days in the subscriber report Ticker Trax.

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Ticker Trax is published by Stockgroup Media Inc. Ticker Trax is an information service for subscribers and neither Stockhouse nor Thom Calandra is a broker or an investment advisor. None of the information contained therein constitutes a recommendation by Mr. Calandra or Stockhouse/Stockgroup Media that any particular security, portfolio of securities, transaction, or investment strategy is suitable for any specific person. Ticker Trax does not purport to tell or suggest the investment securities subscribers or readers should buy or sell for themselves. Subscribers and readers of Ticker Trax should conduct their own research and due diligence and obtain professional advice before making any investment decisions. Ticker Trax will not be liable for any loss or damage caused by a reader’s reliance on information obtained in the reports. Subscribers and readers are solely responsible for their own investment decisions. Opinions expressed in Ticker Trax are based on sources believed to be reliable and are written in good faith, but no representation or warranty, expressed or implied, is made as to their accuracy or completeness. All information contained in Ticker Trax should be independently verified. The editor and publisher are not responsible for errors or omissions or responsible for keeping information up to date or for correcting any past information. Ticker Trax does not receive compensation of any kind from any companies that may be mentioned in the report. Any opinions expressed are subject to change without notice. Owners, employees and writers may hold positions in the securities that are discussed in Ticker Trax. PLEASE DO NOT EMAIL THOM SEEKING PERSONALIZED INVESTMENT ADVICE, WHICH HE CANNOT PROVIDE. Copyright 2009 all rights reserved.


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