An evaluation of project cost management in the mining industry: A case study of Anglogold Ashanti (Gh) Limited – Obuasi mine

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August 2015
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Some businesses are by their exact peculiar nature riskier than others and therefore, investing in them is inherently riskier. Projects are means to achieving strategic objectives. To ensure projects meet such goals, there have to be controls, one of which is Project Cost Management. It is not minimizing cost but ensuring an optimum balance between costs, quality and time requirements. Project cost overruns may cause solvency issues and therefore the need to curtail such risks. Mining projects are usually large scale, complex, involve huge capital outlay and needs to be completed on time. It is an incontestable fact that the capability to use veracious and tenacious project cost controls in the Ghanaian mining projects has inevitably raised concerns to the equity holders in mining sector. The resultant effect is the increased unsystematic risks associated with such mining endeavors. The study focused on the evaluation of project cost management in AGA with specific objectives being the assessment of project cost success criterion, project cost management processes examination and project cost variance investigation. With AngloGold Ashanti Obuasi mine halting its operations and fully entering into a limited operation phase, only a sample size of forty nine (49) personnel were available in the project and feasibility department. Questionnaires were administered to them with follow up interviews of some selected project sponsors. 316 projects from 2008 to 2015 were also evaluated. From the findings, a non-conformity to project cost management objectives and processes was established with 144 project cost overruns. The study recommends a strict adherence to project control mechanisms by project managers and suggests the award of fixed sum engineering, procurement, construction and management (EPCM) contracts with a co-integration of value engineering and alternate analysis from the owner’s team.
A thesis submitted to the School of Business, Kwame Nkrumah University of Science and Technology in partial fulfilment of the requirements for the award of Master of Business Administration Degree in Finance