“Managing investment opportunities under risks in the Ghanaian mining industry — a case study of Sansu surface mines project”

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A mining project is viable, if it can generate sufficient revenue to offset the investments made in capital costs, operating costs and other associated project costs, pay for various taxes and royalties, and still leave reasonable profits from the capital outlay. However, the risk of high initial capital requirements, long pre-production periods and others generally associated with the mining industry, together with the host countries mineral and investment policies often make it difficult to achieve the needed dividends from the invested capital. Mineral projects are therefore, evaluated comprehensively with respect to risks, before being undertaken. However, even after a full evaluation of the project has been undertaken, adverse variations from the planned projections are still evident during the operating stage, thus, rendering the project uneconomic. Therefore, a mining project must be continually re-evaluated for the associated risks to ensure its success. Due to continued increases in the Sansu surface mine cash operating cost, as a result of high-cost and ageing mining equipment, and depletion of higher-grade ore reserves, this thesis seeks to investigate the economic viability of the Sansu Surface Mine Project (SSMP) of Ashanti Goldfields Company. A cash flow model of the SSMP in its last year of operation has been developed, and used for analysing the viability of the SSMP. Sensitivity analysis using the operating and capital costs of the SSMP, and gold price as investment parameters has been conducted using the cash flow generated for the SSMP. It is depicted from the results of the analysis that the SSMP is viable, but most sensitive to the project’s operating cost and the gold price. For profit maximisation of the SSMP, it is suggested that measures be put in place to control the operating and capital costs, as well as fluctuations in the gold price with a view to enhancing returns from the investments.
A thesis submitted to the Board of Postgraduate Studies, Kwame Nkrumah University of Science and Technology, Kumasi in partial fulfilment of the requirements for the award of Master of Science degree in Mining Engineering, 2000