Ashanti Goldfields, one of the few transnational companies based in tropical Africa, is pressing ahead with the long-discussed $32m expansion of its Siguiri mine in Guinea, while simultaneously diversifying into exploration for platinum in South Africa.

The creation of a new “carbon in pulp” plant at Siguiri will help Ashanti bolster the rate of gold recovery from reserves as it digs down into deeper saprolite rock at the site – which may now have another decade of mining life ahead of it.

Meanwhile, exploration for platinum in northern South Africa, under the concession awarded to the 40% Ashanti-owned offshoot Tameng Mining and Exploration in August, signals the group’s interest in diversification.

Initially, Ashanti sought to grow through expansion beyond its Ghanaian production base into other gold-mining operations in Africa. Having broadened the country-spread of its activities, it is now, in exploring platinum possibilities, seeking to open up a new product line.

These developments are a measure of the success with which the company has rebuilt its financial strength after near-catastrophic losses through its gold price hedging strategy in the late 1990s.

Earnings in the third quarter of this year reached $22.5m, 55% up on the same period in 2001. With $33m recently paid off its revolving credit facility, the company’s bank debt now stands at less than $200m – compared with about $700m a few years ago.

The financial recovery can also be taken as a vindication of Ashanti’s decision to trust its African experience. Sub-Saharan countries pose serious challenges for investors, and many Western companies remain wary.

But for the mining industry, Africa is a major source of opportunities – as Ashanti concluded when it started to look beyond its home base in the 1990s.

“We didn’t have any unused opportunities in Ghana. We had the largest operation in Ghana and other companies had come in and staked out concessions. Ghana is a mature country as far as minerals and mine development is concerned,” said Trevor Schultz, chief operating officer, in explaining why Ashanti opted to expand abroad but within Africa.

“We had the expertise. We knew how to operate in Africa. We had a lot of Ghanaians and other Africans in management and technical positions.”

But operating in Africa has posed challenges. Ashanti had to spend $5m upgrading more than 120km of roads to service Siguiri. Heavy equipment for the Geita mine in Tanzania had to be brought via Kenya and transported across Lake Victoria by ferry.

“The common theme in Africa is the complete lack of infrastructure or the poor quality of infrastructure,” said Mr Schultz.

Ashanti stands out for deciding to maintain its head office in Africa – rather than following big South African names to Europe. Managing a major multinational mining company from West Africa would have been extremely difficult 15 or 20 years ago. But today, Mr Schultz told fDI: “Communications are good enough.”

Improved telecommunications and air links enable Mr Schultz and chief executive Sam Jonah to manage Africa-wide operations from Accra. Local holding companies for the various operations around Africa have their own managing directors and boards (on most of which Mr Schultz sits).

It is also from Accra that Ashanti manages its finances and its services for investors – the group is listed on the London, New York, Accra and Harare stock exchanges.

Unlike transnationals in business sectors serving the local market, a mining company is spared the worst of local currency complications. Ashanti’s costly imported inputs and capital equipment are paid for in hard currency, while export revenues are also generated in dollars, collected in offshore accounts (save for the Freda-Rebecca mine in Zimbabwe).

However, the company does have to contend with regulatory complications. In Tanzania it managed to negotiate a specific agreement on mining and taxation terms with the authorities. And when the government subsequently introduced a new mining law that was highly favourable, Ashanti was able to take on these new rules where they were more favourable than its own original agreement.

Value added tax can pose particular problems. As an exporter, Ashanti should be either exempt from the tax or entitled to a rebate on its output. But only in Ghana has this issue been fully resolved; in other countries, the authorities may delay the rebate – which is paid in local currency and not foreign exchange – for a considerable time. This can add several percentage points to production costs.

Good labour relations and a strong focus on safety are priorities, continent-wide. In Ghana, trade unions are strong and wage costs are a significant factor. But even elsewhere, Ashanti is conscious of its standing as a leading and respected employer.

“We have a fairly high profile in all these countries,” said Mr Schultz. He pointed out that Ashanti is the leading gold producer in not only Ghana, but also Guinea, Tanzania and Zimbabwe. “We have to manage our affairs, and especially our labour relations, well.”

Paul Melly