Approximately 900 underground miners at AngloGold Ashanti (AGA)’s Obuasi Mine are expected to lose their jobs today, after the company abrogated its underground development contract with Mining and Building Construction Company (MBC).

The affected workers of MBC, which provides construction and maintenance services to AGA, had been asked to continue working for a 28-day notice period that expires today.

The decision, according to senior managers of AGA, is part of a strategy to revamp the declining Obuasi Mine which employs about 8,500 people directly and indirectly.

“AngloGold Ashanti took the decision in order to secure the viability and long-term sustainability of the Obuasi Mine, which has failed to perform to its potential,” said Kwame Addo-Kuffuor, AGA’s Vice President in charge of Corporate Affairs in Ghana.

“AngloGold Ashanti’s discussions with MBC are now focused on a smooth transition and mitigating the impact on employees. AGA is committed to ensuring that the estimated 900 members of MBC’s workforce directly affected by the termination of the underground development contract receive their due entitlements. The remaining surface contracts at Obuasi between the two parties however remain intact,” he added.

B&FT gathered that the relationship between the two companies dates back over two decades, but was reviewed following the merger between former AngloGold of South Africa and Ashanti Goldfields Company of Ghana in 2004.

The companies since then operated under three-year contracts until 2009, when the renewal of the contracts was changed to a monthly basis.

The Obuasi Mine, which was once the biggest gold mine in the country and the leading employer in the industry, has in recent years become a high-cost producer and has never produced beyond 400,000 ounces since 2004.

The mine has been struggling with over-age equipment, poor security, inadequate power supply, and the activities of illegal miners. Challenges with Obuasi’s underground mining operations, which are carried out by MBC, have also been identified as a key factor responsible for the poor production levels.

Mr. Addo-Kuffuor said these problems have necessitated a restructuring and re-engineering strategy that will involve the recruitment of new skills and labour to undertake the underground development.

But AGA’s decision to abrogate the contract has been met with anxiety by the workforce of MBC.

“Sending all of us home at this time will be a big trouble for us. I don’t know what we are going to do,” said an affected worker who pleaded anonymity.

“I think the government can intervene and talk to AGA to rescind their decision; or better still, we should be paid our entitlement as soon as possible to help us start life all over again.”

Top officials of MBC also want AGA to rescind its decision and resort to dialogue to iron-out the difficult issues for the sake of the workers. But AGA insists it intends to maintain its action as part of Obuasi’s revival and restructuring process.

Peter Anderton, Senior Vice President of AGA Ghana, in a recent interview with B&FT said part of the strategic plan for Obuasi is to invest approximately US$200million next year in the mine, which he reckons is still worth more than 20 years of mine-life and has some 9 million ounces of gold reserves.

“Our core responsibilities for 2012 will comprise modernising and expanding the underground processes with new equipment targetted at significantly improving safety, expanding development of ore reserves, and speeding up ore extraction -- as well as improving recoveries to increase gold production, which is currently just over 300,000 ounces,” he said.

He said he expected Obuasi to be revived in the next three to five years.

AngloGold Ashanti has 20 operations in 10 countries on four continents, as well as several exploration programmes in both established and new gold-producing regions of the world.

The company employed 61,242 people, including contractors, in all its operations in 2011 and produced 4.33 million ounces of gold, seven percent (313,000 ounces) of which came from Obuasi. Its capital expenditure globally in 2011 amounted to US$1.5billion, up from the 2010 figure of US$1billion.

As at 31st December 2011, AGA had attributable ore reserves of 75.6 million ounces and attributable mineral resources of 230.9 million ounces, of which Obuasi accounts for 9.3 million ounces and 31 million ounces respectively.