Vice President of IMANI Africa, Bright Simons, has raised critical concerns about the recently commissioned Royal Ghana Gold Refinery in Accra, arguing that refining gold into 24-carat bars does not constitute true value addition, contrary to claims by Vice President Dr. Mahamudu Bawumia.
Mr Simons asserts that the real value addition in the gold industry lies in creating finished products like jewelry, rather than simply refining raw gold into bullion.
In a post on X, Simons expressed skepticism about the promises made by the government regarding the economic benefits of the new refinery.
“I was surprised to read in the international press news that Ghana was launching its ‘first commercial gold refinery.’ I was even more surprised to hear the Vice President argue that this new refinery will enable ‘value addition,’ which in turn will lead to hundreds of jobs, and the strengthening of the Cedi,” Simons wrote.
Reuters reported that Ghana has launched its first commercial gold refinery in Accra, marking a significant step in the country’s effort to add value to its gold production and increase national revenue.
Simons pointed out that this is not the first time such promises have been made. He recalled similar claims made when other gold refineries were launched in Ghana, including Asap Vasa in 2013, Sahara Royal Gold Refinery in 2015, and Gold Coast Refinery in 2016. Despite these earlier initiatives, the country continues to grapple with the same challenges in achieving real value addition in the gold sector.
He emphasized that gold refining, as it is currently practiced in Ghana, is a low-margin and high-volume business, which is inherently unprofitable when confined to converting mined gold into bullion.
Citing the example of one of the world’s largest refineries in Perth, Australia, Mr Simons noted that such operations make a margin of just 0.17%. In Ghana, where the cost of capital is high, even achieving a 10% operating profit margin is difficult.
Moreover, he highlighted the structural challenges facing Ghana’s gold refining industry, such as the long-standing relationships between large-scale miners and international refineries, which make it difficult for local refineries to secure significant volumes of raw gold. As a result, these refineries often rely on small-scale miners, leading to lower-quality dore (raw) gold that requires additional processing.
He also warned about the environmental and financial pitfalls associated with refining operations in Ghana. Citing the example of Sahara Royal Gold Refinery, Mr Simons mentioned the environmental disputes it faced with nearby residents and the financial difficulties it encountered, which led to the issuance of dud cheques.
Another significant hurdle for Ghana’s refineries is the lack of certification from bodies like the London Bullion Market Association (LBMA). Without such certification, the refined gold must be sold at a discount to less rigorous buyers, further squeezing profit margins. Simons explained that achieving and maintaining LBMA certification is a costly and time-consuming process, with insurance and security costs further eroding profitability.
Additionally, small-scale miners are often reluctant to sell their gold at a discount to local refineries when they can obtain better prices from international aggregators in countries like India and Dubai, where tax incentives make the import of raw gold more profitable.
Mr Simons argued that rather than focusing on refining gold into 24-carat bars, Ghana’s policymakers should prioritize real value addition by supporting the production of finished products like jewellery.
“For gold, the really serious value-addition play is jewellery, not refining into 24-carat bars,” Simons stated.
He also pointed out that the Precious Minerals Marketing Company (PMMC) was originally established in Ghana to lead such initiatives and suggested that government policy should focus on helping PMMC succeed in this area.
Despite the concerns raised by Simons, the government has celebrated the opening of the Royal Ghana Gold Refinery as a significant milestone in its efforts to add value to the country’s mineral resources. The refinery, which can process 400 kilograms of gold per day, is a joint venture between Rosy Royal Minerals of India and Ghana’s central bank, which holds a 20% stake.
During the commissioning ceremony, Vice President Bawumia emphasized the potential of the refinery to boost local job creation, retain more economic value within Ghana, and strengthen the national currency. He also highlighted the Bank of Ghana’s Domestic Gold Purchase Programme (DGPP), launched in 2021, as part of the government’s broader strategy to position Ghana as Africa’s gold hub.
However, Simons’ critique suggests that achieving these goals will require more than just refining gold. It will demand a shift in focus toward higher-value products and a concerted effort to address the structural challenges facing Ghana’s gold industry.
