GHANA MINING HIGHLIGHTS, MARCH 2009

UNCLAS ACCRA 000279

WHITE HOUSE FOR USTR LAURIE-ANN AGAMA
DEPT EEB FOR USITC BRENDAN LYNCH AND MICHAEL FERRANTINO


SENSITIVE

SIPDIS

E.O. 12958: N/A
TAGS: EMIN EIND EINV KPRV GH
SUBJECT: GHANA MINING HIGHLIGHTS, MARCH 2009


1. SUMMARY:


A. In large numbers, artisanal miners have begun to abandon diamond
fields in favor of more lucrative gold mines in the Western Region
as a result of depressed diamond exports due to the global financial
crisis. Diamond exports are expected to drop 30 percent and prices
in one diamond center have dropped by 60 percent. As itinerant
workers move from diamond to gold mines, labor, environmental, and
human rights abuses may rise.


B. U.S. hedge fund Paulson & Co Inc. acquired an 11.3 percent
ownership in AngloGold Ashanti, a global gold producer with two
operations in Ghana.

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A. ARTISANAL MINING: DIAMOND MINES ABANDONED FOR GOLD
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2. Peter Chirico of the U.S. Geological Survey related to econoff
anecdotal evidence that Ghanaian artisanal miners were moving en
masse from diamond mines to gold mines. Chirico was conducting TDY
fieldwork in the alluvial diamond fields in Western Region.


3. Chirico said that the global financial crisis had already started
to hurt Ghana's diamond industry. A large percentage of the local
diamond industry supplies industrial diamonds used for drilling,
cutting and other parts of the construction sector. Buyers for
Ghana's diamonds have dried up, and industry insiders told him they
expected a 30 percent drop in diamond exports as a result of the
global downturn. Chirico observed that diamond prices per carat at
the buying houses of Akwatia fell by 60 percent in the past year.


4. As many as half of Ghana's estimated 10,000 artisanal miners had
already abandoned diamond mines in Akwatia in favor of gold mines
50-100 km away in Abomosu, in the Birim Valley. These miners were
itinerant workers engaged in small scale digging, not trained mining
company employees. Although a few coops exist, the majority of
artisanal miners work in informal groups of up to 200 on a
day-to-day basis. Likewise, excavators used to move earth in
diamond mining have also been largely reallocated to the gold mining
areas, making it more difficult to secure the equipment necessary
for diamond mining.

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COMMENT
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5. (SBU) As developed country consumption slumps as a result of the
global downturn, we expect Ghana's diamond industry to continue to
shink. This trend will be exacerbated by the reported lack of
available equipment for mining activities, and a paucity of alluvial
diamonds easily found by unskilled artisanal miners in the river
beds of the Western Region.


6. (SBU) This trend will also increase labor tensions and human
rights abuses; the GOG Commission for Human Rights and Justice
(CHRAJ) in March 2008 issued a report on abuses of small scale
miners by security guards--sometimes Ghana Police Service officers
working for larger gold mines in Western Region. The report also
documents environmental issues, such as water pollution, erosion and
land degradation. These conditions make life in neighboring
communities more difficult, and become a source of conflict between
miners and community members.

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B. US HEDGE FUND ACQUIRES STAKE IN ANGLOGOLD ASHANTI
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7. (U) U.S. hedge fund Paulson & Co Inc. has acquired an 11.3
percent ownership stake in AngloGold Ashanti from the UK's Anglo
American for USD 1.83 billion. The stake represents approximately 4
percent of the value of Paulson & Co. AngloGold Ashanti is a global
producer of gold and has two operations in Ghana, at Iduapriem and
Obuasi.

TEITELBAUM