The natural instinct and perception for any rational being is that, with gold prices hitting record highs, mining companies are in season and might be raking in extraordinary profits.
As sound as this notion may appear, the President of Ghana’s mining chamber is revealing that this assumption oversimplifies a far more complex reality.
Speaking during an interaction with fellows of the Africa Extractive Media Fellowship (AEMF), the President of the Chamber, Michael Edem Akafia, offered a deep industry perspective, which challenges the popular belief that rising gold prices automatically translate into easy margins for miners.
It must be well-stated that the President of the Chamber, who also doubles as the Vice President of Gold Fields West Africa Region, did not entirely rubbish the benefits that the gold rally comes along with; however, he emphasized that issues must be put in their right context and perspectives.
“There’s always an assumption that when the gold price increases, it’s all margin for mining companies. Unfortunately, it is not, and there are many reasons why,” he stressed.
When Gold Prices Rise, So Do Costs
At the core of the President’s perspective is a basic but often overlooked fact: input costs move with gold prices.
He stressed that many analysts and industry watchers fail to appreciate that whenever gold prices go up, almost every cost line follows. Labour, he mentioned, is usually the first pressure point.
Wage negotiations, he noted, rarely begin without unions referencing prevailing gold prices. The same applies to contractors, equipment suppliers, fuel providers, and service companies, all of whom factor gold prices into their pricing models.
The result is cost inflation, which steadily eats into what many outsiders assume is pure profit.
“When the union come negotiating wage rate, what do you think the first thing they point to is, ah, you see gold price, no, we are not accepting what you are. And then it’s the same for all other big suppliers, your labourers and all these guys, also price with gold price in mind. So there’s always an inflation as far as input price is concerned,” he noted.
The Cost of Mining Certain Areas Increases
The Vice President of Gold Fields maintained that not all gold is equal. This is said to address the misconception that gold is uniformly profitable wherever it is found.
In reality, every mining concession contains both cheap and expensive ore zones. He reveals that some areas are economical to mine at lower prices, while others, known as marginal zones, only become viable when prices are high.
This means that one accompaniment of high gold prices is that, ironically, companies are compelled to mine these costlier areas, precisely because those zones would never be mined during price downturns.
“There’s virtually gold everywhere. The only reason why we may not mine gold here is that maybe the cost of extracting the gold here is maybe $15,000, and the current price is $5,000, so we’ll not bother. But, so at every concession, you have those places which are cheaper to mine, and those places are expensive to mine,” he revealed.
He therefore stated, “If you don’t mine the places that are expensive to mine when the gold price is high, when do you think you’ll ever be able to mine those places?”
Mature Mines, Deeper Challenges
For established mining operations, rising prices do not eliminate structural cost pressures. As mines age, ore bodies lie deeper underground. Going deeper means harder rock, higher energy use, more drilling, and greater wear on equipment.
He further added that hauling distances also increase over time. Once ore is blasted, it must be transported to processing plants, often over longer distances as pits expand. That translates into higher fuel costs, even when production volumes remain unchanged.
“The more you mine, you’re a mature the mine, so what that means is that the ore is not as close to the surface as it used to be 100 years, 80 years, or 60 years ago. So you’re going deeper and deeper, and going deeper and deeper means that rocks are harder, so it’s costing you more to do the same things that you’re doing before,” he indicated.
He continued, “hauling distances, as your mine matures, become longer, and so if you are using dam tracks, your, you know, your big tracks, it will cost you more by way of fuel, just to even haul the same, you know, so that’s the other thing that costs pressures that gold miners face, which ensure that it’s not all margin for us.”
The Price-Taker Problem
Mining companies, Edem Akafia emphasized, are price takers, not price setters. Global gold prices can rise sharply, but they can also collapse just as quickly. He recalled the 2012 crash, when gold prices fell by about 26% in a single day, triggering crisis responses across the industry.
This volatility forces mining companies to think long-term, focusing on sustainability rather than short-term windfalls.
The Problem of Forward Sales
Complicating matters further is the issue of forward sales. Some mining companies, particularly those under financial pressure, sell gold in advance at fixed prices to secure immediate cash flow.
When prices later surge, these firms do not benefit from the rally, as their output has already been sold at lower agreed prices. In such cases, record gold prices exist only on paper, not on company balance sheets.
In this situation, thinking the mining company is enjoying a windfall since the prices of gold are booming is far from reality.
A Period to Invest for the Future
The Vice President of Gold Fields West Africa also noted that responsible miners often use periods of high prices to invest heavily in capital projects, not to maximize short-term profits.
These include infrastructure upgrades, in-pit exploration, environmental safeguards, automation, and emerging technologies such as AI-driven drilling and remote operations.
These investments are necessary to remain competitive globally, but they consume cash that might otherwise appear as profit.
A Call for Balance
Still, the Chamber does not deny that higher gold prices can extend mine life and improve project viability under the right conditions. When well-managed and supported by stable policy, price booms can strengthen the sector and government revenues alike.
The core argument, he insists, is balance. “Yes, gold prices are high,” he emphasized, but adds that the idea that it is all margin ignores the rising costs, the risks, and the long-term investments that define modern mining.
The chamber is therefore calling on the government, advocates, CSOs, and other stakeholders, demanding higher than normal fiscal obligations due to the gold price rally to balance demands with the realities these mining companies are facing.
