Determinants of net cash flow of mining companies in Ghana

Abstract

Mining sector has emerged as one of the most important strategic players for most countries throughout the world, since it is recognised as most important sources of foreign exchange and revenue for Ghana. These and other facts account for reasons why mining companies are always seen as the strategic sectors for Ghana's economy. The decline in the cash flow from mining operations has the potential to impact on government revenue generation negatively. This research investigates the determinants of the net cash flow of operating mines in Ghana. Random effect regression model was employed on a panel data obtained from the World Bank Development Indicators (WDI), Kitco database as well as consolidated financial statements of Newmont, AngloGold Ashanti, and Goldfields from the period of 2008 to 2020. The empirical findings from the study revealed that gold price and quantity of gold produced have strong positive and significant effect on net cashflow of mining firms. On the contrary, all-in-sustaining cost, royalties, and inflation (US) were found to have negatively significant effect on net cashflow. Finally, tax payment also has negative effect on cashflow, but is insignificant. The study recommends that mining companies need to embark on production improvement initiatives such as improving their overall equipment efficiency (OEE) and minimizing waste along its value chain. Finally, mining companies should minimize their cost of production below the market gold price to achieve positive margin aimed at improving upon their net cashflow generation and subsequently creating value for their shareholders and the countries of operation.