Journal of Quality in Maintenance Engineering

Risk assessment of mining projects in Ghana

Charles Teye Amoatey, Samuel Famiyeh, Peter Andoh,
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JQME
23,1
22
Received 3 September 2015
Revised 12 February 2016
13 July 2016
Accepted 17 July 2016
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Journal of Quality in Maintenance
Engineering
Vol. 23 No. 1, 2017
pp. 22-38
© Emerald Publishing Limited
1355-2511
DOI 10.1108/JQME-09-2015-0044
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/1355-2511.htm
Risk assessment of mining
projects in Ghana
Charles Teye Amoatey, Samuel Famiyeh and Peter Andoh
GIMPA Business School,
Ghana Institute of Management and Public Administration, Accra, Ghana
Abstract
Purpose – The purpose of this paper is to assess the critical risk factors affecting mining projects in Ghana.
Design/methodology/approach – A purposive sampling approach was used in selecting the respondents
for the study. These were practitioners working on mining projects in Ghana.
Findings – The study identified 22 risk factors contributing to mining project failure in Ghana. The five most
critical mining project risk factors based on both probability of occurrence and impact were unstable
commodity prices, inflation/exchange rate, land degradation, high cost of living and government bureaucracy
for obtaining licenses. Mitigation measures for addressing the identified risk factors were identified.
Research limitations/implications – This paper is limited to data collected from practitioners working on
mining projects. Due to geographic and logistical constraints, the study did not include the perception of local
communities in quantifying the risk factors.
Practical implications – This paper has documented the critical risk factor affecting the mining industry in
Ghana. Though the identified risk types are also prevalent in other sectors of the construction industry, the key
findings of this paper emphasize the need for a comprehensive risk management culture in the mining sector.
From an academic research perspective, the paper contributes to a conceptual risk assessment framework.
Originality/value – The information gathered through this research can be utilized in identifying and
understanding risks during the early stages of mining project implementation.
Keywords Ghana, Risk assessment, Risk factors, Mining projects
Paper type Research paper
1. Introduction
Mining has contributed immensely to the development of many nations (Down and Stocks,
1977; Madeley, 1999). Nevertheless, with growing local and global competition in the often
complex industry, the likelihood of achieving desired economic performance is becoming
challenging due to risk of mining failures. It is very critical that governments and firms
develop adequate plans to mitigate the effects of these risks. Industry stakeholders need to
identify potential mining risk factors, their likelihood, consequences and severities of
occurrence. This will enable risk management plans to be developed in order to avoid,
mitigate, contain or control these risk factors.
Ghana’s mining sector has played a significant role in the country’s socioeconomic
development since the colonial period. According to Akabzaa (2000), the historical
importance of mining in the economic development of Ghana is reflected in its colonial name –
Gold Coast. Aryee (2012) also identified mining as the most important sector of Ghana, with
gold accounting for over 90 percent of the sector’s income. In 2011, the mining sector
generated about 38 percent of total corporate tax earnings, 27.6 percent of government
revenue and 6 percent gross domestic product. There are currently 23 large-scale mining
companies producing gold, diamonds, bauxite and manganese, and, there are also over 300
registered small-scale mining groups and 90 mine support service companies. Large-scale
mining companies in the country directly employ about 28,000 people and about one million
people are believed to be engaged in small-scale mining activities (Aryee, 2012).
Though Ghana’s mining sector has been very supportive of the country’s economy over the
years, the sector is vulnerable to risks at all levels. The past few years have seen shutdown
of some mining companies in the country resulting from the effects of various risk factors.
Data from the Ghana Chamber of Mines show that, in 2014, the sector experience job loss of
 more than 8,700 representing 41 percent of total industry workforce. Compared to other sectors, Risk assessment
risks associated with mining are fairly predictable and failure to address them would reverse of mining
the benefits derived from mining. The current situation shows that Ghana’s mining sector projects in
is now exposed to more than average levels of risk with significant adverse effects to
national development. Ghana
Several researchers have indicated that project failures come as a result of taking a
wrong approach to project implementation and risk management. Yet a wrong approach to 23
project risk management is often driven by lack of knowledge of situation-specific measures
to consider in initiating and implementing a project (Wong and Tein, 2004; Amade et al.,
2009). The fact that there is very limited sector-specific risk assessment model for the
mining sector is a serious problem. This is because there are specific factors which could
influence project success in this sector. Evidently, academic debate on the subject of project
risk assessment in the mining sector is quite weak, especially in a Ghanaian context.
This study shall contribute to this debate and expand the subject’s literature.
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The observations illustrated above calls for more in-depth understanding of the types of
risks associated with mining projects in Ghana. For instance, it is very important to address
the following issues: what are the critical risk factors which affect mining projects in Ghana?
Are these risk factors unique to the mining sector or are they similar to risks, which pertain
in other sub-sectors of the construction industry? What are the probabilities of occurrence
and degree of impact of these risk factors? What measures are mining companies in Ghana
employing to mitigate the effects of these risks? This study relied extensively on the risk
assessment approach used by Tummala and Schoenherr (2011), who investigated risks
using a supply chain risk management process.
The main purpose of this study therefore is to assess the critical risk factors affecting the
mining projects in Ghana. The specific objectives of the study are:
(1) identify and rank the risk factors affecting mining projects in based on their degree
of occurrence and impact; and
(2) identify strategies used by mining firms and other mining sector stakeholders in
Ghana to mitigate the effects of risks.
This paper makes an important contribution to the field of mining risk management,
and highlights an approach to manage these risks from a developing country perspective.
There is the need for sector-specific factors to be introduced into existing risk management
models. The introduction of these risk factors would ensure that a model suitable to the
mining sector can be generated and used to improve project effectiveness and success.
According to Esteves de Sousa (2012), each sector has its unique risk factors. As a result,
a suitable model of a sector must recognize these unique factors.
Specifically, we identified the critical risk issues that affect mining operations in Ghana, and
further investigated the extent to which these factors were unique to the mining sector. The
study puts forward a proposal for possible approaches for managing these mining risk factors.
The remainder of the paper is organized as follows. The next section discusses previous
related studies on risk factors in the mining sector. This is followed by a presentation of the
methodology of the study. The fourth section discusses the key findings from the study.
The fifth section identifies measures for minimizing the most critical mining risk factors.
Finally, the research conclusions are presented.

2. Literature review
2.1 Definition of terms and stages in risk assessment
Several definitions of risk are available in the literature. Risk is usually referred to as an exposure
to losses in a project (Webb, 1994; Chapman and Ward, 1997) or as a probability of losses in a
 JQME project (Risk Management Standard AS/NZS 4360, 1999; Larson and Kusiak, 1996; Remenyi and
23,1 Heafield, 1996; Jaafari, 2001; Kartam and Kartam, 2001). The Project Management Institute
(2004) defines risk as an uncertain event or condition that, if it occurs, has a positive or negative
effect on a project’s objectives. Risk can also be looked at as a “combination of probability or
frequency of occurrence of a defined hazard and magnitude of the occurrence”. As noted by
Tummala and Schoenherr (2011), regardless of the area of interest, risk is associated with an
24 undesirable loss, i.e. an unwanted negative consequence, and uncertainty.
A very important consideration in properly understanding the concept is the association of
uncertainty with risk. In this paper we conceptualize mining risk as an event that adversely
affects mining operation and hence the desired performance measures of the mining sector.
ISO 31000 (2009) considers risk management as the process of anticipating,
understanding and deciding whether to modify risk. The risk management process
proposed by the Australian Standard for Risk Management and International Organization
for Standardization (Risk Management Standard AS/NZS 4360, 1999; ISO 31000 (2009)) is
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shown in Figure 1. This is composed of seven iterative sub-processes of establishing the

context of risk, identifying risks, analyzing risks, evaluating risks, communication and
consultation across stakeholders and monitoring and controlling risk events (Ahmed et al.,
2007). Famiyeh et al. (2015) crystallized these seven iterative steps into three standardized
process, namely, risk identification, risk analysis or measurement and risk evaluation.
The stages are explained briefly below.
2.1.1 Stage 1 – risk identification. The first step in risk assessment is risk identification.
In risk identification, the team looks at all of the items and events within the project from the
perspective of the various risk categories and identifies those that could potentially have a
significant negative impact on the project. Risk identification is studying a situation to
realize what could go wrong or might affect the project. In this case, the focus would be
issues that might affect the mining operation right from the pre-mining phase, during the
operational phase and the post mining.
This phase would involve a comprehensive and structured determination of mining risks
associated with any problem. Approaches used in risk identification include checklists,
event tree analysis, and cause and effects analysis (Tummala and Schoenherr, 2011;
Tummala et al., 1994).

Risk Register

Establish Context
Communication and Consultation

Identify Risks
ASSESS RISKS

Monitor
Analyze Risks and
Review

Evaluate and
Rank Risks

Treat Risks

Figure 1.
The risk
management process Sources: Risk Management Standard AS/NZS 4360 (1999), ISO 31000
(2009)
 Checklists are methods of risk identification where pre-determined crucial points are Risk assessment
examined for symptoms of potential risk situation (Webb, 1994; Duncan, 1996; Kumamoto of mining
and Henley, 1996; Cross, 2001). These are simple to use and usually evolve over time projects in
through contributions from various functional experts and collective experiences
(Chapman and Ward, 1997; Ward, 1999). Event tree analysis is a graphical representation Ghana
of potential consequences arising from a failure where possible consequences are generated
and broken down from an initial event (Kumamoto and Henley, 1996; Cross, 2001). 25
A cause-and-effect diagram or a fish bone diagram is a graphical representation of root
causes of quality problems, where major causes of the ultimate problem are grouped and
broken down into detailed sources (Russell and Taylor, 2000).
2.1.2 Stage 2 – risk analysis or measurement. With risk identification complete,
risk analysis is subsequently used to identify the likelihood the risks that have been
identified will occur and, if so, when that risk is most likely to happen in the overall project
timeline. There are several techniques in the literature concerning risk analysis techniques
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after their identification to enable them classify into high, medium and low risks. The most
popular method used is the probability impacts grids (Ahmed et al., 2007). In the probability
impact grids, risk events are represented on a grid consisting of probability on one axis and
impacts on another are often used to define threshold regions on the grid, which represent
high risk events based on past experience or organizational procedures (Risk Management
Standard AS/NZS 4360, 1999; Chapman and Ward, 1997; Ward, 1999; Pyra and Trask, 2002;
Stewart and Melchers, 1997; Royer, 2000). Probability and impact grids provide a simple
format for showing relative importance of risk events (Ahmed et al., 2007).
This involves the determination of the consequences of all potential risks, together with
their magnitudes of impact. This stage is concerned with the determination of the likelihood
and impact of each risk factor (Crockford, 1986) (see Tables I and II).
2.1.3 Stage 3 – risk evaluation. Risk evaluation is the function of risk management where
risk events need to be prioritized so that risk mitigation plans are determined either based on
past experience, lessons learnt, best practices, organizational knowledge, industry benchmarks

Impact
Impact level Qualitative description index

Very high Impact will lead to increase in project cost and duration by more than 15%. 5
Cause permanent damage to environment
High Impact will lead to increase in project cost and duration by 10 to o 15%. High 4
damage to the environmental
Moderate Impact will lead to increase in project cost and duration by 5 to o10%. 3
Moderate damage to environment
Low Impact will lead to increase in project cost and duration by o5%. Reversible 2
environmental impact Table I.
Very low No impact on project costs, duration, environment. No injury or death 1 Impact and indexes

Qualitative description
Risk likelihood categories The identified risk factor could occur on an average of … Probability index

Very likely … once per day 5

Likely … once per week 4
Fairly likely … once per month 3 Table II.
Unlikely … once per year 2 Probability categories
Very unlikely … once per decade 1 and indexes
 JQME and standard practices (Ahmed et al., 2003; Ahmed, Amornsawadwatana and Kayis, 2003).
23,1 Risk evaluation involves the sub-steps of risk ranking and risk acceptance. During risk
ranking we determine risk exposure values for each identified risk. Risk exposure value is
the product of risk consequence index and risk probability index (see Table III).
The risk acceptance sub-stage involves demarcation between acceptable and
unacceptable risks based on defined guidelines (Tummala and Mak, 2001; Ng et al., 2003).
26 Here the risk exposure values are grouped into classes representing similar ranges of
exposure. As suggested by Tummala and Schoenherr (2011), for simplicity and parsimony,
risk exposure values of say between 15 and 25 could be classified as “unacceptable,”
therefore requiring immediate actions due to their potential adverse effects on performance
measures. These could include the risk of breakdown of essential exploration equipment
and parts not available, or the risk of the company’s processing plant burning down.
Unacceptable risks usually have adverse effects on the proper operation of the firm and can
result in the shutdown of the mining operations. At this stage, appropriate mitigation or
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response actions must be taken for their containment.

Risk exposure values of between 5 and 14 are classified as “tolerable.” Though no immediate
actions are necessary at this stage, nevertheless, they should be monitored continuously and
further improvement should be sought if resources are available. Risks in this category could
include the risk of temporary strikes of supplier’s staff or delays in clearing machine used by a
supplier. Risk exposure values below 5 are classified as “acceptable.” At this stage risks are
considered to be so small that it is not advisable to spend time and resources for their control.
These risks could involve late, incomplete or defective deliveries of suppliers that do not
necessarily threaten the operations of the mining firm, due to, for example, sufficient safety
stock of the supplies or the non-critical nature of the items. Generally, such mapping of risk
factors based on their severity can provide a valuable overview of all the risks involved in the
sector, which will then inform the most appropriate risk mitigation actions to be performed.
After the risk assessment phase discussed above, mitigation or treatment plans are developed
and implemented to address those risk factors. Risk treatment involves identifying the range of
options for treating the risk, evaluating those options, preparing the risk treatment plans and
implementing those plans. It is about considering the options for treatment and selecting the
most appropriate method to achieve the desired outcome. Treatment options available are
accepting, avoiding, reducing, transferring and retaining the risk. It is also recommended to
continually monitor and review the treatment options selected above for the respective risks.
The next section reviews previous studies on risk assessment which forms the basis for
analyzing the Ghana case.

2.2 Review of literature on mining risk assessment

Radosavljević and Radosavljević (2009) posited that risk assessment and analysis can
contribute substantially to the overall effectiveness and efficiency of mining projects. They

Likelihood
Very likely likely Fairly likely Unlikely Very unlikely
Impact (index ¼ 5) (index ¼ 4) (index ¼ 3) (index ¼ 2) (index ¼ 1)

Very high (index ¼ 5) 25 20 15 10 5

High (index ¼ 4) 20 16 12 8 4
Moderate (index ¼ 3) 15 12 9 6 3
Unlikely (index ¼ 2) 10 8 6 4 2
Table III. Very unlikely
Risk exposure value (index ¼ 1) 4 3 2 1 1
 argued that effective risk assessment that take a realistic view of the present state of mining Risk assessment
projects help companies anticipate, forestall, reduce, and minimize the risk and possible of mining
destructive applications. projects in
Kumar (2010) studied mining companies in India and summarizes the mining investment
risks as geology, marketing, finance, administration, government policies, regional/host Ghana
country issues, environment and national/political stability. Ernst & Young (2011/2012)
report of business risks facing mining and metals ranked the top-ten mining risks as: 27
resource nationalism, skills shortages, infrastructure access, maintaining a social license to
operate (SLO), capital project execution, price and currency volatility, capital allocation,
cost management, interruptions to supply, and fraud and corruption.
Badri et al. (2013) also conducted a study on risk management in the mining sector and
found that regular risks associated with the mining projects include, fire, mine collapse and
vibration associated with long-term problems. Prno and Slocombe (2012) also identified
risks in the mining sector to include social risks, environmental risks and safety risks.
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Moreover, a study conducted by Chunyan (2012) indicated that risks in the mining sector
include geology, market and currency variations, safety incidents, financial peril, and
environmental impacts.
All these identified risks could be very challenging to the success of any mining project.
Therefore, mining companies must muster these risks, assess and see their likelihood of
happening and at what point in the project it could happen and come out with measures to
prevent them from impacting negatively on mining project sustainability.
Sagebien and Lindsay (2011) investigated factors including political risk of mining
projects. They observed that many developing countries face entrenched problems
associated with political instability, deep-rooted inequality and marginalization of certain
groups, historical distrust of government by large segments of the population, inadequate
laws and their implementation, poor conflict resolution institutions and mechanisms, and
significant corruption issues.
Though there is proliferation of articles on risk management in Ghana and Africa,
majority have focused on the construction sector in general (Chileshe and Yirenkyi-Fianko,
2012) with no concentration on the mining sector. So far only Akabzaa and Darimani (2001)
and Amponsah-Tawia and Dartey-Baah (2011) have investigated the impacts of the mining
sector investment in Ghana. The shortcomings with these Ghanaian cases were their overly
descriptive nature and the fact that only few risk factors relating to environmental impact of
mining were investigated. The scope of risk issues considered in these studies was not
sufficiently comprehensive.
2.2.1 Reviews on risk mitigation measures. The discussion so far suggests that mining
projects are associated with many risks. In order to mitigate these risk factors, there is the
need to effectively assess risks and adopt appropriate strategies to deal with them. This
section reviews literature on mitigations measures for addressing some risk factors.
Deloitte Management (2011) identified two key steps in mitigating risk in the mining
sector. First, they suggest companies need to identify potential risks. Risks often arise from
the complex interactions and interdependencies between various factors, which are not
immediately self-evident, also, there should be a risk framing process that will bring on
board the surface threats that may destroy value, as well as opportunities that may enhance
the value. The final outcome of this first step is a risk factor map: a diagram of the important
drivers of uncertainty, flexibility and value metrics, with the emphasis on how the key
drivers interact. The second estimates and assigns probabilities to events, and the impacts
thereof. This step will help mining companies think through any potential obstacles the
project is likely to face and come out with strategies to manage them. The study
recommended the establishment of a capital project plan which should help mining
companies navigate the market cycles well beyond the annual budget market.
 JQME Prno and Slocombe (2012) recommended that, in an attempt to manage social risks,
23,1 mining companies need to have an SLO. Accordingly, there is now widespread recognition
that mineral developers need to gain an “SLO” from local communities in order to avoid
potentially costly conflict and exposure to social risks. A social license can be considered to
exist when a mining project is seen as having the ongoing approval and broad acceptance of
society to conduct its activities. Prno and Slocombe (2012) further suggest that companies
28 can achieve this through investment in corporate social responsibilities. Impacting on the
mining community positively and making sure that their needs are addressed are very
essential in gaining a social license of the community.
Franks and Vanclay (2013) investigated the used of social impact analysis as a tool for
mitigating social risks. They emphasized on the need for proper assessment, monitoring and
management of the social impacts of mining (e.g. high cost of living, prostitution and
increase population) during project implementation.
In Ghana, Amponsah-Tawia and Dartey-Baah (2011) acknowledged that the country’s
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national environmental policy requires mining companies to undertake an environmental

impact assessment before they can be granted approval for a project. For example,
conducting an effective environmental impact analysis will help mining companies quantify
the cost of relocating displaced community members and also the health impact mining
activities could pose to community members.
In order to mitigate the effects of politically related unpredictability risk,
Rose-Ackerman and Tobin (2005) suggested that investors can seek remedies through
the use of investor protection provisions under bilateral investment treaties and
multilateral investment treaties. This suggests that investors must come out with a clear
contract policy that stipulates the consequences of any temporal or premature termination
of the contract. This will ensure that mining firms do not run at a loss in case of political
instability or community uprising.

3. Methodology
The following research methodology was used in identifying and quantifying the critical
risk factors in the mining sector of Ghana. This session presents an overview of the
research design.

3.1 Research design

The study used both qualitative and quantitative approaches for data gathering. First, the
researchers, through the literature review, identified 22 risk factors which were later placed
under seven risk categories (see section 3.1.3 for list of risk factors). Second, a survey was
conducted with industry professionals, using a questionnaire, to assess the likelihood of
occurrence and degree of impact of the risk factors.
3.1.1 Sampling technique. A purposive sampling approach was used in determining the
sample for the study. The sample comprised key personnel in 11 major mining firms in
Ghana. The total population of major mining firms in Ghana is 23. The mining firms were
made up of seven producing mining companies and four mining consulting companies.
3.1.2 Sample characteristics and size. The respondents were mainly geologists, mining
engineers, project managers and administrators. The purposive sampling technique used
ensured that personnel with good knowledge of risk management in the mining sector were
surveyed. Of the 120 questionnaires sent to the experts in the 11 mining firms, 81 were
completed and returned representing a response rate of 67.5 percent.
3.1.3 Questionnaire structure and data analysis. The questionnaire had two main
sections. The first section requested for background information about the respondents
including gender, educational level, years of experience and profession. The second section
 of the survey listed the 22 mining risk factors (summarized from the literature) and placed Risk assessment
under seven categories as follows: of mining
(1) financial/economic risk: unstable commodity prices, inadequate financing, inflation projects in
and exchange rate; Ghana
(2) environmental risk: pollution of air/water bodies, land degradation, spread of
diseases;
29
(3) social risk: displacement of communities. High cost of living, lack of community
acceptance;
(4) safety risk: inadequate protective equipment for employees, accidents due to
material and equipment failures;
(5) political risk: pressure from government, inspectors, political instability,
government bureaucracy for obtaining licenses, conflicts;
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(6) geological risk: inadequate geological expertise, lack of reliable geology and mineral
resource information; and
(7) technical/operational: lack of suitable mining method, poor management, shortage of
skilled manpower, employee strikes and incorrect mineral resource estimation.
Respondents assigned a value representing likelihood of occurrence for each risk factor.
Similarly, an impact or severity value was assigned to each risk factor as required by the
Risk Management Standard AS/NZS 4360 (1999). The SPSS 17 data analysis software was
used for processing and analyzing the questionnaire data as well as checking the validity
and reliability of the survey results. Cronbach’s α of 0.89 was reached. According to Morse
et al. (2002), Cronbach’s α of 0.70 or more reflects a high reliability. It is therefore worth
concluding that the study’s research instrument was valid.

3.2 Analysis of data

3.2.1 Background information. The relative importance of the identified risks in the local
mining industry is done by examining observations and judgments of practitioners in the
field. Using level of education, employment position and work experience, it was inferred
that the respondents had sufficient knowledge of the relevant risk factors associated with
mining in Ghana. The demographic characteristics of the respondents are shown in
Table AI in the Appendix.
In one aspect respondents were classified based on the sub-sector or department they
work. A breakdown of the respondents is as follows: 35 percent were in exploration,
46 percent mining and 4 percent drilling and 16 percent consultancy. Analysis of the
professional background of respondents, show that majority of respondents were geologists
(43 percent), followed by mining engineers (17 percent) and administrators (18 percent).
Nearly 80 percent of respondents have been working in the mining sector for at least five
years and hence were familiar with the issues being discussed. This added to the quality of
their responses.

3.3 Risk analysis and evaluation

In order to properly evaluate project risks factors, it is important to consider both the
probability of risk occurrence and the impact on project objectives once the risk event
occurs. This can be accomplished by using a risk severity matrix, also referred to as the risk
probability – impact matrix in El-Sayegh (2008). The respondents were asked to assess the
previously defined 22 risks based on their probability of occurrence and impact on mining
projects. Risk probability assesses the likelihood that each specific risk may occur.
 JQME Risk impact examines the potential effect on a project objective such as time, cost
23,1 or quality.
The average probabilities of all the 81 responses for the 22 identified risks factors were
then calculated. The same procedure was repeated for the impacts and the results are as
shown in Table II were used. The total risk value for all the risks were calculated by
multiplying the average impacts and their respective average probabilities. For example,
30 for Risk No. 22, the likelihood value was 3.132 and the impact value was 4.000
corresponding to a risk value of 12.528. The entire corresponding risk values have been
presented in Tables II and IV and Figure 2.
The 22 identified risk factors were positioned on the risk severity matrix as depicted in
Figure 2. The “rows” represent the probability values while the “columns” represent the
impact values in the risk severity matrix. Both scales are 1-5 (one being very low to 5 being
very high). The assumption for classification of total value for the various risk factors were
based on Tummala and Schoenherr (2011) and Gray and Larson (2006): minor – 1 to 4
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(green zone); moderate – 5 to 14 (yellow zone): and high – 15 to 25 (red zone). Gray and
Larson (2006) recommend that critical risk factors with risk values greater than 14 will fall
under the “unacceptable” zone.
Using this threshold value of 14, five risk factors were identified as critical since they fell
in the “unacceptable” zone as shown in Figure 2. These critical risk factors are unstable

Probability Impact
Respondents Respondents Risk
Risk ID Risk factors average average value

Financial risk
Risk 1 Unstable commodity prices 4.123 4.321 17.814
Risk 2 Inadequate financing 3.280 3.833 12.573
Risk 3 Inflation and exchange rate 3.980 4.019 15.995
Environmental risk
Risk 4 Pollution of air/water bodies 3.333 4.059 13.529
Risk 5 Land degradation 4.145 4.143 17.171
Risk 6 Spread of diseases 2.513 2.857 7.180
Social risk
Risk 7 Displacement of communities 3.765 3.373 12.697
Risk 8 High cost of living 3.961 4.180 16.556
Risk 9 Lack of community acceptance 3.059 3.627 11.096
Safety risk
Risk 10 Inadequate protective equipment for employees 1.815 3.351 6.081
Risk 11 Accidents due to material and equipment 2.792 3.778 10.549
failures
Political risk
Risk 12 Pressure from government inspectors 3.079 3.143 9.677
Risk 13 Political instability 2.078 3.647 7.580
Risk 14 Government bureaucracy for obtaining licenses 3.920 3.988 15.632
Risk 15 Conflicts 2.393 3.176 7.601
Geological risk
Risk 16 Incorrect mineral resource calculation 2.158 3.584 7.735
Risk 17 Inadequate geological expertise 1.790 2.649 4.743
Risk 18 Lack of reliable geology and mineral resource 2.118 3.130 6.627
information
Technical/operational risk
Risk 19 Lack of suitable mining method 1.725 2.765 4.770
Table IV. Risk 20 Poor management 2.157 3.078 6.640
Risk probability and Risk 21 Shortage of skilled manpower 2.216 2.980 6.604
impact assessment Risk 22 Employee strike 3.132 4.000 12.528
 5 10 15 20 25 Risk assessment
5
of mining
4 8 12 Risk7 16 Risk1 20
projects in
4
Risk3, Risk5,
Risk8, Risk14
Ghana

3 6 8 Risk6
Risk12
12 Risk2
Risk4, Risk9,
15 31
Likelihood

3 Risk10, Risk11
Risk22

2 4 6 8 Risk13 10
Risk15, Risk17 Risk16
2 Risk18, Risk19,
Risk20, Risk21
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1 2 3 4 5 Figure 2.
1 Risk severity matrix
for the 22
1 2 3 4 5 identified risks
Impact

commodity prices, inflation/exchange rate, land degradation, high cost of living and
government bureaucracy for obtaining licenses.
Once risk factors have been identified, their probability and impact assessed, and risk
exposure values determined, risk mitigation and prevention strategies can now be
developed for the most critical risk factors. The recommended response actions for the five
identified critical risk factors are discussed in the next section.

3.4 Risk mitigation

The last session of the survey looked at measures put in place by practitioners to deal with
the identified risk factors. The results show that most mining companies had risk mitigation
plans in place which are aimed at addressing the most significant risk factors. Consistent
with findings by Shen (1997) and Lyons and Skitmores (2004), most companies use
qualitative approaches, such as brainstorming, in risk identification and development of
risk mitigation measures. Table V presents some proposed response plans for the high risk
issues identified.

Risk ID Risk factor Risk value Risk response/mitigation plan Responsibility

Risk 1 Unstable commodity 17.814 Transfer the risk by developing and Finance manager
prices implementing an effective hedging strategies
Risk 3 Inflation and 15.995 Save some of the profits in foreign stable Finance manager
exchange rate currencies
Risk 5 Land degradation 17.171 Develop effective land reclamation plans for Environmental
mined out areas manager
Risk 8 High cost of living 16.556 Engage in CSR and alternative livelihood Social responsibility
projects to support the community and community
manager Table V.
Risk 14 Government 15.632 Officers in charge of permitting should Operations Risk response plans
bureaucracy for submit applications ahead of time to take manager for the high risk
obtaining licenses care of such delays issues identified
 JQME 4. Discussion of results
23,1 This section discusses the results obtained from the analysis of data. The five most critical
risk factors as shown in Table V and Figure 2 were unstable commodity prices, inflation/
exchange rate, land degradation, high cost of living and government bureaucracy for
obtaining licenses.
It would therefore be important for the mining industry to pay critical attention to these
32 risk factors in order to develop appropriate measures to mitigate their effects. Each of the
critical risk factors are discussed below along with suggested mitigation measures.

4.1 Unstable commodity prices

The analysis showed that the respondents perceived “unstable commodity prices”
as the highest risk contributing to mining project failure. Chinbat (2011) ranked this
factor as number 8. The Ghanaian economy has little control over unstable commodity
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price on the world market. A basic economic law of demand and supply can be
used to explain this. If there is a mismatch in the demand and supply of gold, it causes
fluctuation in price. The main impact of price fluctuation is uncertainty in revenue to
producers, costs to consumers and profit to stockholders. According to Brunetti
and Gilbert (1995), high volatility in commodity prices tends to be associated with
periods of tight demand and short-term fluctuations in volatility appear to be associated
with speculative movements. Ghartey-Mould (2000) investigated the economic viability
of the Sansu Surface Mine Project in Ghana and observed that though the project is
viable, it is most sensitive to operating cost and the gold price. Since the Ghanaian
economy has little effect on the risk event, mining companies within the country must
hedge part of their produce to mitigate the shocks arising from the volatility of
commodity prices.

4.2 Inflation/exchange rate

The Ghanaian economy has over the years experienced unfavorable exchange and
inflation rate trends that have affected the smooth execution of mining projects in a
number of ways. The main causes of inflation in Ghana are increases in monetary
aggregates, petroleum price increases, exchange rate depreciation and poor agricultural
production. Others include the dollarization of the economy and over dependence on
imports. Even though this risk factor affects mining, the industry itself has little to do in
fighting it. In February 2015, the Ghana Statistical Service (2015) noted that the mining
sector of Ghana recorded the highest inflation of 29 percent. During the same period the
country saw a decline in mining outputs and laying off of mine workers leading to
complete shutdown of some mining operations. The way around this is to reduce the
country’s penchant for imported products and promote the use of locally produced goods.
It is also important for mining companies to save some of their profits in stable foreign
currencies in order to avoid the effect of inflation and exchange rates fluctuations on
their operations.

4.3 Land degradation

Large portions of land in mining areas of Ghana have been extensively degraded by both
large-scale mining, small scale regularized and illegal operations called “galamsey”
in most communities. Large-scale mining activities, especially the open cast methods
being used now have had a devastating effect on the environment. Through this method,
hills are graded down, vegetative covers of the soils are stripped and deep excavations are
made in order to extract the mineral content underneath. Again the small-scale mining
popularly called “galamsey” leaves several excavations on the landscape, making it
 dangerous to be used for other purposes. Other chemicals such as mercury and cyanide Risk assessment
also discharge into the soil in the process. There have been reports of large mining of mining
companies spilling toxic waste into rivers used by surrounding communities. All these projects in
have negatively affected people’s perception about mining. In order to win community
trust and support, the industry must ensure mining companies comply strictly with Ghana
Environmental Protection Agency’s procedures for conserving the environment. There
should also be a task force to monitor the activities of these illegal small-scale mine 33
workers. It is also important for mining companies to develop effective land reclamation
programs for all mined out areas.

4.4 High cost of living

Mining communities are usually characterized by high cost of living and security threats
due to the influx of migrants. When local communities feel unsafe due to security
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threats and high cost of living, the effect is obviously on productivity and production cost.
Currently at one of the mining firms surveyed, $2 is set aside from every ounce of gold
produced for community development projects. The industry can ensure this is replicated
by other firms. One of the key responses to this risk issue is for mining companies to engage
in comprehensive corporate social responsibility programs as well as effective alternative
livelihood projects for the community.

4.5 Government bureaucracy for obtaining licenses

The cumbersome nature of acquiring permits for legal mining also affects the industry’s
sustainability and often leads to increased galamsey (illegal mining) activities. By this, the
government through the Minerals Commission must equip its personnel well to reduce the
processing time for permits. It is also important for companies to apply for permits well
ahead of time to reduce the delay in processing of permits. Ghana’s Minerals
Commission’s operations should also be decentralized in order to facilitate acquisition of
operating permits.

5. Conclusion
Risk assessment and management are necessary elements of mine planning and
production. This paper has investigated the risks factors associated with mining projects
in Ghana by examining the contribution of various risk factors to project failure. The
study identified the five most critical risk factors in mining projects to be unstable
commodity prices, inflation/exchange rate, land degradation, high cost of living and
government bureaucracy for obtaining licenses. Though, the study aimed at identifying
mining sector-specific risk factors, we observed that the five risk factors listed above
were to unique to the mining industry. Earlier studies have identified these risk factors in
other sectors of the entire construction industry. Furthermore, the study found that risk
assessment in the mining sector has a direct link with mining project sustainability. This
implies that risk assessment helps to eliminate certain obstacles that may become a
hindrance to the effective operation of mining activities. Mitigation measures for
addressing the identified risk factors were discussed. The key findings emphasize the
need for a comprehensive risk management culture in the entire mining sector of the
country. There is the need to develop country-specific risk management processes and
methods informed by analytical research into the sectors operations. To reduce mining
companies’ exposure to risks, government should support the establishment of data
collection, analysis and reporting systems as well as a platform for sharing risk
information among players in the industry.
 JQME 6. Study limitations and implications for future research work
23,1 The information gathered through this research can be utilized in identifying and
understanding risks during the early stages of mining project implementation. The findings
should guide mining practitioners and policymakers in developing appropriate risk
mitigation measures for Ghana’s mining sector.
From an academic research perspective, the paper contributes to a conceptual risk
34 assessment framework. The most critical constraint of this study is the fact that findings
are based only on views of industry professional experts. Due to geographic and logistical
constraints, the study did not include the perception of local communities in quantifying
the risk factors. The perceptions of the local communities are very important in
quantifying and prioritizing the risk factors because the affected people can only perceive
them properly.
A future research could include the perception of the local communities and
government/regulatory agencies. Another future research could examine whether the
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risk factors identified in this paper have similar impact on other construction related
projects in Ghana, e.g. projects in the rapidly growing oil and gas sector. Finally,
it will be insightful to develop a classification system of mining firms based on their risk
profile in order to seek answers to questions such as: what makes some mining firms
in Ghana more or less risk averse than others, and what is the subsequent impact
on performance?

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(The Appendix follows overleaf.)

 JQME Appendix
23,1
Demographic characteristics Frequency Percentage

Gender
Male 63 77.78
38 Female 15 18.52
No response 3 3.70
Total 81 100.0
Level of education
Diploma 7 8.64
Degree 43 53.08
Post graduate degree 27 33.33
PHD 1 1.23
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Other 3 3.70
Total 81 100.0
Years of experience in the mining industry
0-5 yrs 17 20.98
6-10 yrs 42 51.85
11-15 yrs 11 13.58
16-20 yrs 7 8.64
21-30 yrs 4 4.90
Total 81 100
Sector/department
Exploration 28 34.56
Mining 37 45.69
Drilling 3 3.70
Consultancy 13 16.05
Total 81 100.0
Profession
Geologists 35 43.21
Mining engineers 14 17.28
Table AI. Project managers 6 7.41
Demographic Administrators 15 18.52
characteristics of Others 11 13.58
respondents Total 81 100.0

Corresponding author
Charles Teye Amoatey can be contacted at: camoatey@gimpa.edu.gh

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