The Ghana subsidiary of South Africa's Gold Fields has suspended a planned resumption of underground mining at its Damang site after illegal artisanal miners invaded the site, company officials said on Monday.

Gold Fields Ghana's Abosso Goldfields Limited (AGL) subsidiary already operates open pit mines at the site and had been due to reopen shaft mining operations by the end of 2008.

The shaft, abandoned from a previous mining operation 50 years ago, is estimated to hold at least 1.1 million ounces of gold with a lifespan of 12 years.

It's a worrying problem ... nearly 3,000 galamsey operators (illegal miners) have invaded the concession. They are using Chinese-made crushers and other sophisticated tools to mine the ore, Tony Aubynn, Gold Fields Ghana's head of Corporate Affairs and Social Development, told Reuters.

The situation now is that you're no longer dealing with just artisanal mining but rather we're talking about organised groups with improved technology who are competing with the company to mine the ore, he said.

Ghana is Africa's second biggest gold miner after South Africa.

Mike Ezzan, a director of AGL, said the company first became aware of the problem with illegal miners at Damang in May but the situation had got worse this month.

We officially wrote to inform the government, through the minister of mines, that we are suspending the underground project, Ezzan said.

Abosso Goldfields Limited is 71.1 percent owned by Gold Fields Ghana, with Canadian-listed Iamgold holding 18.9 percent and the Ghanaian state the remaining 10 percent.

Aubynn said aggressive and well-armed illegal miners were in control of some of the rich ore bodies in parts of the Damang concession.

Although the company regarded the underground operation as viable, there was no point going ahead with developing it under current circumstances, Aubynn said.

He said disruption caused by illegal miners had cost the Ghanaian state nearly $100 million in lost royalties and taxes, as well as obstructing the creation of more than 200 jobs in the area.

Illegal gold miners have disrupted commercial operations at many mines around the world, sometimes using violence to take control of the richest sections of gold concessions, which can be mined by hand. (Reporting by Kwasi Kpodo; writing by Alistair Thomson, Editing by Peter Blackburn and Ingrid Melander)