Miners look for level playing field in Ghana

SAN FRANCISCO -- Miners operating in Ghana are anxious to know how the national government will address concerns that it is cutting deals on taxes and royalties that might favour some companies over others.

AngloGold’s [AU] recent deal with the government whereby it bought fiscal clarity at a price of 2.7 million shares, or more than $100 million, to cover its Ashanti deal, has raised eyebrows and hackles among rivals in the country who think they may be prejudiced.

Similarly, Newmont’s [NEM] imminent production decision on Ghana is being prefaced by negotiations with government for a competitive regime of taxes, royalties and other imposts to undergird what is expected to be one of the most significant new investments in the country.

There is no clarity on the concessions, if any, that Newmont might wring from Ghana, but competitors are monitoring every move and will be quick to demand a level playing field at the first sign of partiality.

Gold Fields’s [GFI] Craig Nelson said it was still too early to know what impact AngloGold and Newmont would have, but that his company was concerned over potential discrimination. Golden Star’s [GSS] Alan Marter had a similar view, but also saw possible spill-over benefits for the other companies if there was a meaningful imbalance which would likely force a levelling.

Gold Fields partner in Ghana, IAMGOLD was more sanguine. Larry Philips was disinclined to see any likely imbalance in state imposed costs although he welcomed any opportunity to create more value. He noted that AngloGold’s deal had to be seen in the context of the government’s golden share in Ashanti. He sees the deal essentially neutralizing the burden of the golden share, “they’re trading value.”

Nevertheless, he is also insistent that there must be full disclosure of any arrangements for AngloGold and Newmont. “It will only be a preferential deal for them if there are no discussions with other producers.”

One consequence is that current operators are troubled that AngloGold and Newmont are working outside Ghana’s Chamber of Mines. There is apparently some pressure for the two gold giants to work within the local lobbying forum rather than relying on their pricing power to strike private agreements.

That would certainly not suit AngloGold which would hate to be perceived to have paid $100 million only to see the competition free ride on that. However, a more competitive mining code can only be beneficial to the country as a whole and to all the miners there.

In exchange for the shares, AngloGold’s “stability agreement” provides a 30-year extension on its lease at Obuasi; a tax rate of 30% for 15 years rather than the ruling 32.5%; and a flat 3% revenue royalty across all the newly acquired Ghanaian operations rather than a threatened 4-6%.

The government retains its golden share only in respect of its diluted share of the Ghanaian operations which, based on past history, means that it retains its effective free carry on those assets.