Review of major mining events in 2023
The year 2023 was an exciting year for the extractive sector with a major discovery that could change the country’s economic fortunes, the Lithium find.
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Ghana has granted a lithium mining license to Atlantic Lithium Ltd. as the country positions itself to tap into the multibillion-dollar global industry.
The 15-year lease to Barari DV Ghana Ltd., a unit of the Sydney-based company, enables it to start constructing a lithium mine at a 42.6-kilometer site at Ewoyaa in the country’s Central Region.
It comes after almost six years of exploration that has discovered high-grade lithium in commercial quantities.
Ghana’s current mining laws give at least six per cent of the total revenue of minerals obtained by mining companies to the government in royalties.
The current administration, however, is proposing 10 per cent, which has irked investors at Australian company Atlantic Lithium Ltd, which may result in unwarranted delays in production.
In addition, the government has proposed that it will pay $21.5m for a 6.5 per cent equity interest in Atlantic Lithium’s local subsidiary, Barari Development Ghana Ltd, translating to a valuation of $331m of the local asset.
Scrap taxes on explorations -Chamber of Mines
The Chamber of Mines executive has called on the government to exempt exploration companies from the payment of taxes to reduce the risk and high cost of mining explorations.
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That would help to reduce the barriers to exploration companies seeking to enter the mining industry which constitutes Foreign Direct Investment for the country.
At an Editors Forum in Accra, the President of the Chamber, Joshua Mortoti, said the cost of holding land by exploration purposes, among other costs, induced stress on many of the exploration firms in addition to the different types of taxes they paid.
Mr Mortoti said aside from mining explorations being risky, the probability of making a commercial find was also low, hence the need to remove the taxes to make exploration less burdensome.
He pointed out that mining exploration was very expensive yet it was quite uncertain that the investor would make any commercial find.
“But we have a fiscal regime which requires companies to make some payments even before digging the ground and that is the challenge that we have,” he pointed out.
Tullow secures $400-million five-year debt facility
Tullow Oil PLC (Tullow) has entered into a $400-million five-year notes facility agreement with Glencore Energy UK Limited.
The facility will be available to draw for 18 months and proceeds will be used for liability management of Tullow’s senior notes maturing in March 2025.
The interest on the facility will be Term Secured Overnight Financing Rate (SOFR) plus 10 per cent on drawn amounts.
Tullow, in a statement, also announced that it has entered into oil marketing and offtake contracts with Glencore for Tullow’s crude oil entitlements from the Jubilee and TEN fields in Ghana and the Rabi Light entitlements in Gabon which run concurrently with the notes facility agreement.
Mr Rahul Dhir, Chief Executive Officer of Tullow, commented: “Glencore’s $400 million facility commitment is a strong endorsement of our business plan and strategy.
The announcement demonstrates our ability to access long-term capital from a variety of sources and this facility is a material step in our refinancing strategy, following the successful and equity accretive tender offer in June.
Newmont ramps up GH¢843.72m in first quarter taxes
The payment of a GH¢ 843.72 million in taxes, royalties, and levies to the Government of Ghana, through the Ghana Revenue Authority (GRA), the Forestry Commission, and the Ministry of Finance for the first quarter of 2023 on the operations of Ahafo South and Akyem Mines is welcome news for a country caught up in the throes of a fiscal crisis.
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This amount is broken down into Corporate Tax of GH¢ 514.57 million; Minerals Royalties of GH¢ 197.06 million: GH¢78.23 as Pay As You Earn (PAYE); GH¢ 42.31 as Withholding Tax; and GH¢ 11.55 million as Forestry Levy.
This is the largest total tax payment made by a company to the state so far.
Just as importantly it suggests that this year’s total tax payments by Newmont in Ghana may exceed the GH¢2.76 billion paid altogether last year.
Tax payments by Newmont is expected to get bigger in the coming years as the company’s third gold mine is about to come on stream.
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The Ahafo North mine, located near its flagship Ahafo South mine, is projected to produce between 350 to 375 million ounces of gold on average each year over its expected 13-year mine life span, although during the first five years, production will be closer to 300 million ounces before ramping up afterwards.
Why IMF demand full disclosure on gold for oil
One of the conditions the country will have to fulfill in exchange for its new and direly needed $3 billion Extended Credit Facility programme being provided by the International Monetary Fund is a review of the government’s ongoing gold for oil initiative.
The IMF as part of its support for the country has called for a review of the policy to identify associated risks of the programme to the central bank.
The review forms part of ongoing updated safeguards assessment being carried out to provide additional support for the review of the Bank of Ghana Act.
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The Fund is concerned that the initiative lacks fiscal transparency and its benefits are not worth the lack of financial transparency that accompanies it.
Certainly, this is a concern critic have raise locally but the government also points to the gains of the programme since the commencement of the initiative in January.
Petrol prices at the pump have fallen considerably, and instructively the start of their fall coincided with the commencement of the initiative.
Indeed, the architect of the initiative, Vice President Dr Mahamudu Bawumia, said the strategy had the potential to save Ghana some $4.6 billion annually, this being the amount that would otherwise have been spent on the petroleum product imports that are instead being paid for with gold.