Ghana’s leading metal producer, Gold Fields Ghana Limited, says it looks to pump $2.5 billion into its two concessions by 2027 to improve operations following a development agreement sealed with government in March this year.
Company officials said $2 billion will be sunk into the operations of Tarkwa Mines within 11 years, while the Damang Mine, considered to be the biggest surface pit in West Africa, will absorb $500 million.
We needed a stable fiscal environment that will help us make informed decisions on investments
The huge investment is needed to help boost dwindling growth in the company’s operations in Tarkwa and revive Damang concession, where growth has been stagnant for over half a decade due to mounting production costs and falling global gold prices.
The deal concluded between the government and Ghana Gold Fields is seen as a morale booster to resuscitate slumped mining fields as shareholders seek to release more funds running up to 2027 to spur growth.
Goldfields vice president for stakeholder relations for West Africa, David Johnson told local media the agreement provided fiscal predictability since it removed uncertainty often characterised by sporadic revisions of taxes, royalties and several statutory payments.
“We needed a stable fiscal environment that will help us make informed decisions on investments, so, having the development agreement actually helps us a lot in making that decision,” he said.
The company has started feasibility studies into the mineral worth of Damang Mine following the agreement, which officials said ended a row of nearly between the government and Gold Fields.
The study aided discovery of resources level and investment type required to exploit reserves and revive flopping mine areas.
“Once we get the results of that study, at least, we will know that these variables (fiscal indices for mining companies) are constant and so it will make sense for us to make this huge investment,” Johnson was quoted in local papers.
Over the last five years, corporate taxes for mining companies have grown from 25 per cent to 35 per cent, royalties fixed at 5 per cent compared to a range of three per cent to 6 per cent in earlier regime.
Capital gains tax for miners has also been changed to a straight line amortisation over five years at 20 per cent per annum from the initial 80 per cent in the first year and 50 per cent thereafter per year declining basis.
A stabilisation levy was introduced in 2013, while exploration permits and stool fees (customary land tax) also surged by an average of 1,350 per cent between 2011 and 2015.
Many companies viewed the move as punitive to raising new investments in mining explorations but the agreement with government brought some relief.
“Generally speaking, the development agreement just gives us that level of comfort and certainty,” Johnson said.
“It is not so much of whether the increment is 30 per cent or 20 per cent or 15 per cent corporate tax, it is the certainty over a period because that is what we can plan with.
“That is what we can go to the market and say ‘we can’t control gold price but if the price is this, this is how much we can give you.”
The global price of gold hovers around $1,300 per ounce after ending last year at $1,050 per ounce.
Investors in mining say they needed repetitive assurance from companies to guarantee returns before making huge investments in ongoing projects.