GHANA – MINING REGULATION
Ghana, officially the Republic of Ghana, is located in West Africa on the Gulf of Guinea, with Ivory Coast, Burkina Faso and Togo bordering. Due to its strong democratic political system, good governance and sound economic environment, Ghana is recognised as one of the most stable countries in West Africa and remains an interesting and attractive prospect for FDI.
According to the World Bank, Ghana has the thirteenth largest economy by GDP in Africa. It possesses rich natural resources and the Ghanaian mining industry is of considerable importance to the country and its economy, contributing around 5% of GDP in 2014 and earning a revenue of over $5 billion (USD). It is the tenth largest producer of gold in the world, the second largest in Africa and is among the world’s top 20 diamond producers. Bauxite and manganese are also primary commodities and the USGS (United States Geological Survey) reports that Ghana is also a producer of aluminium, cement, crude petroleum, petroleum products, salt and silver. Minerals account for over 30% of exports, with gold exports accounting for over 90% of that total.
Aside from the minerals industry, agriculture and manufacturing are the most significant sectors and Ghana is a world-leading producer and exporter of cocoa, with the cocoa industry contributing to around 15% of the country’s GDP.
Ghana is ranked 52th out of 109 jurisdictions covered in the Fraser Institute’s 2015 Policy Potential Index, while Transparency International rates the country at 61st out of the 175 countries included in its 2014 Corruption Perceptions Index.
PRINCIPAL LEGISLATION AND REGULATOR
The primary mineral legislation in Ghana is the Minerals and Mining Act 2006 (MMA), as amended by the Minerals and Mining (Amendment) Act 2010, as well as the Minerals and Mining (General) Regulations 2012 (MMGR) and the Mineral and Mining (Licensing Regulations) 2012 (MMLR). According to Section 1 of the MMA, minerals in Ghana are the property of the Republic and all rights and ownership of minerals vests in the President in trust for the people of Ghana.
The Minerals Commission Act 1993 (MCA) established the Minerals Commission (MINCOM), a government agency responsible for the regulation and management of the utilisation of mineral resources in Ghana. Duties of MINCOM include: investigating the background of applicants; processing applications for mineral rights; recommending grant of right (or otherwise) to the Minister; liaising with governmental agencies (such as the Environmental Protection Agency (EPA)) to ensure mining companies are operating according to the terms and requirements of title; and advising the Minister on various policy matters in relation to Ghana’s mineral resources. Section 5(1) of the MMA grants the Minister of Lands and Natural Resources (Minister) power to negotiate, grant, revoke, suspend or renew minerals, in accordance with the terms of the MMA and on the recommendation of MINCOM.
GRANTS AND FORMS OF MINERAL TITLE
A mineral right cannot be granted to a person unless the person is a body corporate formed under the Companies Code 1963 or the Incorporated Private Partnerships Act 1962. Mineral rights applications are submitted to MINCOM and must be accompanied by particulars of:
- The financial and technical resources available to the applicant;
- The applicant’s proposal with respect to the employment and training in the mining industry of Ghanaians;
- A budget; and
- A work program (ss. 11(a)-(d), MMA).
Unless further information is requested, MINCOM will provide their recommendation on an application for a mineral right to the Minister within 90 days of receipt of the application (s. 12, MMA). The Minister will then, within 60 days of receipt of MINCOM’s recommendation, notify the applicant on whether their application has been approved or rejected (s. 13(1), MMA).
Types of mining rights granted and administered under the MMA include:
- Reconnaissance Licence (RL) – grants the holder the exclusive right to carry out reconnaissance work within the reconnaissance area for the mineral to which the RL applies (s. 32(1), MMA). A RL does not include drilling or excavation activities and is restricted to a maximum of 5,000 contiguous blocks (ss. 21 and 32(3), MMA). A RL may be granted for an initial term of 12 months (s. 31(2), MMA). If a RL holder wishes to renew its licence, it must do so three months before expiration by applying to the Minister for an extension. Generally, extensions will only be granted for a further 12 months (ss. 33(4) and (5), MMA). A RL is subject to fees of US$15,000 on application, plus an additional US$15,000 for any renewal.
- Prospecting Licence (PL) – grants the holder the right to explore within the PL area for the minerals to which the PL applies (s. 37(1), MMA). An application for a PL must include a programme of prospecting operation (PPO) for approval by the Minister (ss. 11(c) and 36(1), MMA). The PL holder must commence prospecting operations within three months after being issued with a PL, notify the Minister (via MINCOM) of any discovery of minerals within 30 days of discovery, and must carry out prospecting operation in accordance with the PPO (ss. 37(2)(a)-(i) MMA). A PL is restricted to maximum of 750 contiguous blocks and may be granted for an initial term of three years (ss. 34(2)-(3) MMA). If a PL holder wishes to renew their licence, they must do so three months before expiration by applying to the Minister for an extension. Extensions may be granted for a period of up to three years and are subject to a 50 per cent compulsory reduction of the PL area (ss. 35(1), 38(1), MMA). A PL is subject to fees of US$20,000 on application, plus an additional US$20,000 for any renewal.
- Mining Lease (ML) – grants the holder the right to excavate and remove minerals for which the ML relates and within the ML area (ss. 46(a)-(e), MMA). A RL and PL holder will have priority to apply for a ML over the area and minerals to which their respective licence relates (ss. 39(1)-(2), MMA). A ML may also be granted upon application by a non-RL or non-PL holder (ss. 40(1)-(2), MMA). An application for a ML must include a programme of mining operation (PMO) for approval by the Minister (s. 111(d), MMA). A ML is restricted to a maximum of three contiguous blocks and may be granted for an initial term of 30 years (ss. 41(1)-(2), MMA). If a ML holder wishes to renew their licence, they must do so three months before expiration by applying to the Minister for an extension. Extensions may be granted for a period of up to 30 years (s. 44(1), MMA). A ML is subject to fees of US$100,000 on application, plus an additional US$100,000 for any renewal.
Mining rights cannot be assigned, mortgaged or transferred without the approval of the Minister. Approval by the Minister cannot be unreasonably withheld or provided subject to arbitrary conditions (s. 14(1), MMA). Furthermore, a person cannot obtain a controlling interest in a mining company (i.e., a 20% interest), unless that person first serves on the Minister a notice indicating their intention to become a controller (s. 52(1)(a), MMA). There are exceptions for companies listed on a stock exchange or whose assets are not principally in Ghana. The Minister may object to the change of control, if they consider “on reasonable grounds that the public interest would be prejudiced” (s. 53(1), MMA).
The government has the right to acquire a 10 per cent “free carried interest” in any mining operation and has no financial contribution in respect of such interest (s. 43(1), MMA). The government may also require a mining company to issue it with a “special share”, which gives it the right to speak at the annual meeting of the company and generally to block the disposition of the mineral right or a winding up of the Company (ss. 60 (1)-(4), MMA). The MMA also contains recruitment and training provisions that require the holder of a ML to submit a programme for the recruitment and training of “Ghanaian personnel”. The programme is submitted to MINCOM and will become a condition for the granting of the mining lease (ss. 50(1)-(3), MMA). Pursuant to Section 105 of the MMA, a mining rights holder must also in “the conduct of mineral operations, and in the purchase, construction and installation of facilities, give preference to material and products made in Ghana.”
A mining rights holder is liable to pay an Annual Mineral Right Fee (AMRF) to MINCOM. The AMRF (per cadastral unit (21 hectares)) ranges between:
- RL: US$10 - US$16 in the first year and then US$15 - US$20 in the second year;
- PL: between US$20 - US$32 from the first to third year and then US$40-US$50 from the fourth to sixth year;
- ML: US$700 in the first and second year and then US$1000 between the third and 13th year (s. 24, MMA).
A mining rights holder is also liable to pay a prescribed royalty payment to the government at a flat rate of five per cent of total revenues obtained from the mineral production (s. 25, MMA, as amended by the Minerals and Mining Amendment Act 2010). Companies engaged in mining will also be subject to the corporate tax rate (currently set at 35 per cent) with a right to capital allowance of 20 per cent for the life of the project (s. 6A, Schedule 3 Internal Revenue (Amendment) Act 2000).
The MMA provides that, before undertaking any activity, the necessary approvals and permits from the Forestry Commission and the Environmental Protection Agency shall be first obtained (s. 18, MMA). Mining and prospecting operations require an environmental permit (EP) from the EPA under the Environmental Protection Agency Act 1994 (EPA Act) and the Environmental Assessment Regulations 1999 (EA Reg.) before commencing operations (s. 2(j), EPA Act; s. 1, EA Reg.). An EP is valid for 18 months, effective from the date of the issue of the permit (s. 21(1), EA Reg.).
Where an undertaking (in respect of which a preliminary environmental report (ER) or an environmental impact statement (EIS) is approved) commences activities after obtaining an EP, it must obtain an environmental certificate (EC) from the EPA within 24 months from the date of commencement of operations (s. 22, EA Reg.). Additionally, the holder of a PL or ML is required to obtain an exploration operating permit or a mining operating permit from the Inspectorate Division of MINCOM prior to the commencement of any exploration or mining operations (ss. 6(1), 8(1), Minerals and Mining (Health, Safety and Technical) Regulations 2012).
The holder of a mineral right has the right to enter land for purposes of its work (ss. 32(2), 37(1) and 46, MMA). The occupier of land within a mineral right area may retain the right to graze livestock upon or cultivate the surface of land, so long as their actions do not interfere with the mining operations (s. 72(3), MMA), and is entitled to compensation for any loss, damage or deprivation of the use and enjoyment of the land (ss. 73, 74 MMA). The legislation explicitly precludes any compensation related to the value of minerals and its quite helpful in its guiding principles (s. 74(1)(f), MMA). The President has the power to expropriate any land pursuant to Section 2 of the MMA. The Minerals and Mining (Compensation and Resettlement) Regulations, 2012 provide detailed provisions concerning the compensation process, which serve as a model for others to follow.
See Ghana – Environmental Overview Commentary.