Formed from the merger of the British colony of the Gold Coast and the Togoland trust territory, Ghana, in 1957, became the first sub-Saharan country in colonial Africa to gain its independence and following a national referendum in July 1960, Ghana became a republic.
Ghana endured a long series of coups before Lt. Jerry Rawlings took power in 1981 and banned political parties. In 1992 a new constitution was approved and multi-party elections were restored, with subsequent presidential elections occurring every 4 years from 1992, with the current president the Honourable John Atta-Mills elected in 2008. Ghana is a well-administered country, widely regarded as a model for political and economic reform in Africa.
Ghana is located on the Gulf of Guinea, immediately north of the equator and on the Greenwich meridian. Ghana is bordered to the north and northwest by Burkina Faso, to the east by Togo, and to the west by Cote d’Ivoire (Ivory Coast). A tropical rain forest belt extends northward from the shore.
The climate is tropical, with the eastern coastal belt warm and dry, southwest corner, hot and humid, and the north, hot and dry. Ghana has a total area of approximately 239,000 km2. Its capital city is Accra, and other major centres include Kumasi, Tema, Tamale and Sekondi-Takoradi, with a population estimated at 23.9 million people. Although English is the official language, over 100 linguistic and ethnic groups have been identified in Ghana, and these groups could be classified into two major linguistic families: the Kwa and the Gur.
Ghana is the second largest producer of gold in Africa. Rich mineral resources such as gold, diamonds, manganese, limestone, bauxite, iron ore as well as various clays and granite deposits are major sources of foreign exchange. In 1999, Ghana produced 2,620,096 million ounces of gold and 684,033.4 carats of diamonds. Ghana is well endowed with natural resources and agriculture accounts for roughly one-third of GDP and employs more than half of the workforce, mainly small landholders. The services sector accounts for 40% of GDP. Gold and cocoa production and individual remittances are major sources of foreign exchange. Oil production at Ghana’s offshore Jubilee field began in mid-December, 2010, and is expected to boost economic growth. Estimated oil reserves have jumped to almost 700 million barrels.
Ghana Mining Legislation
The right to explore for minerals and to develop a mine are regulated by the Minister of Lands, Forestry and Mines (the ‘‘Minister’’) through the Minerals Commission, a governmental organization designed to promote and control the development of Ghana’s minerals in accordance with the Minerals and Mining Act, 2006 (the ‘‘2006 Mining Act’’).
The overall legislative framework for the mining sector in Ghana is provided by the Minerals and Mining Law of 1986 (PNDC Law 153), as amended in 1994 and 2005. Under the Law, mining companies must pay royalties The 2006 Mining Act provides that concessions granted under the predecessor legislation, the Minerals and Mining Law, 1986 (the ‘‘1986 Mining Law’’) would continue to be governed by that statute for a period of five years following passage of the 2006 Mining Act.
Under the laws of Ghana, mining may only be carried out by bodies corporate or partnerships registered or established under the laws of Ghana. There are three types of mining rights in Ghana: reconnaissance licences, prospecting licences and mining leases. These rights are acquired by making an application to the Minister through the Minerals Commission. Under the 2006 Mining Act the grant of these rights is discretionary, however, in practice applications are generally considered on a first-come-first-serve basis. The types of mining rights are as follows:
A Reconnaissance Licence confers on the holder the right to search for a specific mineral (or commodity) within the licence area by geochemical and photo-geological surveys or other remote sensing techniques. Except as otherwise provided in the licence, it does not permit drilling, excavation or other sub-surface techniques.
The licence is normally granted for up to one year and may be renewed by the Minister from time to time for periods up to one year at a time upon application by the holder. The application for renewal must be made at least three months before the expiration of the licence.
The size of the area over which a reconnaissance licence may be granted is limited to 5,000 contiguous blocks or 1,050km2.
A Prospecting Licence gives the holder the exclusive right to search for specific minerals (or commodities) by conducting geological, geophysical and geochemical investigations to determine the extent and economic value of any deposit within the licence area.
Drilling, excavation or other sub-surface techniques are premitted under the prospecting license.The initial grant of the licence is limited to three years and a maximum area of 750 contiguous blocks or 157.5 km2.
A prospecting licence is granted for a period not exceeding three (3) years and may be renewed for a maximum of two terms or for further periods of up to three (3) years each. The holder of a prospecting licence shall, prior to or at the expiration of the initial term, surrender not less than half the number of blocks of the prospecting area so long as a minimum of one hundred and twenty five blocks or 26.3km2 remain subject to the licence and the blocks form not more than three discrete areas each consisting of either a single block, or a number of blocks each having a side in common with at least one other block in that area.
The grant of a Mining Lease gives the holder the right to mine, win or extract specified minerals (or commodities) within the lease area. The lease may be granted to the holder of a prospecting licence or any person who establishes to the satisfaction of the Minister that a mineral to which the lease relates exists in commercial quantities within the proposed lease area and can be mined at a profit. The lease is issued for up to thirty years subject to renewal for a further thirty-year term.
The size of the area in respect of which a lease may be granted is limited to 300 contiguous blocks 63 km2 for a single grant.
A person other than the holder of a reconnaissance or prospecting licence holder may apply for a mining lease in respect of a mineral specified in the application over land that is not the subject of a mineral right for the same mineral applied for. Government Free Carried Interest The Government of Ghana is granted a 10% free carried interest in all mining operations and has no obligation to contribute to development or operating expenses.
This 10% carried interest also entitles the Government of Ghana to a pro-rata share of future dividends.
Under the 1986 Mining Law, the holder of a mining lease is required to pay, quarterly, a royalty of not less than 3% and not more than 12% of total mining revenues. The royalty is 3% when the operating ratio is 30% or less, and the royalty increases 0.225% for each 1% increase in operating ratio until the royalty reaches a maximum of 12% at an operating ratio of 70%.
Under the 2006 Mining Act, the holder of a mining lease is required to pay, quarterly, a royalty of not less than 3% and not more than 6% of total mining revenues. The Government of Ghana determines the royalty rate each year based on the ratio that the operating margin bears to the value of gold produced from a mining lease in that year.
Based on draft regulations, the royalty is 3% when the operating ratio is 30% or less, and increases to 0.075% for each 1% increase of the operating ratio to a maximum of 6% at an operating ratio of 70%.
On November 18, 2009 the Minister of Finance and Economic Planning tabled a bill entitled Minerals and Mining (Amendment) Act, 2009, which if enacted would impose a flat mineral royalty of 6% of total revenue from mining operations. The bill is currently being considered by Parliament.
All environmental matters in Ghana, including those related to mining, are regulated by the Environmental Protection Agency Act, 1994 and the Environmental Assessment Regulations, 1999, administered by the Ghanaian EPA and which govern environmental impact statements, mine operations and mine closures and reclamation.
Persons proposing to undertake the mining and processing of minerals are required to register their activities with the EPA and obtain an environmental permit prior to commencing such activities. Additionally, no person may commence activities in respect of an undertaking, which in the opinion of the EPA, has, or is likely to have an adverse effect on the environment or public health unless, prior to the commencement thereof, the undertaking has been registered with the EPA and an environmental permit has been issued by the EPA in respect of the undertaking.
An EIS and baseline study of the EIS must be submitted to the EPA prior to issuance by the EPA of any environmental permit where the undertaking is the mining and processing of minerals in areas if the mining lease covers a total area in excess of 10 hectares.
Each environmental permit is valid for a period of 18 months from the date of issue. The EPA is required to hold a public hearing in respect of an application for an environmental permit where there is material adverse public reaction to the commencement of the proposed undertaking, the undertaking will involve the dislocation, relocation or resettlement of communities or the undertaking could have extensive and far reaching effects on the environment.
After the approval of the EIS, an environmental management plan, in respect of operations must be submitted within 18 months of commencing operations and every three years thereafter.
Failure to commence operations within the prescribed time period renders the environmental permit invalid and the applicant is required to resubmit an application to the EPA, together with reasons for the new application.
After commencing mining operations, the applicant is required to apply for an environmental certificate that may be issued subject to terms and conditions. The environmental certificate must be obtained within 24 months from the commencement of operations.
An environment certificate will not be issued by the EPA until the person responsible for the application has submitted evidence or confirmation of the actual commencement of operations, acquisition of other required permits and approvals and compliance with mitigation commitments provided for in either the EIS or preliminary environmental report. Mining companies are also required to submit annual environmental reports in respect of mining operations.