The Minerals Commission has been charged to demand the payment of royalties on monthly basis instead of the quarterly payments made by the mining companies.
Despite the recommendation made for royalties to be collected monthly, all the mining companies, except Newmont Mining Company pay quarterly.
Dr Steve Manteaw, co-Chair of the Ghana Extractive Industry Transparency Initiative, GHEITI in an interview suggested to the Minerals Commission to seek an amendment to the Minerals and Mining Act to facilitate the collection of monthly royalties.
Rebuffing claims by the Minerals Commission that they would be proposing monthly payment of royalties, Dr Manteaw indicated that “it is not about proposing, you must implement what the finance minister has already announced in the budget, that royalties be paid monthly.”
The decision by mining companies to pay royalties on a quarterly basis has been criticized based on the fact that money belonging to the state is kept by the mining firms for as much as three months before they are paid to the government.
Before its amendment, Ghana’s Minerals and Mining Law, Act 703, stated that mining companies must pay royalties ranging from 3% to 6% on the revenue realized from the ounces of gold ore mined.
“A holder of a mining lease, restricted mining lease or small-scale mining license shall pay royalty that may be prescribed in respect of minerals obtained from its mining operations to the Republic, except that the rate of royalty shall not be more than 6% or less than 3% of the total revenue of minerals obtained by the holder,” the law stated explicitly spelt before its amendment to a flat 5% in March 2010.
The amended section now reads: “25. A holder of a mining lease, restricted mining lease, or small scale mining license shall pay royalty in respect of minerals obtained from its mining operations to the Republic at the rate of 5% of the total revenue earned from minerals obtained by the holder.”
However, this provision seems to have been exploited by the gold miners to their advantage. “So for instance in 2003 when Newmont came into Ghana, as part of its investment agreement with government it pegged its payment at 3% based on the prevailing market price at that time of $300 per ounce,” he stated.
This has been affirmed by the firm in a report written on the company’s operations in Ghana titled “Socio Economic Impact of Newmont Ghana Gold”, which stated that “In Ghana, royalties are levied every quarter on the market value of the mining company’s gross output. In the new mining code of 2006, the maximum royalty that can be levied was reduced from 12% to 6% while the minimum remained 3%.
However, companies do not pay more than 3% and Ghana’s parliament only recently voted to increase the minimum level to 5% for those companies without stability agreements with effect from March 2011.”
By Adu Koranteng