Ghana is endowed with substantial mineral resources and has a well-established mining sector, which has grown considerably in recent years to represent an important pillar of the Ghanaian economy. The mining sector plays an important role in the Ghanaian economy as it attracts more than half of all Foreign Direct Investment (FDI), generates more than one-third of all export revenues, is the largest tax-paying sector in the country and makes a significant contribution to Gross Domestic Product (GDP) and employment creation.
Mining investment, irrespective of the type or kind of mining being undertaken, is capital intensive. It is a high-risk as well as a high reward business for mining companies and communities. The historical importance of mining in the economic development of Ghana is considerable and well documented, with the country’s colonial name, Gold Coast, reflecting the importance of the mining sector, particularly, the gold trade to the country.
With 4.8 million ounces of gold produced in 2018, Ghana surpassed South Africa to become the continent’s leading gold producer and one of the world’s top ten gold producers. The country’s mining and quarrying activities revolve around gold. Other minerals found in Ghana include manganese, bauxite, iron ore, and diamonds. Mining and quarrying contributed US$4.2 billion to the country’s GDP in the first three quarters of 2019, representing a 13.3 percent increase over the same period in 2018. Following a wave of investments, the mining and quarrying sector saw its growth propelled by an average of 17.5 percent by the second quarter of 2019. In the same period, export proceeds from the sector as revealed by the ministry of lands and natural resources was US$ 3.3 billion compared to US$ 3 billion generated over the same period in 2018, making the mining sector a major foreign exchange earner for the country.
This article aims to highlight some relevant legislation in the mining sector, primarily because, as demonstrated above, the growth of the mining industry in Ghana has made it critical to understand the legal framework of the Mineral and Mining sector, which will provide a roadmap to both investors and potential investors.
This is an appraisal of the legal framework of the Mineral and Mining Industry in Ghana. It will focus on the ownership of the minerals in Ghana, ownership or authorization of mineral rights in Ghana, environmental regulations, and the mineral tax regime in Ghana among others.
OWNERSHIP OF MINERALS IN GHANA
Ownership of all minerals in Ghana is vested in the President who holds it in trust for the people of Ghana, (Article 257(6) of the 1992 Constitution of Ghana, Section 1 of Mineral and Mining Act 2006). This position was affirmed in Adjaye and Others v. Attorney General And Others Suit No. C144/94, 30th March 1994 (Unreported), where the Supreme Court in interpreting Article 257(6) referred to the case of Tito v. Waddell and others and held that the use of the word “trust” did not create a true trust enforceable by the courts (a trust in the lower sense) but might create a “trust in the higher sense” which is no more than governmental obligation not enforceable in the courts. Therefore, if a trust relates to governmental obligations relating to duties and functions of government, that trust relationship would be unenforceable. The Court further held that looking at Article 257(6) it was clear that what was held in trust was minerals in their natural state. However, looking at parts of the Constitution which relate to functions of Government the judge was inclined to share the view that generally speaking every exercise of powers of government- that is every function of government is carried out in the name of the people of Ghana and for their welfare.
Per section 43 of the Act 703, where a mineral right is for mining or exploration, the Government of Ghana shall be entitled to 10% free carried interest in the rights and obligations of the mineral operations in respect of which the government shall not make a financial contribution. The government is, however, not precluded from obtaining further participation in mineral operations that may be agreed with the holder.
The principal laws governing mining in Ghana include the following.
- The 1992 Constitution of the Republic of Ghana;
- The Minerals and Mining Act, 2006 (Act 703), as amended by the Minerals and Mining (Amendment) Act, 2015 (Act 900);
- The Minerals Income Investment Fund Act, 2018 (Act 987); and
- The Minerals Development Fund Act, 2016 (Act 900).
- The Minerals and Mining (Licensing) Regulations, 2012 (LI 2176);
- The Minerals and Mining (Explosives) Regulations, 2012 (LI 2177);
- The Minerals and Mining (General) Regulations, 2012 (LI 2173);
- The Minerals and Mining (Compensation and Resettlement) Regulations, 2012 (LI 2175);
- The Minerals and Mining (Support Services) Regulations, 2012 (LI 2174); and
- The Minerals and Mining (Health, Safety, and Technical) Regulations, 2012 (LI 2182).
- The Minerals and Mining (Local Content and Local Participation) Regulations, 2020 (LI 2483).
- The Companies Act, 2019 (Act 992);
- The Environmental Protection Agency Act, 1994 (Act 490);
- The Ghana Investment Promotion Centre Act, 2013 (Act 865);
- The Income Tax Act, 2015 (Act 896);
- The Forestry Commission Act, 1999 (Act 571);
- The Water Resources Commission Act, 1996 (Act 522); and
- The Ghana Geological Survey Authority Act, 2016 (Act 928)
MINING IN GHANA
Mining activity is supervised by the Ministry of Lands and Natural Resources and controlled by the Minerals Commission whose responsibilities include;
- To formulate recommendations of national policy for exploration and exploitation of mineral resources with special reference to establishing national priorities having due regard to the national economy;
- To monitor the operations of all bodies or establishments with responsibility for minerals and report to the Minister;
- To secure a firm basis of comprehensive data collection on national mineral resources and the technologies of exploration and exploitation for national decision making;
- To monitor the implementation of laid down Government policies on minerals and report on this to the Minister;
TYPES OF MINING LICENSES IN GHANA
A mineral right is needed to perform a search, reconnaissance, prospecting, exploration or mining for a mineral on any land in Ghana. Mineral rights are granted by the Minister on behalf of the President upon recommendation from the Minerals Commission. A mineral right could be a reconnaissance licence, a prospecting licence, a mining lease, a restricted reconnaissance licence, a restricted prospecting licence or a restricted mining lease.
These are further grouped broadly into exploration mineral rights and exploitation mineral rights depending on the activities permitted under the mineral right. Exploration mineral rights allow the holder to search (prospect) for minerals and gather data to determine the mineral potential of an area while exploitation mineral rights allow the holder to mine the mineral.
Subject to Act 703 and the Subordinate Regulations as listed above, a reconnaissance license confers on the holder and a person authorized by the holder of the reconnaissance license in accordance with the Act, the exclusive right to carry on reconnaissance in the reconnaissance area for the minerals to which the license relates and to conduct other ancillary or incidental activity.
The Minister may, on an application made by a qualified person and on the recommendation of the Commission, grant a reconnaissance license in respect of all or a part of the area applied for and in respect of all or any of the minerals specified in the application. A reconnaissance license may be granted for an initial period not more than twelve months. Any holder of this right may, however, apply for an extension (Section 33 of Act 703). An applicant can also apply for restricted license, which is for 12 months.
For the purposes of exercising the right conferred under Section 31 of Act 703, a holder of a reconnaissance license and a person authorized by the holder of the license, may enter the reconnaissance area and erect camps or temporary buildings. A holder of a reconnaissance license shall not engage in drilling or excavation. The area of land in respect of which a reconnaissance license may be granted shall be a block or any number not more than five thousand contiguous blocks each having a side in common with at least one other block the subject of the application.
This is a license that allows the holder to undertake the following activities on the land to which the license relates:
The holder of a prospecting permit may in the exercise of the rights under the license, enter upon the land to which the license relates to undertaking the following;
- Prospect for minerals in respect of which the license is granted,
- Make boreholes and excavations that may be necessary for the prospecting operations,
- Erect camps and put up temporary buildings needed for the prospecting operations and conduct other activity ancillary or incidental to the prospecting.
Pursuant to Section 34, the Minister responsible for mines may, on an application duly made by a qualified person and on the recommendation of the Minerals Commission, grant prospecting license in respect of all or any minerals specified in the application. An applicant can apply for a restricted prospecting license, which is valid for three (3) years.
This is the highest mining right under Act 703 as it allows the holder to mine, refine, smelt, transport the mineral and conduct other ancillary activities on the land the license relates to. Under section 39 of the Act, a holder of a reconnaissance license or a prospecting license may apply for one or more mining leases prior to the expiration of the license they hold. The application may be in respect of all or any of the minerals which are the subject of the current license and in respect of all or any one or more of the blocks which constitutes the reconnaissance or prospecting area. However, the blocks applied for shall form not more than three discrete areas, with each consisting of
- a single block,
- or a number of blocks each having a side in common with at least one other block in that area,
and each of which could be the subject of a separate mining lease application.
Section 40 allows a person to apply in the prescribed form for mining lease in respect of a mineral in a land over which the person does not currently hold any mineral right. Once the application is duly made, the Minister on the recommendation of the Commission, may grant the applicant a mining lease in respect of all or any of the land applied for and in respect of a mineral specified in the application on condition prescribed.
A mining lease shall be for an initial term of thirty years or for a lesser period that may be agreed with the applicant. The area in respect of which a mining lease may be granted shall not be less than one block or more than three hundred contiguous blocks each having a side in common with at least one other block the subject of the grant. A restricted mining lease can be granted for fifteen years as well.
To create an enhanced, transparent and responsive environment for investment and develop the Ghanaian investment economy, foreigners are allowed to own and mine in Ghana under the Ghana Investment Promotion Centre Act, 2013 (Act 865). Foreign entities can hold mineral rights in Ghana by incorporating a company in Ghana with its object, among others being mining and exploration activities. The GIPC Act establishes the minimum capital threshold needed for non-Ghanaians to participate in several sectors of the economy, including mining.
Section 28 of the GIPC Act states that where a foreign investor has a Ghanaian partner, the capital invested must be at least TWO HUNDRED THOUSAND USD (US$200,000.00) in cash or capital goods relevant to the investment, or a combination of both, through equity participation, and the Ghanaian must hold at least 10% of the equity. This threshold entitles the company to a quota of one (1) expatriate employee.
Where the foreign investor owns the firm entirely, the law states that the investor must invest at least FIVE HUNDRED THOUSAND USD (US$500,000.00) to have the company formed and licensed by the Centre. The foreign investor who meets this threshold is entitled to three (3) expatriate quota.
Section 34 of the GIPC Act, Section 105 of Act 703 and the LI 2483 encourage the employment of Ghanaians over foreigners if the qualifications and experience of the Ghanaian and foreigner are comparable.
The Environmental Protection Agency (EPA) was established in 1994 by the Environmental Protection Agency Act (Act 490) and regulated by Environmental Assessment Regulations, 1999 (L.I. 1652). The EPA is in charge of, among other things, enforcing environmental legislation. Section 18 of Act 703 and the Environmental Assessment Regulations, 1999 (L.I. 1652) of the EPA requires a holder of a mineral right to get an environmental permit from the EPA before engaging in any mineral activity. The applicant is required to submit an application and pay the requisite fees after which the EPA will carry out an initial assessment and issue a screening report for purposes of determining whether the application is approved, objected to, requires submission of a Preliminary Environmental Report (PER) or requires the submission of an Environmental Impact Statement (EIS).
Where the EPA believes that the actions of any undertaking are likely to have a major adverse environmental impact, the applicant will be required to submit an EIS on the undertaking so that the environmental impact of the proposed undertaking can be examined. If an EIS is acceptable to the EPA, it will notify the applicant in writing and grant the environmental permit. Regulation 20 provides that the EPA should arrive at its decision within 90 days of the date of receipt of the application.
The holder of a mineral right who is granted an environmental permit is obligated to submit an annual environmental report to the Agency regarding the mineral operations. The EPA conducts frequent monitoring actions to ensure that mineral right holders are in compliance with the provisions of the environmental permit and with environmental regulations in general.
MINERAL TAX REGIME
According to Section 77 of the Income Tax Act of 2015, a mining income tax is payable on income derived by a person from mineral operations. For each year of assessment, the tax is computed by applying the rate of tax of thirty-five percent (35%) as indicated in the First Schedule to the chargeable income of that person from mineral operations. Section 1 of the Income Act states that chargeable income earned from activities other than mineral operations is taxable.
In ascertaining a person’s assessable income from mineral operations, the income derived from each separate mineral operation is treated as an independent business, and the tax payable for each year of assessment is calculated separately from each business as provided under section 77(4) of the Income Tax Act. An arrangement between a person’s separate mineral operation and any other activity must be conducted in accordance with the arm’s length principles outlined in Section 31 of the Income Act. The transfer of an asset to a separate mineral operation, or the transfer of an asset from a separate mineral operation, is treated as an acquisition or disposal of the asset, depending on the circumstances and therefore subject to capital gains assessment.
Section 78 provides that, a mineral operation performed in connection to a mine is considered a separate mineral operation. A mineral operation performed with a shared processing facility is also considered a separate mineral operation. When a holder of a reconnaissance license is later granted a prospecting license, a mineral operation undertaken prior to the award of the prospecting license is treated as conducted with respect to the prospecting to the same separate mineral operation. Furthermore, where the holder of a prospecting license obtains a mining lease and the area of that mining lease falls entirely within the prospecting license prior to the grant of the mining lease, the mining lease is treated as conducted with respect to the prospecting license and conducted with respect to the same separate operation.
Prior to the commencement of commercial production of a commercial find, person who incurs a revenue expenditure or a capital expenditure in the course of reconnaissance or prospecting operations shall consolidate all of such expenses into a single pool, and no revenue expenditure or capital allowance is allowed, and the expenditure is not included in the asset’s cost (section 79). Such expenses cannot be classified as either domestic or non-domestic.
Subject to any fiscal stability agreement, the mineral royalty rate is 5% of the total revenue earned from mining operations and is calculated for each year of assessment. A person’s income from separate mineral operations are taxed separately. A fee, royalty, or other payment due under the Mineral and Mining Act in relation of a mineral right or otherwise constitutes a debt owed to the Republic and is recoverable in court.
When it comes to the resolution of disputes under Ghana’s mineral and mining legislation, there are numerous regulations. The law encourages all mining industry participants to make every attempt to resolve all problems through mutual negotiations. (Section 27 of the Mineral and Mining Act).
However, where a dispute arises between a holder of a mineral right who is a citizen and the Republic over an issue expressly stated in Act 703, such a dispute shall be referred for resolution (Section 27(2) of Act 703). If the dispute is not resolved amicably within 30 days of the dispute arising, or within a longer period agreed upon by the parties, a party to the conflict may submit the difference to arbitration for resolution under the Alternative Dispute Resolution Act, 2010 (Act 798) or any other enactment of such nature that may be in place.
Where a dispute arises between a holder who is not a citizen and the Republic in respect of a matter expressly stated under Act 703, such a dispute or question shall be referred for resolution, and if the same is not resolved amicably within 30 days of the dispute arising or a more extended period as agreed between the parties, the difference may be resolved using any of the following mechanisms;
- Under international machinery for the resolution of investment dispute as agreed to by the parties, or
- If the parties do not reach an agreement under international machinery within 30 days or a more extended period as may be agreed between the parties, the matter may be submitted to arbitration under the following;
- Firstly, the framework of a bilateral or multilateral agreement on investment protection to which the Republic and the country of which the holder of the mineral right is a national are parties, or
- Secondly, if no agreement contemplated by subparagraph (i) exists, the rules of procedure for arbitration of the United Nations Commission on International Trade Law, UNCITRAL Rules.
- The 1992 Constitution of the Republic of Ghana.
- The Minerals and Mining Act (703/2006), as amended by the Minerals and Mining (Amendment) Act (900/2015).
- The Environmental Protection Agency Act (490/1994).
- The Income Tax Act (896/2015).
- Ghana Investment Promotion Centre Act, 2013 (Act 865).
- The Minerals and Mining (Licensing) Regulations, 2012 (LI 2176).
- The Minerals and Mining (Local Content and Local Participation) Regulations, 2020 (LI 2483)
- Adjaye and Others V. Attorney General and Others Suit No.C144/94, 30th March 1994 (Unreported).
- Agbesinyale, P. (2003). Ghana’s gold rush and regional development: The case of the Wassa west district of Ghana. SPRING Research Series, 44. University of Dortmund, Germany.
- International Council on Mining and Metals, 2015, “Mining in Ghana –What future can we expect?” at page 5.
- Kwesi Amponsah-Tawiah, Kwasi Dartey-Baah, “The Mining Industry in Ghana: A Blessing or a Curse” International Journal of Business and Social Science Vol. 2 No. 12; July 2011 at page 62.
12. https://sustainabledevelopment.un.org/content/documents/dsd/dsd_aofw_ni/ni_pdfs/NationalReports/ghana/Mining.pdf last visited on 27/01/2022.
- https://gipc.gov.gh/mining/ lasted visited on 27/01/2022.
- https://gra.gov.gh/portfolio/mineral-royalties-tax/ last visited on 8/02/2022.
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