Ghana and Mali mining developments create regulatory risk for investors

Mali's president has created a new ministerial-level post dedicated to mining oversight, which will have powers to supervise mining policy, monitor compliance with Mali's mining code and review reports from mining title holders. These responsibilities were previously held by the mines ministry, but the move has centralised authority in the office of the presidency.

A proposed overhaul of the mining sector by Ghana’s government, aimed at increasing state revenue and preventing the abuse of licensing terms, includes cancelling long-term stability agreements and significantly increasing gold royalty rates. The Chamber of Mines reacted by indicating that the changes may undermine investor confidence.

Edward James, an expert in corporate crime at Pinsent Masons, said: “Recent developments in Ghana and Mali reflect a broader continental trend in which governments are reassessing mining frameworks to secure a greater share of value for local stakeholders or, as is the case in Mali, a greater concentration of power.”

Ghana’s intends to end stability agreements held by Newmont, AngloGold Ashanti and Gold Fields, and introduce a royalty regime starting at 9% and rising to 12% when the price of gold hits US$4,500 per ounce. While the Chamber of Mines acknowledged the value of a sliding‑scale royalty system, it warned that the current proposal would place Ghana higher on the global effective tax curve, potentially making new projects unviable and leading to job losses.

Although Mali has appointed an experienced mining executive in the newly created role, the consolidation of authority into the office of the presidency increases the risk of political intervention in mining investments, according to James.

James said: “The moves will create compliance risk in both countries, albeit that the nature of the risk is different. Whilst the political landscape in Mali is already complex, the move will further concentrate power in the hands of the president, who is the general of the military junta led transitional authority. The risk that arises is that companies may seek to by-pass the bureaucrats in the mines ministry to get ahead by making inappropriate offers to the new office holder. Such conduct should of course be avoided.”

“In Ghana, the risk does not arise from a concentration of power, but rather through the threatened disruption of the status quo. When investors decide to invest in mine, it is typically based on long-term forecasts to ensure that they can recover the steep investments made and ultimately make a profit. These assessments are sensitive to changes in key assumptions like tax and royalties. Whilst the gold price may be high now, that may not always be the case. The first risk that Ghana faces is that in future investors will think twice before investing. The second and more imminent risk is that some mines may be tempted to make inappropriate offers to avoid the touted increased tax or cancellation of agreements,” he said.

“Current mine owners in Mali should ensure that they have tightly regimented compliance programmes and oversight to manage the potential risk that the newly appointed ministerial position may present. Future investors in mines in Mali should similarly adopt robust compliance due diligence to ensure that there is no track-record of corruption in the entities or mines that they are looking to buy. In Ghana, current mine owners should likewise ensure that they keep a close eye on developments and the people responsible for responding to the current situation to ensure that they act appropriately.”