New local content law for mining industry

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A new local content law for Ghana’s mining industry is expected to be ready for cabinet and Parliamentary consideration about two months from now. The design of the new law began formally last year, and Minister for Lands and Natural Resources, Kweku Asomah Cheremeh confirmed this timeline for completion to Goldstreet Business at the weekend after the 91stAnnual General Meeting of the Ghana Chamber of Mines in Accra.

Most importantly, the impending new law introduces the concept of compulsory local participation in Ghana’s mining industry for the first time. Existing legislation specifies certain inputs that must be supplied by local companies but does not insist on levels of local equity participation in any mining activities.

In Ghana’s relatively much younger upstream oil and gas industry, it is compulsory that local companies must have a minimum of five percent equity stake in exploration and production activities. Indeed, it is this regulation that has allowed GOIL to make its much publicized entry into the upstream segment by taking the compulsory five percent stake in the Deepwater Cape three Points exploration block taken by Exxon Mobil.

This regulation has not been replicated for mining activities, evidently because of the huge risk involved in exploration and the large investments required to set up a mine; compulsory local equity participation requirements could slow down the pace of putting the requisite new investment together since local investors with the requisite equity capital and appetite for exploration risk could be hard to come by.

Instructively, GOIL is one of the oldest and largest downstream oil and gas industry operators in Ghana and is listed on the Ghana Stock Exchange, which is why it is able to commit the estimated US$25 million  investment required to take up its five percent stake.

However, certain key aspects of support services in the mining industry will be entirely reserved for Ghanaian enterprises under the impending new law, particularly the supply of fuel for mining operations and haulage of both production inputs and the ore that is mined.

This is expected to significantly increase local participation in the mining industry which has inevitably been very low, even though local content with regards to the source of mining input supplies has been on the rise.   Most gold mines are entirely foreign owned, one very notable exception being Rocksure’s participation in AngloGold Ashanti’s new underground mining operations at Obuasi, expected to commence production next year.

The impending new law also aims to ensure that local content consists of locally manufactured mining inputs rather than just primarily imported inputs sourced by indigenous suppliers as has largely been the case hitherto.

The new local content law is in part the result of a comprehensive review of the existing law by a consultant contracted for this purpose by the Minerals Commission. The new law also incorporates measures to fulfill a 10 point agenda arrived at by a round table forum convened by the Ghana Chamber of Mines last year which aims to strategically spur local manufacturing of mining inputs.

The impending new mining law is being seen by the industry as a step towards empowering local industry to fulfill government’s most ambitious local value added target – that of refining at least 30 percent of Ghana’s gold production locally.

source: ghanaalert.com