The Ghana Chamber of Mines is urging the government to either defer the implementation of the proposed sliding-scale royalty regime or abolish the Growth and Sustainability Levy prior to introducing a revised variable royalty structure.
This is to avoid excessive front-end fiscal stacking and unintended long-term consequences.
According to the Chamber, this will ensure sustainable revenue for the government while ensuring the continued expansion of mines and the start of new projects.
In its position paper, it said, while it supports the principle of a sliding-scale regime, it does not agree with the proposed range of royalty rates.
Accordingly, it proposes a more balanced and investment-responsive royalty range of 4.0% to 8% to be applied without the Growth and Sustainability Levy and additional 1% of net profit to be set aside in a dedicated fund for industry and host community specific projects and initiatives when gold price exceeds $4,500, as a fair and sustainable alternative that preserves competitiveness, while ensuring predictable fiscal returns to the State.
“Should government proceed with the reform, the Chamber further recommends the inclusion of robust transitional and grandfathering provisions to protect existing operations and committed investments approved under the current regime. A balanced, predictable, and competitive fiscal framework remains essential if Ghana is to maximise the long-term value of its gold resources, sustain employment and investment, and preserve the sector’s contribution to national development”, it added.
The Government of Ghana’s consideration of an increase in mineral royalty rates, specifically, a transition from the current fixed royalty of 5.0% to a variable or sliding-scale regime ranging between 5% and 12%, comes at a critical juncture for Ghana’s gold mining industry.
However, the Chamber argued that the timing of the proposed increase is particularly consequential. “It coincides with structurally rising unit costs, maturing and increasingly complex ore bodies, and a fiscal framework that already imposes significant gross- and profit-based charges on mining operations”, it explained.
It pointed out that the proposed reform constitutes a material adjustment to a core fiscal parameter that directly influences investment decisions in a capital-intensive and long-life industry, highlighting that “Given that royalties are levied on gross revenue, any material increase would have an immediate and non-linear effect on mine cash flow, cut-off grades, and life-of-mine economics, especially for mature and low-grade operations”.
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Source: www.myjoyonline.com