• The lands ministry announced on 16 April that the government will assume control of the Damang gold mine in Western region.
• This comes after the government announced on 14 April that an application by South African miner Gold Fields to extend its lease of the Damang gold mine had been rejected.
• The decision by the state over the Damang mine forms part of a wider reform agenda to bolster earnings from Ghana’s gold sector.
• This agenda does not pose any immediate contractual or operational risks to miners in Ghana.
• The state’s ability to derive additional value from the gold sector via reforms faces various headwinds.

The lands ministry announced on 16 April that the state will assume control of the Damang gold mine in Western region. This comes after the government announced on 14 April that an application by South African miner Gold Fields to extend its lease of the Damang gold mine had been rejected. Gold Fields’ lease agreement is set to expire on 18 April. As per the government, Gold Fields had failed to meet the requirements stipulated within the country’s mining charter. Gold Fields allegedly failed to declare verifiable mineral reserves or put forward an exploration budget.

This seemingly relates to Gold Fields’ conclusion of mining operations at the site in 2023, due to what it described as the site’s limited lifespan. Since then, Gold Fields has only been processing existing gold supplies from the site. Gold Fields acknowledged the state’s decision, claiming that it had met the requirements for its lease extension, but would honour the decision. It nonetheless noted that it would continue to engage with the government to “secure the best outcome for all stakeholders”.

The Signal

The decision by the state over the Damang gold mine forms part of a wider reform agenda. Since assuming office in January, the government of president John Mahama has vowed to reform the country’s gold sector, particularly small-scale and artisanal operations, while ensuring the state derives maximum benefit from larger operations (such as Damang). The latter had already been touted under the former regime of president Nana Akufo-Addo, which called for greater royalties and stakes in pending lithium mining projects. Under Mahama, the government has expanded upon this position – amid an ongoing rally in gold prices – by stating its intention to no longer automatically renew mining leases. Going forward, the state will review all leases upon expiration and ensure that government is deriving the maximum benefit from operations before approving any renewal. Part of this wider agenda saw the creation of the Ghana Gold Board (GoldBod) in March, which is mandated to oversee the management of gold trading in the country. To this end, the government announced on 16 April that gold derived from official artisanal miners could no longer be exported independently by traders in the country. As of 01 May, GoldBod becomes the sole legal buyer, seller, assayer, and exporter of gold produced by registered artisanal miners. It appears the directive is only centred on the artisanal sector, from which the state struggled to derive foreign currency, and which is marred by smuggling and illicit trading. Traders seeking to export gold from the artisanal sector must do so through GoldBod’s buying scheme, in which foreign buyers pay the regulator in United States dollars (USD) and then it pays local traders in Ghanian cedi (GHS). The Mahama regime has noted that ensuring greater control over the gold trade – and bolstering broader output in the sector – will be key to shoring up foreign reserves and easing external pressure.

This agenda does not pose any immediate contractual or operational risks to miners in Ghana. There is little to suggest that the Mahama administration’s gold – and broader mineral – reform agenda will impact existing contracts. Rhetoric by state officials indicates that the government will ensure that existing operations are unaffected until associated leases expire. Even in such cases, the state is not expected to automatically assume control of mining operations. For one, it does not have the capacity to replace existing miners once their leases expire, while the Mahama administration has put forward an investment-focused policy agenda. Adopting a nationalistic disposition towards the mining sector would deter ongoing efforts to attract new investment in the mining sector, particularly as the development of the nascent lithium sector continues to progress. To this end, the decision to assume control of the Damang mine is premised on Gold Fields’ lack of intent to develop it further if the lease were extended. While Gold Fields’ suspension of operations in 2023 was touted as being in response to a limited lifespan of the mine, it also comes as it has scaled back operations globally and sold smaller operations. The state appears intent on trying to maximise any revenue from the site at a time when Gold Fields is seemingly unwilling to do so. Mining companies are still likely to see the government attempt to re-negotiate some tenets of lease agreements once they expire; however, this is largely in line with other policies adopted across the continent, where decades-old mining contracts are being reviewed to ensure the state is receiving a proportionate share of revenue.

The government’s ability to derive additional value from the gold sector via reforms faces various headwinds. As noted above, the decision to review expired contracts by the government is not novel, and is being adopted across many countries in Africa. However, such contracts typically span decades, limiting any expansive contract review and associated increase in state royalties. As such, the state’s position on larger-scale operations is not expected to have any meaningful impact in the near term. While the government is expected to adopt a prudent approach in its management of these reviews, the policy itself may still increase caution on the part of smaller miners seeking to enter Ghana. As for changes to regulations around the artisanal sector, tangible improvements in gold revenue and foreign currency earnings may equally be elusive. In theory, GoldBod’s sole mandate to purchase and export gold from the artisanal sector should help shore up foreign currency and ease external pressure. However, this initiative appears to largely mirror that of former such projects, including the former government’s gold for oil programme and Domestic Gold Purchasing Programme (DGPP). These were geared towards ensuring that the government was maximising the revenue derived from the artisanal and small-scale gold sectors by promoting sales directly to the state; however, what transpired was a reported decline in output within the artisanal and small-scale gold sector. This suggests that artisanal and small-scale gold miners were still selling through unofficial channels. Both initiatives were also marred by governance shortcomings, missing data, lack of enforcement, limited transparency and corruption, which ultimately hindered their touted success. While the Mahama government has promised to address the shortcomings of these programmes in GoldBod, the new regulator still appears to have shortcomings in terms of oversight of the artisanal sector and enforcement of regulations. As such, Goldbod’s ability to ensure that artisanal and small-scale gold miners are only selling through correct channels remains in doubt. Without sufficient oversight, Goldbod’s directive may rather serve to expand the illicit gold trade in Ghana as artisanal and small-scale gold miners seek to accumulate USD as opposed to GHS for sales. Finally, it could further reduce incentives for illegal miners in Ghana to formalise their operations, particularly amid an ongoing rally in global gold prices. This could undercut the state’s ability to capitalise fully on the rally despite its reform programme.