Ghana, with its abundant mineral deposits, is a shining star in West Africa’s business landscape. Its rich resources, democratic political system, and robust economy position it as one of Africa’s leading and most stable economies. This democratic governance ensures a business-friendly environment that is more conducive than one might expect. The US Geological Survey estimates Ghana’s gold reserves to be a substantial 50 million ounces (1,600 tons).
Ghana requires a particular method of setting up a company to explore minerals. This involves obtaining a license from the Minerals Commission, a regulatory body responsible for overseeing the exploration and exploitation of minerals in the country. The process of obtaining this license involves rigorous steps, which potential investors or business owners need to be aware of.
The Minerals and Mining Act, 2006, as amended by the Minerals and Mining (Amendment) Act, 2015 (Act 900) and other subordinate regulations, provides a guide on how to set up a company licensed to explore minerals in Ghana.
Relevant Legislations
The exploration of minerals (gold) reserves in Ghana is governed by several laws within her jurisdiction which includes the following;
a. Substantive Legislation:
i. The 1992 Constitution of the Republic of Ghana.
ii. The Minerals and Mining Act 2006(Act 703) as amended by the Minerals and Mining (Amendment) Act 2015 (Act 900) (All together the Minerals and Mining Act).
iii. The Minerals Income Investment Fund Act, 2018 (Act 978)
iv. The Minerals Development Fund Act, 2016 (Act 900)
b. Substantive Regulations
i. The Minerals and Mining (Licensing) Regulations, 2012 (L.I 2176)
ii. The Minerals and Mining (Explosives) Regulations, 2012 (L.I 2177)
iii. The Minerals and Mining (General) Regulations, 2012 (L.I 2173)
iv. The Minerals and Mining (Compensation and Resettlement) Regulations, 2012 (L.I 2175)
v. The Minerals and Mining (Support Services) Regulations, 2012 (L.I 2174)
vi. The Minerals and Mining (Health, Safety and Technical) Regulations, 2012 (L.I 2182)
vii. Minerals and Mining (Tracking of Earth Moving and Mining Equipment) Regulation, 2020 (L.I 2404)
viii. Minerals and Mining (Local Content and Local Participation) Regulation, 2020 (L.I 2431)
c. Other legislative and regulatory provisions have relevance for mining operations in Ghana including the following;
i. Companies Act, 2019 (Act 992)
ii. Environmental Protection Agency Act, 1994 (Act 490)
iii. Ghana Investment Promotion Centre Act, 2013 (Act 865)
iv. Income Tax Act, 2015 (Act 896)
v. Forestry Commission Act, 1999 (Act 571)
vi. Water Resources Commission Act, 1996 (Act 522)
vii. Ghana Geological Survey Authority Act, 2016 (Act 928)
These laws listed constitute the principal and subordinate legislation regulating the mining of industrial minerals, including gold, in Ghana. They set out the licensing regime for mineral exploration in Ghana, the rights of a mining leaseholder, and the objects and powers of regulatory institutions in the industry, including the Ministry of Mines and Natural Resources and the Minerals Commission, among others.
Principal Institutions Regulating the Industry
The Ministry of Mines and Natural Resources and the Minerals Commission of Ghana are the chief administrative bodies regulating the sector. As succinctly stated in the laws listed above, they provide the framework for the conduct of gold explorations in Ghana.
However, the holder of a mineral right must obtain the necessary approval and permits from the Forestry Commission (FC) and the Environmental Protection Agency (EPA) before undertaking an activity or operations under the licence. This is significant in ensuring the protection of natural resources, public health, and the environment.
Ownership of Mineral Resources
Under the principal Act, the Minerals and Mining Act, 2006 (Act 703) as amended, every mineral in its natural state in, under or upon any land in Ghana, rivers, streams, watercourses throughout the country, the exclusive economic zone or any area covered by the territorial sea or continental shelf is the property of the Republic of Ghana. It is vested in the President in trust for the people of Ghana.
This reinforces the constitutional position of Ghana that the President holds all minerals in trust for the people.
Types of Mining Licenses in Ghana
a. Reconnaissance Licence Holder (RLH)
Under Act 703 and the Subordinate legislation listed above, a reconnaissance license bestows upon the holder and a person the exclusive right to conduct reconnaissance in the designated area for specific minerals.
An applicant can also apply for a Restricted Reconnaissance Licence (RRL), which is specifically valid for a period of 12 months.
It’s important to note that a reconnaissance license holder is not permitted to engage in drilling or excavation in the designated area. This limitation ensures that the license’s boundaries are clear and understood, keeping all parties informed and aware.
It’s worth noting that a reconnaissance license is granted for an initial period of 12 months.
b. Prospecting Licence Holder (PLH)
The Minister responsible for mines may, on an application duly made by a qualified person and on the recommendation of the Minerals Commission, grant a prospecting license for all or any minerals specified in the application. The holder of a prospecting permit is empowered to exercise the rights under the license, including the right to enter upon the land to which the licence relates to undertake the following;
i. Prospect for minerals in respect of which the licence is granted
ii. Make boreholes and excavations that may be necessary for the prospecting operations,
iii. Erect camps, put up temporary buildings needed for the prospecting operations, and conduct other ancillary or incidental activity to the prospecting.
For those interested, there is an option to apply for a Restricted Prospecting License (RPL). This variant of the standard prospecting license is valid for three (3) years. The application process for this variant is similar to that of the standard license, with the additional requirement of specifying the desired restriction period.
A prospecting license shall be granted for an initial period not exceeding three (3) years.
c. Mining Lease (ML)
A holder of a reconnaissance license or prospecting license may, before the expiration of the license, apply for a mining lease in respect of all or any of the minerals, the subject of the permit and in respect of all or any one or more of the blocks which constitute the reconnaissance or prospecting area.
A restricted mining lease can be granted, as well. This is for fifteen (15) years.
A mining lease, offering flexibility, shall be for an initial term of thirty (30) years or for a lesser period that may be agreed with the applicant, ensuring accommodation to your specific needs.
d. Small Scale Mining Licence
Section 82 of Act 703, as amended, provides the legislative framework for the License of small-scale mining in Ghana. Without contrary opinion, it states that a person shall not engage in or undertake a small-scale mining operation for a mineral unless the Minister grants a mining licence.
Therefore, before initiating a small-scale mining operation, it is crucial for an entity to apply for and obtain a licence from the Minister responsible for mines, who plays a pivotal role in this process.
Legal Qualification for Small-Scale Mining Licence
Legal qualification under Act 703 as amended exists for the grant of a small-scale mining licence for the operation of small-scale mining in Ghana.
It provides that a small-scale mining licence shall not be issued to a person unless that person qualifies under the following:
• Is a citizen of Ghana
• Has attained the age of 18 years, and
• Is registered by the office of the Minerals Commission in an area designated as District Office
Government Participation Interest in Mining Lease
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, to which the government shall not make a financial contribution.
However, it’s important to note that the government is not precluded from obtaining further participation in mineral operations. This further participation can be agreed upon with the holder, ensuring that all parties are included in the decision-making process.
Grant of Mining Licence in Ghana
Except for small-scale mining rights that can be granted to an individual as provided for under Act 703, only corporate bodies incorporated in Ghana under the laws of the Republic of Ghana shall be given a mineral right in Ghana. However, a license for small-scale mining is granted only to a citizen of the Republic of Ghana who has attained the age of 18 years and is registered by the office of the Minerals Commission in an area designated and known as the District Office. Under no circumstances is any foreigner allowed to participate in the small-scale mining industry.
Foreign Ownership, Minimum Capital Requirement, and Restrictions
Foreign entities can hold mineral rights in Ghana by incorporating a company in Ghana with the object, among other things, being mining and exploration activities. The Ghana Investment Promotion Centre Act, 2013 (Act 865) prescribes the minimum capital threshold for non-Ghanaians to participate in various sectors of the economy, including mining.
The law provides that where the foreign investor has a Ghanaian partner, the foreign investor is required to invest a foreign capital of not less than TWO HUNDRED THOUSAND UNITED STATES DOLLARS (US$200,000.00) in cash or capital goods relevant to the investment or a combination of both by way of equity participation. The person who is a citizen must hold at least ten 10% of the equity.
However, where the foreign investor wholly owns the company, the law, as stated, provides that the investor must invest a minimum of not less than FIVE HUNDRED THOUSAND UNITED STATES DOLLARS (US$500,000.00) to have the company incorporated and licensed by the Centre.
It is important to stress that a foreign investor is not mandated to have a local equity partner (Ghanaian) to participate in the mining industry under Ghana’s mining laws. This, therefore, means that an incorporated company with equity participation held wholly by non-Ghanaians shall be entitled to own mineral rights in Ghana.
Restrictions
The only restriction to participate in the mining industry in Ghana by an entity incorporated by a foreigner is that it cannot engage in operations relating to industrial minerals unless it commits in its proposed program to invest at least TEN MILLION UNITED STATES DOLLARS (US$10,000,000.00) in the operations.
As the Minister of Mines may occasionally declare, industrial minerals include basalt, clay, granite, gravel, gypsum, laterite, limestone, marble, rock, sand, sandstone, slate, talc, salt, and other minerals.
Assignment And Joint Venture Arrangements of Mineral Rights
The law requires that a mineral right shall not in whole or part be transferred, assigned, mortgaged or otherwise encumbered or dealt with in any manner without the prior approval of the Minister responsible for mines. The approval, however, shall not be unreasonably withheld or given subject to unreasonable conditions.
This demonstrates, therefore, that a foreign entity that meets all requirements set out under Act 703, the Companies Act, and the Ghana Investment Promotion Centre Act, shall, with the approval of the Minister responsible for Mines, be entitled to partner with an indigenous Ghanaian company with a mineral right to explore for minerals in Ghana.
The law states that within 30 days of receiving an application for approval of an assignment of mineral rights or any arrangement, be it a mortgage or joint venture, the Minister shall be required to give written reasons for approval or rejection of that arrangement.
However, if the Minister fails to do so, then, upon an applicant’s request, the Minister shall give written reasons to the applicant for the failure to communicate a decision on the application. This subsequent communication from the Minister shall reach the applicant within 14 days of receipt of the request from the applicant.
Incentives and Benefits of a Holder of Mineral Rights
The mining leaseholder is entitled to several incentives and benefits in Ghana. Among them, the holder is entitled to capitalization of expenditure on reconnaissance and prospecting approved by the Minister on the advice of the Minerals Commission, where the holder starts the development of the commercial find.
The holder of a mineral right is further entitled to additional benefits, including the following;
i. Exemption from payment of customs import duty in respect of plant, machinery, equipment, and accessories imported specially and exclusively for the mineral operations;
ii. Exemption of staff from payment of income tax on furnished accommodation of the mine site;
iii. Immigration quota in respect of the approved number of expatriate personnel; and
iv. Personnel remittance quota for expatriate personnel free from the tax imposed by an enactment regulating money transfer out of the country.
Dispute Resolution
The mineral and mining laws provide ample provisions for resolving disputes in Ghana. The law urges all players in the mining industry to make efforts to resolve all disputes through mutual discussions.
However, where a dispute arises between a holder of a mineral right who is a citizen and the Republic regarding a matter expressly stated under Act 703, such a dispute shall be referred for resolution. Suppose the same still needs to be resolved amicably within 30 days of the dispute arising or a more extended period as agreed between the parties. In that case, the difference may be submitted by a party to the conflict to arbitration for settlement under the Alternative Dispute Resolution Act, 2010 (Act 798) or any other enactment that may be in place.
On the other hand, 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 30days of the dispute arising or a more extended period as agreed between the parties, the difference may be resolved using any of the following mechanism;
a. Under international machinery for the resolution of investment disputes as agreed to by the parties or
b. If the parties do not reach an agreement under (a) 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;
i. 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
ii. 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.
Ghana has signed and ratified investment treaties with Denmark, the United Kingdom, China, Germany, Malaysia, the Netherlands, and Switzerland. These treaties generally protect nationals’ investments from the contracting parties.
It is important to note further that each agreement granting mineral rights shall make provision on the resolution method of the dispute that may arise under the contract.
Stability Agreement
To guarantee mining companies’ investments, the Minister may enter into a stability agreement with the holder to ensure that the holder of a mining lease shall not be affected by a new enactment, order, or instrument for a period not exceeding 15 years from the date of the contract.
A stability agreement, however, needs the ratification of the Parliament of Ghana.
Local Legal Representative (LLR)
The foreign entity should have access to legal representation before it seeks to incorporate a company to apply for mineral rights in Ghana. Most especially when the foreign entity aims to enter into a joint venture with a Ghanaian company having a mineral right in Ghana, the local legal representative will conduct due diligence on the local company to ascertain the veracity of its mineral lease.
Further, the lawyer will also be expected to educate and proffer sound professional advice to the foreign entity on any changes in the laws and regulations governing acquiring mineral rights in Ghana.
Also, the legal representative shall police the processes leading to the company’s incorporation with the Registrar Generals Department, registration with the Ghana Investment Promotion Centre, and application of mineral rights from the Minerals Commission of Ghana. Timely legal advice must be obtained from a lawyer with knowledge and working experience in Minerals and Mining space in Ghana.
The Legal Representative shall also be responsible for formulating and drafting agreements to govern all transactions in Ghana. This is intended to secure the parties’ interest in the transaction and ensure that their reasonable expectation is met at the end of the day.
Conclusion
As seen from the above, the grant of a mineral licence entitles the holder to undertake mining within the prescribed limits of the laws established for mining in Ghana.
Legal Notice
The contents of this publication, current at the date of publication set out above, are for reference purposes only. They do not constitute legal advice and should not be relied upon. Legal advice about your particular circumstances should always be sought separately before taking action based on this publication.
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