Mining outlook

Wilson Abena, Kumasi, Ghana
February April 01st, 2024

I n 2020, large-scale mining companies dominated this industry with over 71.1 percent of mining activities. Small scale mining account for 29.1 percent. Gold, diamonds, manganese, and bauxite are the four major mined minerals. In 2021, gold generated 96.2 percent of mining revenues. The share of revenues for manganese was 3.22 percent, bauxite 0.42 percent and diamond 0.04 percent.

Mining companies and institutional setup

Ghana exports significant proportion of its gold, manganese, bauxite, and diamond. An absence of domestic industrial transformation and value addition reinforce dependence on export.

In 2023, the mining value chain had 20 ‟large scale mining companies”¹. The Precious Minerals Marketing Company (PMMC) assays precious minerals for the government. It buys raw or semi-processed gold from ‟small-scale mining companies”. But, the PMMC is not a commodity trading market and it is not supervised by the Ghana Security Exchange Commission. The Bank of Ghana, Customs, and the Minerals Commission also track activities in the mining sub-sector. The Commission has a record of 71 active licensed exporters. The PMMC is also independent from the Ghana Commodities Exchange (GCE) and the exchange does not trade minerals commodities produced in Ghana. Ghana remains a taker of mineral prices set in London and New York.

Contribution to the economy

In 2022, the Ghana Chamber of Mines reported that mining contributed 7.6 percent of the national GDP. Gold alone accounts for 96.98 percent of gross mineral revenues. The rest came from manganese (2.57 percent), bauxite (0.42 percent) and diamond (0.03 percent). Mining was the largest contributor to direct domestic taxes in 2022. The sector’s fiscal payments amounted to 18.6 percent of total direct domestic tax receipts. Local procurement of goods and services and employment also contribute to the economy. Yet, complex structural issues continue to slow the modernization of this industry.

Structural bottlenecks

On May 11th, 2023, the ministry of lands and natural resources convened stakeholders in the mining sector in Accra. The stakeholders analyzed the challenges and ways of harnessing natural resources. During his keynote speech, the President of Ghana said that Ghana receives ‟suboptimal benefits from natural resources”. This means that the country receives only a small fraction of revenues from the international mining business. He attributed this situation to historical challenges and shortcomings in negotiations with companies. The President called for a rectification of past mistakes to ensure Ghana has ‟optimal benefits ”from mining.

During the same event, Samuel A Jinapor, minister of lands and natural resources, called for the development of a domestic value addition².

Illicit financial outflows smuggling and corruption also afflict the sub-sector. Participants to the event agreed that illegal miners or ‟Galamsey”³ in the local language, exact irreversible environmental damages⁴. Deforestation, pollution, and habitat destruction are the visible signs of these damages.

Transformation

Ghana is targeting three minerals (aluminum, iron ore, and gold) to start its domestic value addition strategy. In 2018, the State set up the Ghana Integrated Aluminum Development Corporation (GIADEC) to develop the full value chain of Aluminum. Similar plans are under development for iron ore. In 2019, the country set up the Ghana Integrated Iron and Steel Development Corporation (GIISDEC) to create a value chain in iron ore. Together, the GIADEC and GIISDEC will conduct upstream production and downstream transformation.

At the same time, Ghana aims to process 400 kilograms of gold per day. The Bank of Ghana is seeking certification from the London Bullion Market Association (LBMA) to be able to award certification standards to refineiries in Ghana and facilitate access to the international market⁵.

Prospects

The Ghana Chamber of Mines (GCM) is optimistic about the prospect of the sub-sector. Mining is a catalyst for national economic development according to Sulemanu Koney, the CEO of the Chamber⁶. According to Koney, in 2022, the sector contributed 18.6 percent to state direct taxes and generated US$4.14 billion of forex currency. The sector provides 11,191 people, of which 99 percent are Ghanaians.

The discovery of lithium deposit increase the sector’s appeal to investors. In 2018, Ghana discovered commercial quantities of lithium at the Ewoyaa lithium mine in the Cape Coast region. The mine has a 12.5 years economic lifespan and proven reserves of 25.6 million ton.

In October 2023, the government granted Atlantic Lithium Limited a 15-year mining lease to develop the Ewoyaa project. The lease gives Barari DV Ghana Ltd. (the subsidiary of Atlantic Lithium), the exclusive right to mine lithium and related minerals in the area. The parend company is a member of London Stock Exchange (Alternative Investment Market) and since May 2024, of the Ghana Stock Exchange. The company says that a ‟scoping study indicates life of Mine revenues exceeding US$1.5bn‟⁷. It will invest US$102 million to develop the project.

In October 2024, the CEO of the MIIF, Edward Nana Yaw Koranteng, disclosed that the company has established a gold trade desk that supports the small-scale mining sector. The trade desk offers a traceability mechanism, which supports environmentally sustainable mining. Through this entity, the MIIF buys and exports gold to LBMA markets. This initiative has generated US$777 million in just eight months, and contributed to an increase in gold reserve, which in turn, help stabilize the cedi against the dollar.

In addition to Atlantic Lithium, the MIIF has also made strategic investments in Castle Minerals, AshantiGold, ElectroChem Ghana Ltd, and Injaro, a venture capital fund supporting SMEs in the mining sector. The MIIF is bullish about the future. Recent internal estimates disclosed that the company had of US$1.5 billion in current assets under management at the of 2024 and forecasts US$6 billion within the next ten years¹⁰.

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