Chamber of Mines seeks incentive scheme to boost exploration

The Ghana Chamber of Mines has called for the establishment of an incentive scheme to help reduce the high cost of exploration and to also attract the required investments into the high-risk business of mineral exploration.

Addressing the annual general meeting of the Chamber, Mr Eric Asubonteng, President of the Chamber, said the relevance of exploration in ensuring a pipeline of future viable mining projects cannot be over-emphasised.

Mr Asubonteng, therefore, called on the government to exempt exploration companies from payment of Value Added Tax on big-ticket cost items such as drilling and laboratory services.

“This exemption has proven to be a major incentive for attracting exploration into mining countries globally,” he said.

He said exploration was critical in guaranteeing sustainable production of mineral and discovery of new mineral resources to supplement production from existing mines or replace the output of mines whose economic ore body gets exhausted.

“However, exploration investment in Ghana has declined signi?cantly in recent years. This is alarming for a country to which mining is critical for forex and scale revenue generation as well as other value-enhancing services,” Mr Asubonteng said.

The expenditure on global mineral exploration, as measured by the company exploration budget, dropped by 11.5 per cent to $4.293 billion in 2019 from $4.852 billion in 2018.

The decline in budgeted exploration expenditure was caused by a general reduction in spending across all the mining jurisdictions except Australia and South East Asia-Paci?c regions.

In Africa, the projected exploration spending for 2019 stood at US$ 615.9 million and Ghana's neighbour, Burkina Faso, was the biggest bene?ciary.

Burkina Faso was earmarked to receive $132 million in 2019 while Ghana came second with a budget of $98.6 million.

“The disparity runs its own sad commentary for the Ghanaian mining industry. As Africa's leading producer of gold, Ghana must continue to create the requisite policy and legal prescriptions and platforms to engender mining exploration.”

Mr Asubonteng said in taking advantage of the opportunities that mining presents, Ghana must be seen to be creating the enabling environment for both local entrepreneurs and foreign investors while looking beyond the risks associated with exploration.

Touching on the challenges facing the mining industry, Mr Asubonteng said the poor railway system had remained the biggest challenge for the bulk mineral producers.

He said without a railway system which is a more cost-competitive mode of transporting the bulk materials to the ports for shipping, companies would be forced to use the more expensive road haulage alternative from their respective mines.

It is estimated that the cost of road haulage is 50 per cent more expensive than the alternative of using the railway lines; which would consequently result in the high cost of operation and adversely impact the revenue that the State would receive by way of corporate tax.

“We need to take advantage of the innovative measures in global transportation to construct fully functional railway systems to further open opportunities in the value chain of mining,” he said.

The chamber also called on government institutions to consider the removal of some of the elements in the price build-up of diesel supplied to the mines, saying challenges with the ex-refinery price, as well as taxes, levies, and margins on diesel have a lasting impact on the productivity of the mining industry if not checked.

Additionally, the Chamber urged the government to review its intention to standardize mineral revenue retention regimes.

The Chamber's analysis shows that retaining the existing general practice where mining companies have binding retention agreements based on their forex requirements will inure to the benefit of the industry and the country as well.

On the issue of operational permitting, the Chamber said although there was a slight improvement in the issuance of environmental permits, the unpredictable lead times for issuing permits by the EPA adversely affect project planning and execution.

It also impacts negatively on the sourcing of investment capital for projects because it creates uncertainty regarding cash flows and other project metrics.

One other key challenge that the Chamber had to grapple with was the government’s decision to withdraw military officers from the concessions of mining companies on 31st January 2019.

Mr Asubonteng said the measure ushered in serious security challenges for the operating mines across the country, adding that the pull-out of the troops from the mines was disconcerting and resulted in a situation where the mines were not fully assured of safeguarding such critical installations.