The recent decision by the Minister of Lands and Natural Resources to terminate Resolute Mining’s mining lease for the Bibiani gold mine in Ghana has been a surprise to many. By suddenly ordering the mining company to cease all activity at the mine site without any explanation, the Ghanaian government sent shockwaves through the stock price of Resolute. By close on Wednesday,
Resolute’s stock price was down 24.7% on the London Stock Exchange hitting a record low since listing in the late 1990s. While the company is considering a possible legal action, this decision may well be a new item to add to the already long list of disputes within Ghana’s mining sector.
Another potential legal dispute for Ghana’s mining sector
After several years of negotiations with the Chinese company Chifeng Jilong Gold Mining to sell the Bibiani mine, the two parties had reached an agreement last December for a price of around $105 million.
The site is estimated to contain approximately 21.7-million tons, grading 3.6 g/t gold for 2.5-million ounces of contained gold.
While waiting for explanations from the Ghanaian government, the mining company has declared that it is seeking legal advice, probably with the intention of taking Ghana to court. Indeed, the stakes are high for Resolute as this brutal decision by the ministry could scupper its deal with the Chinese counterpart.
A new legal procedure, after the one opened a few months ago by the Australian Cassius Mining for a similar dispute over the Gbane mine, would further undermine investor confidence in the Ghanaian mining sector.
A new and sensitive file for the minister who starts piling up errors
While the dismissal of former Minister Kwaku Asomah-Cheremeh was supposed to turn the page on numerous scandals and poor management of the sector in the last few years, some early signs suggest that there is still a long way to go to restore the image of the Ghanaian mining market.
In addition to the dispute with Resolute Mining, other recent decisions by the Minister of Lands and Natural Resources could revive Ghana’s old ills.
One example is the recent appointment of Martin Kwaku Ayisi, Deputy CEO of the Minerals Commission as interim CEO. With the departure of the former CEO Addae Antwi-Boasiako, who was granted accumulated leave, Minister Samuel Abu Jinapor has opted for continuity by appointing Martin Kwaku Ayisi, who knows the inner machinery of the institution.
This appointment, followed by other changes in key positions in the sector, is said to be linked to the Minister’s desire to “restore sanity and reduce corruption” in the agency, according to a MyJoyOnline source. Choosing Martin Kwaku Ayisi could, however, have the opposite effect as his track record raises suspicions among the mining sector.
Hence, it is not entirely sure that his arrival at the head of the Minerals Commission will please operators. As Martin Kwaku Ayisi is only appointed on an interim basis for now, the next few weeks should provide an early assessment of whether he has the ability to manage the Minerals Commission or whether another CEO will have to be found to satisfy the miners.
The mining sector is currently skating on thin ice, not only with the Resolute Mining case and the appointment of Martin Kwaku Ayisi, but also on other issues like the recent controversy around gold trafficking.
The 25% drop in the value of Resolute on the London Stock Exchange sends a serious warning of the fragility of investor confidence. It is now up to the Minister of Lands and Natural Resources to act accordingly…
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