Bright Simmons, IMANI Africa Honorary Vice-Chairman, said the claim by Minister of Lands and Natural Resources Samuel Abu Jinapor that the royalty rate agreed in the lithium deal was the highest in the country’s history was incorrect.
He explained that some may argue that Ghana lacks current lithium royalties as the country has enjoyed fairly high interest rates in the past.
Royalty rates on lithium contracts were increased from the standard 5% to 10%, and the state’s free interest in mining operations was increased from 10% to 13%.
However, Bright Simmons pointed out that the terms of the contract were not generous enough.
βYes, 10% seems high, because we have recently signed contracts that claim we are shortchanging, and a 13% free carry interest rate is interesting. The truth is that these conditions are not that generous because if you look at the entire history of mining in this country, you can say that in the 70s, Ghana’s participation rate was automatically 55%.
βYou canβt mine in Ghana unless the state owns 55%. So are we comparing fiscal yields on lithium now to what they were then? Or are we comparing the fiscal yields on lithium now to what they were then? Or have we had any say since 1990? “Is there a period of time when we had it? What are we doing? I mean, there was a period in our country when more things happened,” he said.
He added: “Whether that was a good thing is another debate, because some argue that the state is too dominant and private investment is not coming in.”By the 1980s, there were 33 gold mines. The argument is that they have reduced it to about four.” , Therefore, private technology, private management ability, etc. were shut out.
βBut the country has a history in the 70s when the Acheampong government said 55 percent of all minerals were state property, so it is true to claim that this is the best in terms of liberality of terms. No. What about 13%, or even if you raise it to 19%, or even further to 29% as the Minister has suggested, that may be the case, but how does that compare?β
He also pointed out that Ghana’s fixed royalty structure is not the best option.
Explaining his case on JoyNews Newsfile on Saturday, he said the government should have made changes to the royalty rate.
βWhat that means is how much we get from the beginning, so basically a royalty is the company doing the mining pays you a certain amount of money, regardless of whether they make a profit or not. And what we determined at the time was that the most prudent way to determine that royalty was to look at the company’s operating margin, i.e. how much profit the company was making, and peg it at that. That’s what it means.
βThus, when the price of a mineral increases dramatically in the world market, all things being equal, its operating margin will automatically improve and the royalty rate can then be adjusted. , when you look at that adjustment model, you could get rates as high as 25% on paper rates,β he said.
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