Gold miners operating in Ghana and Ivory Coast are refusing to comply with tax increases imposed this year, saying the new regulations flout their existing licence agreements, industry sources told Reuters.
Countries across West Africa have been taking advantage of soaring gold prices to increase mining taxes and raise additional revenue to plug gaping budget deficits and ease high debt levels.
Mining companies in the region have mostly complied apart from in Ghana and Ivory Coast, Africa’s top and seventh biggest gold producers respectively, where companies say terms agreed when licenses were granted should be honoured by both parties to protect and spur investment, the six industry sources said.
Mining companies have agreed between themselves not to pay the extra taxes while they negotiate with the Ivory Coast and Ghana governments to repeal the hikes, according to the sources.
Producers in the two countries include Gold Fields, Newmont, AngloGold Ashanti, Barrick, Endeavour, Allied Gold and Perseus. They all declined to comment or did not respond to Reuters‘ requests for comment.
In January, Ivory Coast introduced a flat royalty tax of 8% of annual revenue, according to a document seen by Reuters, up from 3%-6% previously, depending on the miner’s contract.
Ghana, which has defaulted on its debt and is undergoing a debt restructuring, raised a tax on gold miners’ annual gross output to 3% in March, from 1%, after appealing to the companies to help it plug revenue gaps, said a source in the country’s finance ministry.
“If people have invested for the long term and you change the rules midway, it can affect the project. New rules can apply to new projects,” said an executive at a major international mining company operating in Ivory Coast, who asked not to be named.
The mines and finance ministries in Ghana and Ivory Coast did not respond to Reuters requests for comment.
Elsewhere in the region, military-ruled Burkina Faso introduced a sliding scale royalty regime in February, linking royalties to gold prices, which miners have largely complied with, two other sources familiar with the matter said.
Miners in Mali, Niger and Guinea have also been mostly complying with aggressive regulations introduced by new mining codes.
Ongoing negotiations
Gold prices have surged nearly 30% this year, driving up profits for gold miners in the first quarter, but sudden regulatory changes are a frequent obstacle to doing business in Africa.
Barrick has been in a two-year standoff with Mali’s military-ruled government over new mining legislation aimed at boosting state revenue, a dispute that has seen the Canadian miner’s Loulo-Gounkoto complex shut, executives detained and its share price plunge.
Barrick, which also has operations in Ivory Coast, did not respond to a Reuters request for comment.
Miners in Ivory Coast are currently holding talks with the mines and finance ministries to break the impasse over the new taxes, a mining executive said.
In Ghana, the companies under the Ghana Chamber of Mines have asked the government to reconsider its measures.
If talks fail, companies could face financial penalties for delayed tax payments if the governments insist on the tax increases. One mining company in Ghana, which did not want to be named, said the tax authority has the right to shut a company’s operations and impose penalties. The companies could also choose to sue if they can prove their contracts should be immune to tax hikes.
Denis Gyeyri, Africa senior program officer at the nonprofit Natural Resources Governance Institute, said governments are too quick to raise taxes when prices spike but don’t lower them when prices fall.
“Royalty rates should be progressive – compensating mines at low prices and maximizing government revenue at high prices,” Gyeyri said.
Countries should also keep their tax rates competitive, he said, pointing out that royalty rates for miners in Western Australia, for example, vary between 2.5% and 7.5% depending on the extent of processing.
(By Maxwell Akalaare Adombila, Loucoumane Coulibaly and Emmanuel Bruce; Editing by Veronica Brown and Susan Fenton)
