When Ghana’s Minerals Commission set out plans to scrap long-term stability agreements and move gold royalties from three to five per cent onto a sliding scale starting at nine, I read it the way almost everyone did, as a tax story.
Bullion has been sitting near record levels for months, governments take their share when prices allow, and the coverage said so. I had no particular reason to look twice.
What stopped me was the justification. Isaac Tandoh, the commission’s acting chief executive, barely mentioned the gold price when he spoke to Reuters in January.
“We’ve seen companies use revenue from Ghana to buy mines elsewhere while refusing to pay even basic obligations,” he said. Renewal of the stability agreements, he added, was “conditional, not automatic”.
He was making an argument about conduct, in public, on the assumption it would go down well.
It’s that assumption that interested me. Officials pick their justifications with some care, and anyone raising a levy while prices are high has the easiest argument in the world available to them, which is that the money is there and the country should have more of it. Reaching past that for an argument about behaviour is a choice. It also does work the price argument cannot do, because scrapping stability agreements is a much bigger step than lifting a rate.
Those agreements are a legal protection that investors priced in years ago, and no government removes one on a technicality. You do it when enough of the public already thinks the companies had it coming. Tandoh had plainly thought about the industry’s reply as well, because when the suggestion was put to him that tougher terms would deter investment, he said companies “operate under harsher conditions elsewhere and still make profits”, and that “mining is about numbers”.
I can hear the objections, because I made them myself: governments have always taxed commodities harder when prices run, the rhetoric is just the wrapping, and reading belief into a fiscal decision is the sort of thing communications people do to make their own work sound important. Fair enough, except that the wrapping was chosen, the stability agreements went with it, and the argument landed. None of that happens unless the ground was already prepared.
One sentence, five jurisdictions
Once we started pulling at it, Ghana stopped looking like a one-off. Mali has taken state equity to 35 per cent, and the dispute that followed put Barrick’s Loulo-Gounkoto complex under provisional administration with four employees in detention before the two sides settled. Niger revoked three companies’ agreements in March, having earlier seized roughly a thousand tonnes of uranium from SOMAIR. Burkina Faso has legislated for a 15 per cent state stake. Elsewhere, the instruments differ but the instinct does not, from the Democratic Republic of Congo’s cobalt quotas to Indonesia’s nickel export ban. Underneath all of it sits the same sentence: this resource is too important to be left to the company holding it.
Whether any of these governments acted in good faith is a separate question, and not one I can settle from London. What can be said is that the grievance they are reaching for has a factual basis. A great deal of mining revenue has left a great many countries over the past century without leaving much behind, and enough people in those countries know it. A finance ministry looking for revenue will reach for whichever argument the public already accepts, and in most of these jurisdictions that argument is lying there waiting to be picked up.
If a company genuinely takes more than it leaves, publishing a clearer account of itself changes nothing, and deserves to change nothing. The argument I am making only holds where the record will stand up to being read, which means part of my job is occasionally telling a client that their problem is not the story.
Which brings me to the part that should worry the industry. Miners will recognise the idea that a resource is too important to be left to the company holding it, because it is the one currently opening doors in London, Washington and Brussels. Every critical minerals strategy of the past three years rests on it. The sector has read the whole episode as vindication after a long stretch of being treated as a problem to be managed, and I understand why, but vindication of that kind looks to me more like a loan than a gift. The same logic that makes your product strategically essential makes you a tempting thing for a state to take a larger share of.
Built for the fence line
What keeps nagging at me is how badly matched the industry’s tools are to the problem. Social licence, as it is actually practised, is a local instrument. It concerns the community nearest the pit, it gets measured in that community, and it behaves like something that community grants or withholds. Resource nationalism turns up in a capital city rather than at the fence line, argued by ministers in front of a national audience who will never see the mine, and a liaison programme working beautifully in the nearest town offers no protection whatsoever against it. Plenty of companies can describe sentiment in that town in forensic detail and tell you almost nothing reliable about how they are regarded two hundred miles away, where their fiscal terms are decided.
Written by the other side
There is a newer layer on top, and it is the one I find most people have not thought about. When a minister’s adviser, an analyst or a journalist wants a quick account of what a company has actually done in their country, they increasingly ask an AI assistant rather than open a file or make a call. Those answers are built from whatever is public, readable and widely cited, and for most mining companies the readable, widely cited account of their conduct was written by people who oppose them.
The company’s own version is sitting in a sustainability report produced for auditors, which is long, heavily caveated and almost never linked to.
The full piece sets out why social licence offers so little cover here, and three things worth doing before the next mining code is drafted.
Read it here: Ghana did not double its royalties because of the gold price
Adam was the Wall Street Journal’s southern Africa correspondent, based in Johannesburg.