Parliament has ratified the development agreement granting stability terms and tax concessions to AngloGold Ashanti, enabling it to commence redevelopment of Obuasi Mine.

According to the report of a joint committee between Ghana and AnGloGold Ashanti (Ghana) Limited (AGAG), a capital investment of US$880m during execution of the Development Agreement – which is expected to end 31st December, 2023 – will be committed by the company.

The report further indicated that a total of US$1billion, 45m [US$1,045million] is to be spent for the redevelopment over the mine’s estimated 22-year lifespan.

Contributing to support the ratification, Minister for Lands and Natural Resources John Amewu stated that the direct economic benefits to the country from implementing the AngloGold Redevelopment Agreement is estimated at US$5.3billion over the mine’s life.

These include payment of royalties, corporate tax, Custom duties, withholding tax, contribution by way of employment, and transfers to the Community Trust Fund and Local business participation (goods/consumables, services, utilities).

Another benefit that will accrue to the country is interconnectivity between the mine and rest of the economy.

An estimated US$2.4billion will also accrue to local businesses over the mine’s life, and the report further revealed that the total number of persons to be employed directly by the company and its subcontractors will average between 2,000 and 2,500 over the mine’s life; with expected earnings of about US$371million.

The Joint Committee was informed by officials of AngloGold that before the suspension of its operations in Obuasi, the company was contributing about US$250million to the economy of Obuasi Community – with direct employment and third-party subcontractors of 300 and 350 persons respectively.

US$259m tax concession

Parliament also approved an estimated US$259m of fiscal concessions for AGAG; in the form of royalties, income tax, capital allowance, retention of losses, Customs import and VAT.

By the agreement, during the Stability period AGA is required to be exempt from any application of new taxes which may be imposed under an enactment.

Background

As part of the arrangement for the merger of AngloGold Limited and Ashanti Goldfields Company Limited to form AngloGold Ashanti Limited (AGA) in 2004, to support plans of extending the life of Obuasi Mine, the government of Ghana granted AGA a stability agreement.

The Stability Agreement conferred various fiscal concessions and stabilisation to the company’s subsidiaries in Ghana: namely AngloGold Ashanti Ashanti (Ghana) Limited (AGAG) responsible for the Obuasi Mine; and AngloGold Ashanti (Iduapriem) Limited (AAIL), which operates the Iduapriem Mine.

The Agreement for these entities are operational and valid until April 2019.

While the Iduapriem Mine continues to run profitably, the Obuasi Mine has been making losses due to operational difficulties. The continuous losses necessitated AGAG to undertake a major restructuring programme – under an Amended Programme of Mining Operations(APMO) approved by government in November 2014 in accordance with the Minerals and Mining Act, 2006 (Act 703).