AngloGold Ashanti Ltd., Africa’s biggest gold producer, said it was not “appropriate” for Ghana to renegotiate a 2004 agreement that capped mining royalties paid to the government.
“We consider the agreement pretty much cast in concrete,” said Alan Fine, a spokesman for AngloGold Ashanti, in an interview from Johannesburg yesterday. “We don’t believe it would be appropriate to renegotiate it.”
AngloGold operates the 113-year-old mine at Obuasi in the Ashanti region, 80 kilometers (50 miles) from the regional capital Kumasi and the smaller Iduapriem mine, 70 kilometers north of the city of Takoradi.
Production at the mines rose 2.5 percent to 571,295 ounces in 2009, according to data from the Ghana Chamber of Mines. AngloGold said output from its Ghanaian operations accounted for 11 percent of global production in 2008.
While the government is yet to start examining changes to the so-called stability agreements, it has formed a committee that is studying “the areas we can review,” said Paul Atiglah, director of mines at the Ministry of Lands, Forestry and Mines.
Ghana is “taking advantage of the provision in the law which allows for possible review of the stability agreement where deemed necessary,” Atiglah said in an interview from the capital, Accra. He declined to elaborate on the possible review.
A spokeswoman for Colorado-based Newmont Mining Corp., which has an agreement covering royalties from its Ahafo mine, declined to comment when contacted by phone in Accra. She declined to be identified in line with company policy.
A 2004 agreement capped AngloGold’s royalties paid to the government at 3 percent of mining revenue and limited its corporate income tax rate at 30 percent for 15 years, according to the company’s website. It also extended the lease on the Obuasi mine until 2054.
In return for the agreement AngloGold issued the government shares currently worth about $120 million and paid $10 million in cash, Fine said.
In 2009, Ghana adopted a 5 percent royalty rate on mining revenue, though companies with stability agreements were exempted from the increase, according to U.K.-based Menas Associates.
“Ghana has a deserved reputation for its investor friendly mining regime,” Christopher Melville, a mining consultant at Menas, said in an e-mailed note Aug. 10. “However, like it or not, stability agreements exist to protect private companies from the kind of regulatory changes currently envisaged by the Ghanaian government.”
AngloGold’s shares fell 4.2 rand, or 1.3 percent, to 31.51 rand at 1:20 p.m. in Johannesburg today, giving the gold company a market value of 114.6 billion rand ($15.6 billion). Gold declined $4.10 to $1,229 per ounce as of 12:25 p.m. in London.