Two Ghanaian Experts Throw More Questions to Agyapa Negotiators

General news for Tuesday, September 1, 2020

Source: The Herald

2020-09-01

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The founding chief executive of the Minerals Commission, Kofi Ansah and Fui Tsikata, a legal practitioner, have raised additional questions about the controversial Agyapa deal.

The two, with a total of 84 years of work experience in energy and minerals law and policy, had previously advocated for the freeze of the controversial Agyapa Mineral Royalties deal that had metamorphosed from the Asaase Royalties.

According to them, “in the industry, a royalty company is one that finances mining projects and, normally, in return receives royalties from the income these projects generate. The fact that Agyapa is assigned royalties payable to the Government does not mean, Make it a royalty company on its own. “

They feel that stopping the deal will allow for dispassionate discussions outside the context of the 2020 election cycle.

“Since we issued our first statement on August 26, 2020 regarding the Agyapa transaction, we have received messages from many different quarters, either of praise or respectful disagreement” and “… we feel compelled to offer some elaboration and clarification regarding the issues we raised “. they declared.

The two explained that, this being their second statement, it is to draw attention to what appears to have been overlooked by proponents of the transaction.

“… the fundamental question we sought to focus on was: what is the appropriate value of the Government royalty rights that the transaction seeks to assign to the Agyapa company?” they asked.

They also wanted to know how the people who took the deal arrived at their valuation, the gold prices used, and during what period.

In addition, they demanded that projections be made about the amount of gold that would be produced and in what period.

Below is the full statement from Kofi Ansah and Fui S. Tsikata

An additional statement on Agyapa’s royalty transaction

Since we issued our statement on Wednesday, August 26, 2020, regarding the Agyapa transaction, we have received messages from many different quarters, either of praise or respectful disagreement.

We feel obligated to provide some elaboration and clarification regarding the issues we raised and, in some respects, to draw attention to what in our statement appears to have been overlooked by the proponents of the transaction.

The fundamental question we sought to focus on was: what is the appropriate value of the Government royalty rights that the transaction seeks to assign to the Agyapa company?

It is not simply a technical question. To demonstrate this, let’s use a hypothetical example. If the appropriate value of the rights being assigned is US $ 3 billion but we accept the US $ 1 billion figure stipulated in the agreements, a person who pays US $ 500 million for half of the shares of the company you can quickly sell those shares for $ 800 million. to a person who wants to buy at that price, knowing the actual underlying value.

If that happened, 300 million dollars that should be in the coffers of the Government would have been destined to private parties. It is irrelevant that the government still retains its 50 percent stake: it would have given $ 300 million to individuals without good reason. Therefore, the consequences of the initial undervaluation can have a large impact on our income situation. That would be particularly serious given the indefinite duration of the broad rights being transferred. That is why we believe that the issue deserves more attention and requires more comprehensive responses from the Ministry of Finance and the Mineral Income Investment Fund than we have seen so far. This is the context in which we ask ourselves a series of simple questions: § How was the figure of one billion dollars as the value of assigned rights arrived at?

We have heard that this is simply a nominal figure used for the incorporation of Agyapa. That does not mean, presumably, that he was chosen arbitrarily. The question of how it was arrived at remains.

Second, if that is not the opinion of government advisers as to the real value of the rights assigned to the company, what do you think the real value is?

How did you arrive at your assessment?

What gold prices did they use and during what period?

What projections of the amount of gold to produce did they use and during what period?

We have heard that Agyapa will operate as a royalty company. In industry, a royalty company is one that finances mining projects and typically receives royalties in return from the income generated by those projects. The fact that Agyapa is assigned royalties payable to the government does not, by itself, make it a royalty company.

If the Government and MIIF have decided that Agyapa would operate as a royalty company in the conventional sense, this supposedly means that a business plan has been developed identifying the prospects that the company will finance, with an analysis of what those projects will produce. If such a business plan exists, we would be very interested in examining it as, we are sure, the Ghanaian public would.

Of course, it is not the case that simply because Agyapa operates as a royalty company, it will make a profit like the successful ones do.

We understand that questions have been raised as to why we use different royalty rates in the income calculations attached to our statement. In fact, the notes in the attachment explain this quite clearly. Of the eleven companies that we have considered, the royalty rates for those that produce 60 percent of the total volume are on a sliding scale, while the others have a fixed rate of 5 percent. Therefore, when calculating royalty income from mines for any year, you need to take into account the fact that the price of gold affects the rate that producers must pay of sixty percent and also give appropriate weight to what represents its production as a percentage of the price of gold. total.

This transaction has huge implications. It is important to its legitimacy and to the country that it does not appear to be being misled by genuine concerns that have not been adequately addressed.