Dr. Toni Aubynn Chief Executive Officer The Ghana Chamber of Mines

1. Harnessing Africa’s Minerals Resources for Sustainable Development. A change from Cash-cow to Integrated mining-led Sustainable Development. Some realities from Ghana’s Mining Industry International Economic Forum of the Americas (IEFA)Toronto Global ForumToronto Canada 1-3 October Dr. Toni Aubynn Chief Executive Officer The Ghana Chamber of Mines

2. Outline • Ambivalence about the benefit of mineral exploitation • Some Global facts about Mining • Some realities from Ghana • Conclusion Key message: Minimise the focus on mineral rent; adopt more creative, integrative mining-led sustainable development

3. Ambivalence and Common Perceptions • Africa is loosing out • ‘Ghana is not receiving any benefit from mining’ or ‘is not benefiting enough......’ • ‘No physical transformation in our mining communities i.e. Tarkwa and Obuasi vs. Johannesburg?’ • ‘Tax them more’

4. Basis of the ambivalence and ‘losing out’ Perception Eleven African countries are among the top ten global resource countries in at least one major mineral. Source:Deutsche Bank; US Geological Survey (USGS); World Nuclear Association, cited from McKinsey Global Institute Analysis (2010)

5. Basis of the ambivalence and ‘losing out’ Perception cont’dSome leading African mineral resources (2005)

6. …And Yet: • Persistence of poverty, inequality and unemployment • Inadequate visible local content Africa mining business • No significant reflection on the communities where mining takes place • ….Plus • Africa’s resilience to the recent global economic crises and descent economic growth providing it a new confidence • Past history of industry not very transparent (enclave) • Industry Mining Industry, ‘a bad story teller’ • Positive commodity price particularly gold and oil in the last decade • Perception of Revenue equating profit

7. Reaction to these perceptions • Attempt at ‘Resource Nationalism’ in South Africa. A clear NO from SA Government • Zimbabwe: increase in royalty on gold from 4.5% to 7% and proposed changes in ownership structure • Zambia attempted introduction of Windfall profit tax among other fiscal changes • DR Congo to increase taxes • Ghana

8. SOME GLOBAL FACTS

9. Global mining - 1984 CIS 22.1 % Europe excl CIS 7.7 % North America 13.7 % Asia 11.0 % Latin America excl Mexico 16.0 % Africa 19.5 % Oceania 9.4 % Source: Raw Materials Data, 2012.

10. Global mining - 2010 Global mining 2010 CIS 10.5 % Europe excl CIS 2.4 % North America 8.2 % Asia 25.0 % Latin America excl Mexico 22.1 % Africa 10.4 % Oceania 14.4 % Source: Raw Materials Data, 2012.

11. Strong demand drivers • Extended period of growth. • China/Asia major engine. • Infrastructure & industrial/personal use. • Decline less dramatic than expected – long term growth will slow down but remain steady.

12. Increasing Supply constraints • Costs increasing • Price volatility but increasing • Host countries demading more share – • more state intervention • Increasing competition between countriesRemote locations • Lower oregrades • Human resources

13. Some realities from Ghana: Contribution of the mining sector

14. Leading Mining Regions of Africa Source:Deutsche Bank; US Geological Survey (USGS); World Nuclear Association, cited from McKinsey Global Institute Analysis (2010)

15. Traditional Minerals in Ghana • Traditional minerals • Gold • Manganese • Bauxite and • Diamonds. • Others not fully exploited include • Kaolin • Salt • Clay • Marble • Mica • Limestone etc. • Recent airborne geophysical survey confirms traces of several other minerals including iron ore, platinum, uranuim, lead, copper, etc.

17. Source: Ghana Minerals Commission 2012

18. Over $7billion attracted to Ghana since 2000

19. ‘Gold price soaring’ 2000-2012

20. Has reflected in the Contribution to GDP

21. Contribution to Merchandise Exports by Key Sectors

22. Performance of the Mining Sector in 2011 (cont’d) • Number One Tax Payer and highest contributor to GRA: • Contributed about Us$540millionto GRA representing 27.61% of total Internal Revenue collections in 2011. • paid Us$360million, in corporate tax to the GRA, representing 38.26% of the total company tax collected in 2011. • The sector voluntary contributed an amount of about Us$27 million to their communities and the general public • Contributed about 42% of gross merchandise exports earnings • companies returned about Us$3.1 billion representing 75% of their mineral revenue through the BOG and the Commercial Banks in 2011 against statutory requirement of 25%. • Industry grew by 14.3% in 2011 as compared to 8.3% in 2010 • Continues as the leading attractor of FDI

24. Government revenue increased with rise in gold price

25. Ghana’s policy response to ‘losing out’ • Imposed the fiscal measures on the mining companies in 2012: • Changed mineral royalty from a range of (3 to 6)% to a flat rate of 5% • Changed capital allowance from 80% in the first year and 50% on declining balance to a straight line amortization over 5 years at 20% each year • Ring-fencing of assets for the purposes of determining tax payable • Corporate tax increased from 25% to 35% • Review of Stability Agreements • Proposed windfall profit tax of 10% (Suspended temporarily on 6 September 2012 a welcome news)

26. Cost of production have increased dramatically Total taxes and levies Note: Cost inflation after 2012 estimated based on historical CAGR 2001-2012; Crude Oil Prices for West Texas Intermediate delivery to Cushing, Texas Source: Economist Intelligence Unit, International Energy Agency, Eskom website, Government of Western Australia website, press searches, Bloomberg

27. Value Proposition: Create Value through Integration: • Notable sectors that have benefited from the mining industry in Ghana include: • Banking & Financial Services, • Transport & Logistics, • Hospitality and Catering, • Consulting-Environmental &Engineering Services • Manufacturing & Fabrication • Chamber, Ghana Minerals Commission and the IFC collaborated Project on Local Content

28. Conclusions • Africa host significant mineral resources. Minerals price environment has never been better • The needs for more creative ways to leverage the current environment for Afica’s development • Excessive reliance on rent/taxes may be a slippery-slop. There is need for a balance between profitability and equity. • Ghana still the best destination for mining investment evenn beyond the West Africa region. BUT can lose it if cost issues including fiscal impost are not seriously addressed • Mining should not be a ‘stand-alone’ economy, it must be integrated into the broader national and regional economy • Local Content and Value addition is the surest way to optimising the benefits of mining

29. Thank You