By: Sarah Baafi
Ghana’s push to increase revenue from gold mining is facing strong caution from industry players, who warn that rising royalties could make parts of the country’s mineral wealth economically unreachable.
Speaking on GTV Breakfast Show during a detailed discussion on understanding royalties, Patrick Appiah Mensah, Managing Director of Bogoso Prestea Gold Mine, laid out the technical and financial pressures confronting the sector.
He began by backing the broader policy direction of successive governments to maximize national benefit from gold. Ghana, with over a century of mining history, remains one of Africa’s leading producers. However, he stressed that the method of extracting that value matters.
Mensah explained that royalties function as a fixed share of revenue rather than profit. Because gold prices are determined on the international market, companies cannot adjust pricing to absorb higher taxes. The result is a direct increase in operating costs.
This cost pressure, he said, is already affecting Ghana’s competitiveness. Investors compare jurisdictions globally, and when Ghana’s average effective tax rate exceeds industry benchmarks, capital shifts elsewhere.
He pointed to a more structural problem. Gold grades are declining. In practical terms, a tonne of ore today yields significantly less gold than it did one or two decades ago. Companies now spend the same or more on energy, equipment, and chemicals to extract smaller quantities.
“If the economics do not support it, the gold remains in the ground,” he indicated, noting that several mine closures are driven not by depletion, but by cost inefficiencies.
Mensah emphasized that this risk is higher for local mining firms. Unlike multinational companies with diversified operations across countries, Ghanaian firms depend almost entirely on domestic conditions. Higher royalties reduce their margins and weaken their ability to raise financing on international capital markets.
He added that developing a single mine can require between 500 million and 600 million dollars in capital. Investors expect stable returns, and even small shifts in cost structures can determine whether a project proceeds or stalls.
Despite these concerns, Mensah acknowledged public expectations that mining companies should contribute more to national development. Many host communities, he noted, still feel excluded from the benefits of mining, which has fueled distrust and negative sentiment toward the industry.
He said this perception often leads to the assumption that mining firms are consistently profitable and can absorb higher taxes. In reality, he argued, the sector operates under tight margins shaped by global prices and rising production costs.
Appiah Mensah welcomed moves to increase local participation in mining, citing the acquisition of the Damang mine by Engineers & Planners as a step toward retaining more value within the country.
However, he warned that without a balanced fiscal regime, such gains could be short-lived. Policies that raise costs too high may limit expansion, reduce employment opportunities, and ultimately shrink the revenue base government seeks to grow.
He called for sustained engagement between policymakers and industry players to design a royalty framework that is both competitive and fair. The goal, he said, is to ensure that mining continues to generate value for the state, investors, and communities.
Mensah concluded that Ghana’s challenge is not whether to benefit more from its gold, but how to do so without undermining the very industry that produces it.
