Ghana’s Mining Revenue Gamble: Analyzing the Sliding-Scale Royalty Proposal

In a significant shift in mineral fiscal policy, Ghana has tabled a Legislative Instrument to implement a sliding-scale royalty regime for all minerals, moving beyond an initial focus on lithium. This analysis examines the proposal’s mechanics, its rationale against soaring gold prices, and the critical questions it raises about balancing immediate state revenue with the long-term health of the mining sector and its contribution to the national treasury.

Introduction: A New Royalty Framework for Ghana’s Mines

On December 19, 2025, Ghana’s Minister for Lands and Natural Resources presented a Legislative Instrument to Parliament proposing a fundamental change to how mineral royalties are calculated. Instead of a fixed percentage, the new system would tie royalty rates to the market price of each mineral, creating a “sliding scale.” While initially linked to securing a lithium mining lease with Atlantic Lithium, the government unexpectedly expanded the framework to encompass all minerals, with gold royalties being the most economically consequential change.

This move is governed by the Minerals and Mining Amendment Act, 2015 (Act 900), but its timing and scope have sparked intense debate. Mineral royalties are a cornerstone of Ghana’s non-oil revenue, totaling over GHS 20 billion from 2011 to mid-2025. The core question is whether this policy tweak will maximize mining revenue for the state or inadvertently undermine the very mining investment and profitability that generates that revenue, particularly through its impact on corporate income tax.

Key Points: The Core of the Proposal and the Debate

• Policy Shift: A sliding-scale royalty, applicable to all minerals (not just lithium), where the royalty percentage increases as the international commodity price rises.
• Primary Target: Gold, Ghana’s most valuable mineral export, is the central focus due to record-high prices exceeding $5,000/ounce.
• Revenue Tension: The government seeks a larger share of “windfall” profits during price booms, but higher royalties reduce taxable profits, potentially shrinking the larger corporate tax base.
• Competitiveness Risk: Industry estimates suggest the effective tax rate could climb to 60-68%, potentially making Ghana one of the world’s highest-taxed mining jurisdictions.
• Modeling Gap: The government has not publicly released its own fiscal impact analysis on long-term revenue, investment, and production, creating uncertainty.
• Historical Warning: Precedents from Ghana’s cocoa sector and global gold price cycles warn against locking in permanent policy responses to temporary commodity booms.

Background: Ghana’s Existing Mining Fiscal Regime

To understand the proposal’s impact, one must first examine the current system. Ghana’s mining fiscal regime is a composite of several levies:

• Mineral Royalty: A flat 5% on gross revenue for gold. Three companies operate under stability agreements with rates between 3% and 5% tied to gold prices.
• Corporate Income Tax: A standard rate of 35% on taxable profits.
• Financial Sector Sustainability Levy: 3% of profits (proposed to be reduced to 1%).
• Other payments include mineral rights fees, ground rent, import duties, and PAYE.

The scale of the sector is immense. Of 25 large-scale mines, 16 are Ghana Chamber of Mines members. These 16 companies paid a combined GHS 17.6 billion to the government in 2024. Crucially, corporate income tax (GHS 10.3 billion) is the single largest contributor, not royalties. In 2024, large-scale mining contributed approximately 11% of Ghana’s total tax revenue (GHS 151 billion). The Natural Resource Governance Institute estimates Ghana’s effective tax rate on mining already exceeds 50%, meaning the state captures over half of mining company profits.

Analysis: Unpacking the Sliding-Scale Proposal and Its Implications

The proposed sliding scale would see the royalty rate escalate in steps as the price of gold (or other minerals) increases. For instance, a price above $2,000/oz might trigger a 6% rate, while $3,000/oz might mean 7%, and so on. The intent is clear: to automatically capture a greater share of mining windfall profits during commodity super-cycles.

The Catalyst: Record Gold Prices and Revenue Aspirations

The immediate driver is the historic surge in gold prices. After averaging ~$2,300/oz in 2024, prices hit ~$4,500 in 2025 and crossed $5,000 in 2026, fueled by geopolitical uncertainty, central bank buying, and the return of Donald Trump to the U.S. presidency. With gold being a critical foreign exchange earner—especially as oil production declines and cocoa faces challenges—the government is seeking to monetize this price boom directly through higher royalties.

The Fiscal Mechanics: A Potential Self-Defeating Strategy?

The central analytical flaw, highlighted by economists and the industry, is the fiscal interaction between royalties and corporate tax. Royalties are a deduction against taxable profit. A higher royalty rate directly reduces the profit base upon which the 35% corporate tax is calculated.

Example: If a mine has $100 in revenue and $60 in operating costs (pre-royalty), its profit before tax is $40.

• Under a 5% royalty: Royalty = $5. Taxable Profit = $35. Corporate Tax (35%) = $12.25. Total State Take = $17.25.
• Under a 7% royalty: Royalty = $7. Taxable Profit = $33. Corporate Tax (35%) = $11.55. Total State Take = $18.55.

In this simplified scenario, total revenue increases. However, the analysis becomes complex because higher royalties also reduce cash flow for miners, potentially leading to:

• Accelerated depletion of high-grade reserves: Miners may mine lower-grade ore bodies sooner to maintain cash flow, affecting long-term production profiles.
• Reduced reinvestment: Less capital for sustaining and expanding operations, new exploration, or technology upgrades.
• Higher operational costs: To maintain profitability, companies may cut costs or defer projects, potentially impacting employment and local procurement.

The Ghana Chamber of Mines’ modeling indicates that when these behavioral and investment effects are accounted for, the effective tax rate (total state take as a percentage of pre-tax profit) could rise to 60-68%. At that level, the marginal project may no longer be viable, deterring new mining investment in Ghana.

The Behavioral Impact: How Companies React to Higher Royalties

Mining is a capital-intensive, long-horizon business. Companies evaluate projects based on net present value (NPV) and internal rate of return (IRR). A higher, price-sensitive royalty:

• Compresses margins: Especially during high-price periods when operating costs also rise as miners access lower-grade ores.
• Alters mine planning: Shortens mine life by accelerating the extraction of higher-grade resources, reducing the total taxable profit over the life of the mine.
• Weakens the investment case: Future projects with tighter margins may not meet investment hurdles, leading to a slowdown in new mine developments and expansions.

This creates a paradox: a policy designed to capture more from existing high-price operations may make future operations uneconomic, leading to a decline in the overall mining sector contribution to GDP and employment.

The Missing Government Analysis and the Audit Question

In October 2025, the Minerals Commission announced a forensic audit of large-scale miners covering the prior decade. This fueled speculation that the audit uncovered significant fiscal leakages, prompting the sliding-scale proposal as a corrective measure. However, the Ghana Chamber of Mines has confirmed no such audit has been conducted. The Lands Ministry has not responded to queries on the audit’s status.

More critically, despite repeated requests, the Ministry has not disclosed its own fiscal impact modeling for the sliding scale. Without this transparency, the public and investors cannot assess:

• The projected revenue trajectory under different gold price scenarios.
• The estimated impact on corporate tax receipts versus royalty gains.
• The effect on the pipeline of future mining projects and exploration activity.
• The overall effective tax rate compared to peer jurisdictions like Burkina Faso, Côte d’Ivoire, or Tanzania.

The Chamber’s 60-68% estimate, while unverified by the state, is the only public benchmark and raises serious concerns about Ghana’s mining competitiveness.

Practical Advice: Navigating the Uncertainty for Stakeholders

For the government, investors, and analysts, navigating this policy shift requires a cautious, evidence-based approach.

For Policymakers and the Government

• Publish Comprehensive Fiscal Modeling: Immediately release the government’s full analysis, including sensitivity analyses on gold prices, production costs, and investment levels. This is non-negotiable for credibility.
• Conduct a Full Cost-Benefit Analysis: Quantify not just the expected royalty windfall but also the projected reduction in corporate tax, potential下降 in new investment, and long-term production forecasts.
• Engage in Structured Dialogue: Hold transparent consultations with the Ghana Chamber of Mines, individual companies, and independent fiscal experts to stress-test the model.
• Consider a Hybrid or Capped System: Explore alternatives, such as a higher fixed royalty with a temporary windfall tax (sunset clause) during extreme price spikes, or an overall effective tax rate cap to prevent extreme outcomes.
• Accelerate Value Addition Plans: The long-term solution to commodity volatility is downstream processing. The pending overhaul of the Minerals and Mining Act must include concrete, bankable incentives for local gold refining and jewelry manufacturing to capture more value domestically, not just tax revenue.

For Mining Companies and Investors

• Aggressively Model Scenarios: Run detailed financial models incorporating the proposed sliding scale, focusing on changes to NPV, IRR, and payback periods for existing operations and assets in the exploration pipeline.
• Advocate for Transitional Provisions: Seek stability agreements or grandfathering for existing operations to protect the economics of investments made under the previous 5% regime.
• Engage Collectively: Work through the Ghana Chamber of Mines to present a unified, data-driven case to the government on the potential negative impacts on total revenue and future investment.
• Review Capital Allocation: Temporarily pause or re-prioritize major expansion and greenfield exploration budgets in Ghana until the final, transparently modeled policy is enacted and its impact is understood.
• Diversify Regional Portfolios: Compare Ghana’s projected effective tax rate under the new regime with other African mining jurisdictions to inform future investment decisions.

For Analysts and Civil Society

• Demand Transparency: Insist on the publication of the government’s fiscal model. Scrutinize the assumptions on cost inflation, production decline rates, and investment responses.
• Monitor the Audit Narrative: Closely follow any developments regarding the promised forensic audit. Its findings (or lack thereof) are crucial to understanding the government’s true motivation.
• Analyze Historical Precedents: Continuously reference the cautionary tale of Ghana’s cocoa sector, where policy adjustments to benefit from high prices left the sector exposed when prices fell.
• Track Peer Jurisdictions: Monitor how other major gold-producing countries are adjusting their fiscal regimes in response to high prices. Is Ghana becoming an outlier?
• Evaluate the “Resource Curse” Risk: Assess whether this policy move increases the likelihood of a “boom-bust” cycle in government revenue from mining, undermining macroeconomic stability.

FAQ: Common Questions About Ghana’s Sliding-Scale Royalty

What exactly is a sliding-scale royalty?

A sliding-scale royalty is a variable tax rate on mineral revenue that increases as the international market price of that mineral rises. For example, a royalty might be 5% when gold is $2,000/oz, 6% at $2,500/oz, and 7% at $3,000/oz. It aims to capture a larger share of “windfall” profits during commodity price booms.

Why is Ghana implementing this now?

The primary stated driver is the record-high price of gold (over $5,000/oz in 2026). The government seeks to increase its immediate share of revenue from this windfall. The policy also aligns with the enabling legislation (Act 900) and was initially tied to finalizing a lithium mining lease.

How will this affect the price of gold for Ghanaians or global markets?

It will have no direct impact on the global market price of gold. Indirectly, if it significantly dampens investment and production in Ghana over the long term, it could marginally reduce global supply decades from now, but this is a second-order effect. The policy is purely about how Ghana’s share of revenue from its own gold is calculated.

Is this legal? Does it violate mining agreements?

The government is using the authority granted by the Minerals and Mining Amendment Act, 2015 (Act 900). However, the legality may be challenged if it violates specific stability agreements or investment treaties that guarantee fiscal terms for the duration of a mining lease. Three gold companies operate under such agreements with royalty rates between 3-5% tied to price