Mining companies have asked for time to study the Bank of Ghana’s (BoG) gold purchase programme that will, for the first time in their history, pay cedis for the gold they produce.
An international commodity, gold is generally sold in the US dollar but the BoG’s objective of using local resources to build reserves means that the central bank will only pay the cedi equivalent of the prevailing price of the metal.
The Chief Exchange Officer of the Ghana Chamber of Mines (GCM), Mr Suleman Koney, told the Graphic Business last Monday, that while miners had expressed their “full commitment” for the programme, there were concerns that it could disrupt their existing supply contracts and expose them to currency losses.
He said the companies also wanted to be sure that the transaction “will be at arms’ length” and that “there will be no need for discount.”
Consequently, Mr Koney, whose outfit advocates for the mineral mining sector and allied service providers, said members of the chamber had asked for time to study the programme before joining as suppliers.
While at it, he said the chamber would ensure that there will be no need for firms to be forced by a policy or law to supply to the central bank to help achieve the central bank’s objective.
The first of its kind in 60 years, the BoG launched the gold purchase programme in June this year aimed at doubling its gold reserves in five years to supplement the traditional ways that the country has built reserves over the years.
It has since bought 280 kilograms (kg) of the yellow metal from a GH¢200 million budget set aside to purchase a total of 540kg this year.
The Director of the Financial Markets Department of BoG, Dr Steve Opata, had explained to the Graphic Business that the decision to pay cedis for the gold was non-negotiable and firms ready to abide by it were welcome.
In reaction, Mr Koney of the Chamber of Mines, however, said while miners were excited about the initiative, they will have to thrush out a few issues with BoG and their stakeholders before participating fully.
“As for the commitment from us, it is clear. It is a novelty and we support it but we need to sit with the BoG, our partners and stakeholders and think through it properly.”
“The BoG said they wants to pay in cedis and that is fine but it is also new to us. Because, ideally, you will say that gold is sold in US dollars and so if you want to buy from me, then you have to pay in US dollars but that will defeat the purpose of their programme,” he said.
The Foreign Exchange Act, 2006 (Act 723) prohibits the pricing and payment in currencies other than the local currency and the BoG has been at the forefront of enforcing it.
“Again, we have suppliers we deal with. We need to go back to these stakeholders and tell them that our host government says this and these are the implications,” the CEO said.
“For me, it is a question of meeting of minds; it needs us to think through it deeply and that is ongoing but of course, if it is going to be at arms’ length and the issue of discount will not be there, no problem,” the CEO said.
He said although the amount targeted by the central bank was not substantial compared to the industry’s produce, its execution needed to be properly managed to ensure that it did not disrupt the business plans of the firms.
He said the miners were currently at various stages of consultations with their stakeholders and expressed the hope that the decisions would be communicated soon.
The Director of the Financial Markets Department of the BoG, Dr Steve Opata, said while the central bank was firm on its decision to pay only in the local currency, it was willing to work with the miners on the quantities to be supplied.
“We understand that they have contracts but we are not saying that do not supply to them because ours is not even a lot. We are saying that they should support the nation to build its reserves using local resources,” he said.
He also explained that the amount the BoG will pay for will be determined by the prevailing world market price at the time the transaction was being sealed.
The BoG currently has 8.77 tons in gold reserves.