Analysis of financing mineral projects in Ghana
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Date
2003-11-29
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Abstract
The mining sector of Ghana is a major contributor to government revenue in the form of export earnings (currently 40 percent) and Gross Domestic Product (11 percent). The bulk of capital for financing this sector is external and foreign based, with little contribution from the Ghanaian financial institutions and market. The economic potential of the country can be fully exploited in the mineral industry with the Ghanaian participation in financing these operations.
This research investigates the type and sources of financing large-scale mining operations in Ghana within two distinctive periods, the Pre-Structural Adjustment Period (Pre-SAP) and the Post-Structural Adjustment Period (Post-SAP).
The collection of primary data was acquired from operating large-scale mining companies in Ghana and some financial institutions, through the administration of questionnaire. The questionnaire was analysed statistically to generate meaningful information.
The types and sources of finance for the sector in the Pre-SAP period includes parent company (23.8%), skilled labour loan (14.3%) debt financing (23.8%), equity financing (4.8%), delayed payment (9.5%) and import-export financing (23.8%). Financing during the Post-SAP period took different turn and dimensions although some of the types and sources in the previous period Pre-SAP were employed. During the Post-SAP, the sources and types of financing include; debt/loan (17.2%), equity financing (10.8%), parent company (14. 1%), delayed payment (15.6%), takeover/joint venture (7.8%), hedging (6.3%), equity shares (14.1%) and import-export credit (14%). Comparing the two periods, the types and sources of capital increased in number and this can be attributed to the stable political scene and economic adjustment.
In order to encourage the Ghanaian participation in financing large-scale mining operations in Ghana, this thesis recommends strengthening and restructuring the Ghana Stock Exchange to cover some West African countries and encourage the Ghanaian financial institutions to invest some of their profits in the mining sector through the Ghana Stock Exchange.
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A thesis submitted to the Department of Mining Engineering,
Kwame Nkrumah University of Science and Technology in partial
fulfilment of the requirements for the award of Master of Science degree in Mining Engineering, 2003