The Bare Facts in the Black Volta Saga

1. If you didn’t get time to watch my presentation on Newsfile about the Black Volta goldmine, E&P, Azumah, and Ecowas Bank (@BIDC_EBID), here is a recording to view at your leisure.

2. I am very impressed by the bold journalism displayed by Newsfile, Joy, and Multimedia. Especially considering the amount of pressure they were under to drop the whole Black Volta goldmine subject matter from further coverage.

3. The presentation summarises my findings in the earlier essay.

Some readers may be aware of how I got involved in this murky affair. For those who don’t, suffice it to say that I was literally invited in.

At any rate, Ghana is part of the EITI regime, which makes civil society players like myself an integral player in mining governance conversations.

4. The main goal of the presentation was to dispel disinformation that was preventing a proper analysis of the public interest issues in the saga.

5. Example: E&P had suggested that Ibaera Capital, the party with which they are ultimately in dispute with, had been sitting on the Black Volta asset since 1992 without adding any value.

6. E&P also created the impression that Ibaera was broke, couldn’t pay Ghanaian tax authorities, and was reliant on E&P to pay salaries and expenses (which they pegged at $500,000 a month).

7. E&P had also suggested that the shareholders of Azumah Ghana, the entity that currently holds the licenses for the Black Volta mine, are split, and that Ibaera’s managing partner, James Wallbank, who doubles as the Chairman of Azumah Ghana is isolated.

8. Finally, E&P had suggested that Ibaera and its subsidiaries had entered a deal with E&P for E&P to buy the Black Volta mine in 2023 but was now backing out because gold prices are higher.

9. Based on my independent analysis of the facts, none of these claims are accurate. Because of these claims, however, E&P had attracted massive public sympathy among ruling party followers. That sympathy has clouded public sentiment and misdirected some Ghanaians from the true public interest elements in this case.

10. The public interest here is to ensure that an environmental-friendly, commercially viable, high-producing mine is built in one of the most deprived parts of Ghana – Upper West – to create jobs, generate economic activity, and, therefore, taxes for the country.

11. A second major public interest objective is to prevent the slide of the mining sector into a power-anarchy, in which people who have political power seize assets without contributing any serious value. Once a country embarks on that path, there is no turning back.

12. Ibaera Capital has not been sitting on Black Volta since 1992. It only bought part of the rights in 2017. In 2020, it acquired the full rights in the project.

13. Between 1992 and 2005, various investors looked at the nucleus of Black Volta – Kunche – and backed out. In 2005, a group of people, Ghanaians and foreigners, came together and decided to develop the resource. This is when Azumah Ghana was formed.

14. Because it takes a long time to find enough gold and develop a sizable mine to profitably exploit, the whole process is rather expensive and time-consuming. Local banks and funds therefore tend to avoid investing in gold mines. Globally, according to S&P, the average time from mineral discovery to production is 15.7 years.

In Ghana, there are many gold deposits discovered in the 1990s that have still not been mined. For example, Kubi, now in the hands of BXC and Asante Gold, was discovered in 1988. It is still not a fully developed mine.

15. Due to local fund-raising challenges, Azumah Resources founders created an entity in Australia to raise funds on the Australian Stock Exchange in 2006. They got about 1/3rd of the shares as a result.

16. The new investors then took control over time as the founders provided paid services like exploration drilling etc. Contrary to impressions created by assigns of E&P, Ibaera fully owns all the entities associated with the Black Volta project that signed the agreement with E&P in October 2023.

17. Between 2006 and 2016, the project was not idle. Millions of dollars were spent drilling around the Upper West in concession areas looking for enough gold to make the mine viable.

18. In a viable gold concession, there about 2 particles of gold in every million particles of rock and sand. Sometimes less. A very large expanse of land must be combed to find enough rocks rich in gold (cutoff grade) to make it worthwhile to build an expensive mine and invest in all the environmental safeguards.

19. Galamsey thrives because the patient capital and technology needed for this type of high-risk endeavour just doesn’t exist for most Ghanaians who want to get into gold.

20. Thus, by 2016, Azumah needed more injection of capital. Many of the original investors wanted to exit because the stock price had crashed from 70 cents around 2011 when institutional investors jumped in to less than 5 cents. IMPORTANT POINT: many of the early investors lost money as a result. Gold is a risky business, especially on a large-scale.

21. This was the picture when Ibaera Capital entered the picture in 2017. It committed to acquire 42.5% to 47.5% of the asset by injecting more capital (~$13.5 million) to further advance the project. In 2020, it took full control.

22. Here is what is critical to understand: knowing that there is gold in an area doesn’t mean that you have confirmed that there is enough gold there to be mined profitably. It took Azumah Resources 6 years of expensive drilling and testing (all costing a lot of money) to confirm in 2012 that there are “commercial reserves” of about 400,000 ounces across the licensed exploration areas.

23. Given the expanse of the area, the cost of infrastructure needed, and everything else, investors were still not keen to go ahead and invest in a mine.

24. When Ibaera came in (2017), it took them another 3 years and a $40 million commitment for further work to confirm reserves of 1 million ounces of gold in an area of more than 1000 square kilometers. At this point, they were confident that, with additional work, a viable mine could be built.

25. After fully acquiring the mine in 2020, Ibaera did further exploration work from the committed capital budget to take the mineable reserves to nearly 1.8 million ounces before opening talks with E&P.

26. Thus from 1992 when it was thought that about 225,000 ounces of gold (inferred resources) could be squeezed out of the Black Volta area, roughly $120 million in investment over the years has been needed to confirm to Ghana that there are about 2 million ounces of “contained gold” stuck there.

27. That is VALUABLE DATA procured with a lot of money. It is disinformation therefore to suggest that Ghana has gained nothing since 1992. The truth, rather, is that because of the data, whoever goes there to mine no longer needs to spend money to know where to drill.

28. In fact, if this wasn’t hugely valuable work, E&P wouldn’t be fighting Ibaera for that patch of land specifically. The Black Volta mine on its own covers less than 1000 square kilometers.

29. The Upper West is over 18000 square kilometers. Apart from the western segment which has a population density of over 100 per sq km, many parts of the region are very sparsely populated. There is thus, at least, 9000 square kilometers of land to be explored.

30. If finding gold to mine profitably was easy, E&P would have taken the 100 million dollars from the Ecowas Bank and gone somewhere else in the region to build a new mine.

31. Which brings us to the key issue: has E&P done enough work and contributed enough value as yet? The truthful answer is, NO. Others have spent years and tens of millions of dollars to discover roughly 1.7 million ounces of gold RESERVES since the 1990s. Since E&P came into the picture in 2023, it has yet to do any work that adds any significant value. It must do that to earn a fair dollar.

32. Because E&P controlled the Ecobank project account set up after the partnership agreement in 2023, it spent the money it contributed on its own interests and not the project’s interests. For instance it spent at least $500,000 on its lawyer (or, per some info, $1 million) to sue people to further its interest. As far as Ghana is concerned, this has added no PRECIOUS MINING DATA to de-risk our gold reserves for investment, whether by locals or foreigners.

33. It was E&P that voluntarily signed an agreement in late 2023 saying clearly that it will ONLY EARN SHARES if it built the mine in partnership with Ibaera. It is the one now trying to change the terms to a straight acquisition. It is not the investors who backed out of a deal. E&P did. The agreement (which several analysts have now seen) was very clear: E&P was to earn shares based on value added in building the mine.

34. The investors started having a challenge with E&P’s approach as far back as May 2024 when it rejected the term-sheet of the Ecowas Bank for not complying with the terms of the agreement. At this time, gold’s price was less than $2400. When the agreement was signed in October 2023, gold price was about $2300. Gold prices did not influence the disagreements.

35. E&P says that when it came on the scene, the company owed money to regulators and was thus in trouble. The truth is that when the new companies bought the company in 2020 (after the previous investors run out of money and the company was sold), they met tax bills that they disputed for years. E&P used its influence to get the GRA to waive the penalties, but it was the investors who PAID THE TAX ARREARS, not E&P. Creating the impression that a private equity fund (Ibaera) freshly backed by US institutional funds was broke and needed to be bailed out is disinformation.

36. The national interest is for the mine to be built and built well so that it creates environmentally sustainable jobs. The national interest is also to have a mining industry in which there is a fair playing ground and people make money because they invest time, energy, skill, and resources and not because of their political connections.

37. E&P signed an agreement to play by the rules and invest to get a stake. It is now trying to do something else (direct acquisition that only clears the company’s historical liabilities without a fair return for risk taken). Because it clearly has regulatory and political power, policy analysts and activists like me have a duty to publicise the situation to minimise the chance of that happening.

38. If we don’t push for a fair playing field and argue that because E&P is a local/national champion we must encourage the rules to be bent in its favour, we would be contributing to “power-anarchy” in the mining sector. Ghanaians playing in that space without political connections would also be muscled out. Yes, a few Ghanaians will benefit, but the majority will suffer.

39. For example, I know for a fact that some Ghanaian suppliers of E&P have had challenges collecting their money from E&P after delivering services. In some cases, they have gone to court and served E&P and still been ignored for months. If such companies become too scared to even pursue their interest because E&P is involved, how would that be in the national interest?

40. Nobody has an issue with the widely popular sentiment that Ghanaians should take charge and ownership of their resources. Or that national champions like E&P must be supported. But this should be achieved through policy smartness and not political buga buga, which is never sustainable.

41. For example, the reason too few Ghanaians own large, modern, mines is because the financing environment in Ghana isn’t ready to support Ghanaians with patient capital yet. How do we fix that problem through POLICY to attain the political goal of greater local ownership? Refusing to tackle the policy issues and rushing for political solutions is exactly what I have termed KATANOMICS.

42. Secondly, we say we want national champions like E&P to thrive, yet we are encouraging behaviour that will damage their reputation and ensure that they FAIL! If E&P continues down this road, I can assure you that they will lose at arbitration. EBID alone can’t fund the mine (the $100 million is not enough to build the mine as it is merely E&P’s right to participate).

43. At least $200 million is needed between project start and “first gold”. Should E&P damage its reputation through a failed arbitration outcome, it would struggle to complete the mine. Lawsuits could block development for a decade as we have seen with the Akoase mine following Viking’s sale to the owners of Sian (a Chinese entity).

44. It is KATANOMIC thinking to say that we want our resources developed by one of our own (political objective) and then encourage behavior such as the politically exposed Mineral Commission and EBID Board issuing approvals for acquisition (policy missteps) when such actions could block development for years. The current dispute has already lost the project 15 months of progress.

45. My analysis, as always, is entirely prepared in the spirit of public and national interest. I bear no personal ill will or malice towards E&P even if, due to bad advice, I am personally embroiled in a bizarre libel lawsuit with the company for saying things that they have themselves admitted to, or is glaringly obvious to anyone who bothers to pay attention. Ghana Forever.