Future Global Resources takes over Bogoso-Prestea mine at near zero cost
Mining deals and transactions particularly for multinational companies and the transfer/revamp of mine assets between companies are required to be well scrutinized and the hard questions asked to give assurance for prolonged life of mine operations, the sustainability of jobs and sustenance of impacted communities as well as the guarantee of revenue streams to Government.
This was the case when Newmont Corporation in 2006 declared an investment plan of some US$450 million capital into the Ahafo mine (Newmont’s Ghana Gold Mine Construction On Schedule (modernghana.com), some US$ 185 million capital injection in a joint venture between Goldfields and Asanko Gold in March 2018 (Gold Fields, Asanko Form Joint Venture In $202.6 Million Deal | Kitco News), about US$1.4 billion capital when Goldfields had to expand the Damang Mine (https://www.todaygh.com/gold-fields-invests-1-4bn-damang-mine/), US$500 million capital investment into the Obuasi Mine in 2018 (AngloGold quizzed over $590m investment in Obuasi mine – Graphic Online) etc.
Recent sale of a mine with the largest concession in Ghana, Golden Star Bogoso Prestea Limited (GSBPL) to a barely year-old mining Company, Future Global Resources (FGR) has not followed this transparent path and is shrouded in secrecy raising doubts among local and international stakeholders. Will the GSR to FGR sale process become the new normal and be a reference point in the Country where Corporate organizations in Ghana would follow in subsequent deals? We set out to investigate the truth to advice the public and Government on the risks and opportunities this present to the Country.
In the sale agreement published on 30th September 2020 (Golden Star – Golden Star Completes Sale of the Bogoso-Prestea Gold Mine to Future Global Resources (gsr.com), GSBPL had been sold to FGR for staged payment arrangement of up to US$95 million. Five months from the announcement of the sale, neither GSR nor FGR has made any public statements concerning capital investment in Bogoso Prestea gold mine unlike how similar deals by Newmont, Goldfields and Anglogold have unfolded.
Further, no declared payment has been made by FGR in the sale agreement to GSR. The unanswered question however is, could the two companies be in ‘bed’ to deceive the public and the Government of Ghana, and what are the consequences?. Does FGR have the financial capacity to operate the mine? What are the present commitments from FGR, if any, that could make the company still operate in the midst of challenges? What will FGR loose should they declare the mine bankrupt?
Our checks indicate FGR has nothing to loose as no investment has been made so far. Rather, FGR gains in many ways in this arrangement through the payment of its executives and recruited foreign staff. The nation at this stage continues to be robbed in broad daylight. A further probe is needed for this unusual sale transaction in Ghana.
Following the sale and in their Q3, 2020 financial report, GSR indicated that the sale of Bogoso-Prestea gold mine removed some $53 million dollars of rehabilitation provision from their balance sheet (http://s1.q4cdn.com/789791377/files/doc_financials/2020/q3/PressRelease_20201028_Q3 -2020-results-FINAL.pdf) .There have been media publications alluding to a possibility of the sale being a ploy to pass environmental obligation to Ghana in the event of a failure of the inexperienced new owners (FGR) (https://www.modernghana.com/news/1041470/goldenstar-resources-grand-plan-to-revert-53m.html).
Unanswered is whether the US$53 million rehabilitation liabilities could be borne by a new mining firm which is private and has not demonstrated any financial forte or investment in the business. Will the new owners be willing to address the handed over liabilities or there is a further game plan to this? Any unpaid liability reverts directly or indirectly to the nation and has to be borne by the Government of the day.
There is a high risk of massive loss (in excess of US$53 million) to the nation if probing and accountability investigations are not carried out by the relevant Government Agencies to arrest the situation and provide assurance that the tax payers monies will not be used to take care of the liabilities created by a foreign investor. Government has 10% shareholding in the Mine as well as being the allodial owner of the gold mineral, and hence must be interested in the ‘Going Concern’ of FGR to operate the Bogoso-Prestea gold mine.
Needful acts are required from the relevant Government Agencies to protect and ensure the country benefits from the gold resource. So far, there has not been any declared and intended effort to protect Government interest in the sale deal. La Mancha who now control Golden Star Resources (GSR) per their past records in mining deals is characterised as making fortunes from mines and selling same within a short period of time relinquishing the liabilities required to be fixed to the next owner without the necessary consideration of the capability of the buyer to address any residual liabilities.
The nation in which La Mancha operates then suffers the cost of the liabilities. Experts may argue that Ghana Government could consider the option of exercising the right to increase her percentage ownership share of GSR (from 10% to say 30%) as a hedge against any unexpected failures of FGR as a going concern.
Ghana has been a hub of mining and actually can boast of a number of major mining giants operating in the country. Simple checks at Companies House, UK indicate that FGR, the new company taking ownership of GSBPL (with the largest concession in Ghana), was formed on December 30, 2019. FGR also indicates it is a subsidiary of Blue International Holdings and describes the Bogoso-Prestea mine as the “first asset within Blue’s mining portfolio [that] establishes the Group as the owner of Ghana’s largest mining concession” (https://blueinternational.com/).
FGR is a novice in the mining industry and having operated projects only in the energy sector for African Governments. Shrouded in secrecy is how FGR was formed in December 2019, placed under Blue Holdings and was selected among all the giant mining companies operating in Ghana, Africa and the rest of the world. Unanswered question in this context is “was FGR formed for the intended purpose of the sale which was to occur within 10 months to offload the financial burden of US$53million from the GSR’s balance sheet and to relieve GSR from any responsibilities associated with rehabilitation and capital injection required to revamp the Bogoso-Prestea Mine?.
Readers may recall in a publication where La Mancha Group acquired majority shares in GSR (Wassa and Bogoso/Prestea Properties) when Wassa Mine was already making profit in 2018 (La Mancha announces the investment of US$125.7 million in Golden Star Resources and the creation of a strategic partnership (globenewswire.com). GSR in 18 months then offloaded the Bogoso/Prestea Mine to FGR to concentrate on the Wassa profits. Was there an initial game plan to make fortunes and revert liabilities at Bogoso/Prestea Mine to the state?
Should there be a concern requiring probing by Government as to how and why FGR was formed, selected and the intent for GSR in selecting such an entity among all the other mining giants? Was any of the mining giants contacted for the sale bid? If this arrangement was genuine and that the new company will invest nothing to survive/grow the mine, couldn’t same arrangement be made for locals (Ghanaians) to own the mine?
Government Agencies must conduct the due diligence with focus on ensuring the new company (FGR) delivers on extending the life of the mine and that the GSR/FGR sale is not a hoax to avert history repeating itself as in the case of Bontey Mine where liabilities were reverted to Ghana Government when the mine executives left the country unceremoniously.
The ploy of deception and bigger game plan of La Mancha profiting enormously from the Ghanaian gold resource while leaving the country with liabilities became conspicuous following the sale arrangement for Bogoso-Prestea Mine when past events were assessed.
- In August 2018, La Mancha purchased 30% shares of GSR amounting to US$125.7 million declaring this was a strategic plan to revamp Prestea Underground mine and to help accelerate the development of the Wassa Mine (La Mancha announces the investment of US$125.7 million in Golden Star Resources and the creation of a strategic partnership (globenewswire.com). Wassa mine was making profit and Bogoso-Prestea mine making losses at the time of the share acquisition. Andrew Wray, CEO of La Mancha, stated: “We have worked closely with Golden Star to understand the potential of its asset base and to agree this transaction which will help to unlock the value of the world-class Wassa and Prestea ore bodies, through accelerated exploration and resource definition drilling and the injection of development capital to fast-track the expansion of high-margin production at both operations.
- Beyond this announcement on August 2018, in excess of 80% of the capital investment was injected in expanding Wassa Mine while Bogoso-Prestea mine improvement was hampered.
- From August 2018 to June 2019, La Mancha as the major shareholder of GSR made significant changes to the GSR management team replacing the CEO, COO and other management team members primarily with La Mancha’s team – intent was to execute all strategic plans of definite timelines for profit maximization despite the consequences (Golden Star – Golden Star Announces Changes to Its Management Team (gsr.com).
- October 2019, GSR announces the relocation of its corporate office from Toronto, Canada to London, United Kingdom (http://s1.q4cdn.com/789791377/files/doc_news/2019/10/PR_191022_Office-Relocation_Final.pdf).
- December 2019, Future Global Resources (FGR) was incorporated in the United Kingdom (FUTURE GLOBAL RESOURCES LIMITED – Overview (free company information from Companies House) (company-information.service.gov.uk).
- In July 2020 and in the midst of COVID 19 pandemic and lockdowns, GSR proceeds to announce binding agreement with FGR for the sale of Bogoso-Prestea Mine and concluded the sale deal with the sector minsters approval on the final day of the sale closing on 30th September 2020 (Golden Star – Golden Star Completes Sale of the Bogoso-Prestea Gold Mine to Future Global Resources (gsr.com).
- In their 2020 Q3 report, GSR then published that ‘the Bogoso-Prestea disposal removed $24m of negative working capital and a $53m rehabilitation provision from the Company’s balance sheet. With the cash generation from Wassa no longer encumbered by losses at Bogoso-Prestea, the infill drilling of the Wassa underground ore body and exploration of the wider license areas are expected to be accelerated in 2021 (Golden Star – Golden Star Resources Reports Results for the Three and Nine Months Ended September 30, 2020 (gsr.com).
So what is the next stage in this strategic plan of GSR?
The sale deal between GSR and FGR ensured that FGR paid near US$0 to take over the Bogoso-Prestea mine and paying a deferred reclamation bond of US$5million (against the US$53 million published) at the end of March 2021 while all other payments are staged (US$10million and US$15million payable to GSR on July 2021 and 2022 respectively) (Golden Star – Golden Star Completes Sale of the Bogoso-Prestea Gold Mine to Future Global Resources (gsr.com).
Clearly, the intent of acquiring the 30% shares in August 2018 was to acquire the already profit yielding Wassa Mine and surrender the Bogoso Mine and its liability to a buyer who may or may not have the financial capability to address it. The new owner when frustrate and having not invested any money in the mine could then declare bankruptcy and revert the liabilities to the Government. GSR will not be liable as well as FGR for the collapse of the mine. Perfect plan with no foreseeable costs.
These events unfolding requires a further probing and preemption of the next move by La Mancha (GSR) and FGR in this sale as well as GSR’s intent for the Wassa Mine in Ghana. Is there a possibility of FGR declaring bankruptcy? – only field observation by Government Agencies could attest to the possibilities. The La Mancha GSR game plan is so unfriendly to the Ghanaian mining industry in setting a bad precedence for other mining companies to emulate.
As a closing question, the sale required the approval of government as a 10% shareholder of GSR and this was publicised in an earlier press release on July 27, 2020 by Golden Star. We are however not familiar with any Parliamentary level effort that conducted due diligence and endorsement of the sale prior to government granting the approval.
Is it possible for the sale of an asset with government ownership to occur without the necessary institutional perusal prior to approval at the Ministry? Should there be a post-sale audit of the transaction to determine if proper procedures were followed since the public is not familiar with any parliamentary level consideration of the sale prior to Ministerial approval.
In an industry like mining, critical decisions must be made according to the laws of Ghana by stakeholders. Politicians and lobbyists (representing businesses) bringing pressure on technocrats and government officials to inappropriately bend the rules or turn a blind eye altogether, has huge impacts on the mining industry at large, job security, communities, the environment, among others – this should be foremost on the minds of, and a caution to, ALL who will within the value chain including Government agencies and their representatives.