Summary
- The Ecowas Bank for Investment & Development (EBID) claims to have signed an agreement to finance the Black Volta Gold Mine.
- Black Volta Gold Mine is owned by Azumah Resources.
- Azumah Resources is owned by Ibaera Capital.
- Ibaera Capital insist that it is not involved in any such deal.
- EBID is a regional multilateral development bank expected to abide by the highest transparency and governance standards.
- It is incumbent on EBID to clarify this strange and bizarre confusion.
- While we are on the subject, word has gone out that the President of Ghana is seeking to “intervene”.
- That intervention is much warranted as this situation definitely has political undertones. There are two Directors of Azumah Resources who were nominated by Engineers & Planners (E&P) on the back of an agreement with Ibaera that the latter has terminated, and which is now the subject of arbitration in London. Those two Directors are all appointees of the President, manning key institutions, namely the SSNIT and Ghana Infrastructure Investment Fund. E&P’s own admission of regulatory influence compounds this perception. The Chair of Governors of Ecowas Bank is another appointee of the President, his serving Finance Minister.
- Hopefully, wise counsel will prevail and an amicable solution shall be found that benefits the people of the Upper West and strengthens Ghana’s reputation as a mining jurisdiction for both local and international investors.
- Creating national champions in any sector, including mining and oil & gas, requires sophisticated strategies, not buga buga.
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One of the murkiest, most fascinating and most sensational fights for control of a gold mine is playing out in Ghana as prices of the yellow metal shoot for the sky.
This saga is part boardroom battle, part political fiesta, and part policy mess. Everything rolled into one katanomic soup.
If you are only interested in the drama, you can skip the next section on the long history of the project and go straight to the section headed: “Black Volta Saga”.
The Long & Checkered History of Azumah
The company at the centre of it all is called Azumah Resources Ghana Limited (Azumah Ghana), incorporated in February 2005, with shares held in the Isle of Man by a company called Eaglehand. Its antecedents, however, are in Australia.
The overseas entity was registered on 23rd December 2004. A little under a year later, it listed on the Australian Stock Exchange (ASX) in a bid to raise $6 million.
In January 2006, the company, Azumah Resources, was officially admitted to the ASX. Its main asset was a reconnaissance mining license held through its Ghana affiliate (Azumah Ghana). It also became apparent that the entrepreneurial mastermind behind the company, David Harper, held shares alongside a complex web of vendors, a situation that attracted a bit of concern from the exchange.
Source: Daily Graphic
David Harper’s love for Azumah Nelson accounts for the name chosen for the connected entities in Australia and Ghana.
The vendors did not include Geodrill, which David had founded in 1998 to penetrate the mining services industry in Ghana. But it was clear that there was an intricate web of ownership across all of them.
The primary business logic appeared to consist of various mining service providers undertaking exploration operations and consulting on behalf of Azumah in exchange for shares. At least until such a time as the company could raise more money.
At any rate, soon thereafter, a $3 million deal was signed between Azumah and Geodrill for the latter to undertake exploration drilling on behalf of the former.
By this time, the company’s three main deposits – Kunche, Bekpong, and Julie-Collette – in the Wa-Lawra area of Upper West were taking shape, with resource accretion occurring steadily. Not all the resource growth had happened organically. It was a series of shares and royalty-based transactions in 2009, for instance, that brought the Julie, Collette, and Josephine prospecting licenses into the fold.
By 2015, the company’s exploration had found enough gold to support a mine with a life of 7 years, producing at about 90,000 ounces of the precious metal per year.
Despite marquee investors like Macquarie, JPMorgan and Dundee holding shares at various points, money was tight. It had become clear over time that the Australian stock exchange was not sufficiently hospitable to Azumah as far as its fund-raising goals were concerned.
The company owed the government various fees and had considerable challenges with the community which felt that they had been around for much too long without evidence of any job creation or other economic activity.
In 2017, Ibaera walked through the door. A private equity fund founded by former mining executives, Ibaera, brought industry insight in addition to money. The Ghanaian government granted permission for Ibaera to inject $US 13.5 million into the ongoing exploration effort to ready the mine for development in exchange for a total of about 47.5% of the company’s shares.
James Wallbank, Peter Hairsine, Jon Hronsky, Paul L’Herpiniere, and Chris Alexander were brought in by Ibaera to beef up the Azumah team. The economic reserves of gold identified at this time were about 624,000 ounces of gold.
By 2019, intensive exploration and prospecting work had pushed up the reserves. Sometime in 2019, the reserve estimate hit the psychologically important 1 million ounces mark. The resource estimate, meanwhile, was climbing towards the 3 million ounce level. (Some of Bekpong’s gold-bearing ore was underground and therefore outside the scope of the initial open-pit mining strategy.)
In March 2020, pleased with itself because of the reserve growth, Ibaera, through its IGIC fund, acquired 100% of Azumah Resources and committed itself to building the Black Volta mine, where the ore from all the viable deposits would be brought for processing. Ibaera committed to a $40 million investment to position the mine for full construction.
By this time, the expected mine life had increased from the initial 7 years to 11 years. Annual production was expected to hover around 150,000 ounces a year (by comparison, the famous Newmont Akyem mine is rated at about 420,000 ounces a year). The reserve estimate was closer to 1.65 million ounces of gold, with more resource-to-reserve conversion anticipated along the northernmost corridor of the Wa-Lawra range.
The price of gold was, as always, an important factor. With the cost of production having been pegged around $905 per ounce and the price of gold hovering around $1400, things were tight. Reserves were considered viable if the price of gold did not drop below $1350. Base economics, however, required the gold price to move to $1650.
To optimise the economics, Ibaera started discussions with Engineers & Planners (E&P), famous for its flamboyant founder and sole owner, Ibrahim Mahama, brother of Ghana’s current President. (Disclaimer: I am currently in court with E&P and Ibrahim Mahama regarding a defamation suit they brought because I mentioned creditor issues, financial challenges, and political influence over regulatory bodies in an earlier article about another mining controversy).
E&P is known as a bold risk-taker. Ibaera must have seen some of the deals they had done with the likes of Gold Fields and the capital burden they had assumed in those deals.
The entry of E&P into the picture, dear reader, marked the start of the saga you are about to witness.
The Black Volta Saga
On 10th September 2023, an elaborate 42-page agreement, notarised in Singapore, was signed between, on the one hand, IGIC, Cangol, both Azumah entities (Ghana and Australia), and two mining subsidiaries of Azumah (“investors”), and, on the other hand, Engineers & Planners.
The core of the agreement is for E&P to pay $100 million to the investor parties and, this is important, inherit over $180 million in debts accrued from 2006 in the Azumah operations.
To obtain the latest reserve estimates, the investors agreed with E&P to jointly fund an updated study to be performed by DRA Global. Each side was to bear half the cost. DRA Global was also to produce the main designs for the mine, at E&P’s cost.
Following this preliminary stage, the burden shifts considerably to E&P. E&P agreed to fund the main civil and construction costs for the mine and to take over exploration financing from 1st October 2023. Shares in Azumah Ghana (referred to as “ARG” in the extracts that follow) were to vest proportionately in E&P as it executed its commitments.
Of fundamental importance was the Engineering, Procurement and Construction contract that was to guide the civil works for the mine.
Equally crucially, additional debt was required to finance the construction. The agreement makes it super clear that no financing can be secured without their participation. Note that IGIC is specifically mentioned in this regard. E&P is not allowed by the Agreement to enter into financing agreements/arrangements without the active participation of IGIC.
Clause 2.3.3 is emphatically clear that the debt secured must be on the books of Azumah Ghana. E&P cannot borrow the money on its books and hand it over.
Clause 2.3.9 says emphatically that only the Project Board (more on that later) can confirm that any debt has been satisfactorily secured and that such debt instrument must not have as a condition a requirement for further approval by an investment committee.
To obtain the shares of Azumah Ghana, E&P was required to pay over $181 million in the first tranche by 30th June 2024.
The second tranche payment, due by 30th June 2026, is of a similar amount.
To work together to achieve the objectives, including fundraising and mine development, two new joint governance structures were created.
E&P was to appoint the majority of the persons on a technical committee.
A reconstituted Board of Directors for Azumah Ghana was designated as the project board for the Agreement. The majority of board members was to come from the investors, whilst E&P appointed two members.
As of this year, the reconstituted Board of Directors of Azumah Ghana, as recorded by the Office of the Registrar of Companies, is as follows:
Nana Dwemoh Benneh
Noel Nii Addo
James Henry B. Wallbank
Hector Amponsah Nyinaku – Secretary
Jonathan M.A. Hronsky
Steven Evan Zaninovich
The first two Directors, constituting the minority, were appointed by E&P.
The shareholding of the company has, however, not changed.
The reason the shareholding did not change, and remains firmly within Ibaera’s control, is rather simple: E&P could not raise the money to meet the June 30th 2024 deadline.
E&P and the investors disagree on why E&P could not make the payment, a dispute we shall turn to momentarily.
But after months of wrangling, the investors issued a termination notice on 24th December 2024.
The letter is self-explanatory: from the investors’ point of view, E&P failed to enter the EPC contract and failed to make payments by the relevant deadlines.
But I skipped a beat. Before Ibaera could terminate, E&P had taken the matter to arbitration in London under the ICC rules on 21st October 2024.
Through some digging, we have obtained vital snippets of the confidential material submitted to the ICC.
The E&P filing has 50 itemised paragraphs.
Insofar as I can discern a list of grievances, they are as follows:
- Good faith support
E&P suggests that it had used its influence on key regulators to cut the investors some serious slack:
An odd claim given E&P’s tendency to take offence at suggestions that it exercises considerable regulatory influence in Ghana.
- Deliberate Frustration
E&P insists that the reason the EPC could not be signed was because the investors deliberately frustrated efforts to get DRA Global to the work anticipated in the agreement, without which E&P couldn’t commence any construction work anyway.
E&P insists, furthermore, that it has spent $5.5 million on the project and procured pickup trucks to advance work.
More critically, E&P asserts that it could not raise the funds because the Project Board Chair, James Wallbank, wouldn’t make the corporate documents necessary to create a guarantee for the lenders to advance the loan facility.
As a consequence of all the above, E&P’s prayer is that the arbitral tribunal should compel the investors to stick to the Agreement.
The investors started their reply to E&P’s claims by first laying out the milestones.
They then proceed to complain about the lack of specifics and particulars in the broad assertions made by E&P. More to their chagrin, the E&P assertions do not reference what specific provisions in the Agreement have been breached and in what manner.
The investors take some time showing which specific sections of the Agreement have been breached and why certain actions taken by E&P in purported compliance with the Agreement fall short.
In particular, they show that the Ecowas Bank finance document did not meet the terms of the Agreement.
Neither does Afreximbank’s.
They point out that nowhere in the Agreement is a guarantee made a requirement for raising the project finance. They then remind E&P that per the terms of the Agreement, E&P must involve the investors in every process and detail of the fundraising effort.
At any rate, insists the investors, the consideration payments themselves were not made by the deadline, and they consider the failure to have been costly to them and therefore grounds for their own counterclaims.
Certain other portions of the investors’ confidential submissions to the arbitral panel that have surfaced also show that the two E&P nominees to the Project Board have been taking corporate actions, including the signing of contracts and the unauthorised access of funds in the project account at Ecobank, without the approval of the Project Board. Suggestions have been made that any funds E&P claims to have expended on Black Volta have not been audited. The monies have been spent from an Ecobank bank account controlled by E&P through the two Directors, who contributed to the Azumah Board.
The points in the last paragraph would be dramatically illustrated by events this week.
The EBID angle
(Before preparing this essay, we reached out to EBID. They did not respond.)
The Ecowas Bank for Investment & Development (EBID) grew out of the Ecowas Fund set up in 1975. It became a regional development bank in 1999. Currently, both its President and Chairman of Governors are Ghanaians.
Fitch recently affirmed EBID’s credit rating at “B”. It balanced the shrinking of ECOWAS with the Bank’s portfolio performance in arriving at a stable outlook.
In recent times, there has been a hot debate about whether Africa’s multilateral development banks (MDBs) – i.e. banks predominantly owned by governmental entities and focused on development rather than profit – have taken on characteristics that make them too commercially aggressive and less effective at risk management.
The recent downgrades of Afreximbank have reinforced perceptions in certain quarters that Africa’s newer MDBs sometimes do not abide by the conservative governance standards we have come to expect from the likes of the AfDB, standards like transparency, policy focus, alignment with other MDBs, and strict credit standards.
When it leaked late last week, that despite the termination notice issued by Azumah Resources shareholders and the pendency before an arbitral tribunal of matters concerning E&P’s continued relationship with Azumah’s investors and owners, E&P had booked Marriott Hotel in Accra to stage a ceremony during which EBID will announce the provision of financing to Azumah Resources to mark E&P’s acquisition of the Black Volta Gold Mine.
Come today, Monday, the 7th of July, despite a strongly-worded statement from the owners of Azumah Resources that any such event would amount to deceit, the President of EBID still showed up at a signing ceremony where claims were made on behalf of Azumah.
The E&P nominated the Directors of Azumah, the Chief Executive of the GoldBod, and other dignitaries were also presented.
The President of EBID insisted that the event and their announcement of finance for the Black Volta project should not be politicised.
Before talking about politics, there are serious questions that must be asked from an institutional and governance perspective:
- With which entity precisely did EBID sign the agreement? If E&P, what is the basis for E&P’s continued capacity to act on behalf of Azumah Resources?
- If the agreement was signed with Azumah Resources, how could that be when the majority shareholders and Board Members have explicitly disassociated themselves from the entire affair? Was it not clear that anyone purporting to be representing Azumah at the event was in fact an assignee of E&P?
- Have the terms of the EBID financing for Black Volta changed from what was emphatically rejected by the Azumah Resources Project Board last year? (Curiously, EBID had to restructure another E&P loan facility in 2023 after servicing became difficult for E&P.)
- Given the scale of E&P’s liabilities under the Agreement, how does EBID intend for the project to proceed with just a $100 million commitment?
- We all see the likes of AfDB and the World Bank finance projects. Extensive impact studies and the like precede any commitment. All the preparatory information is posted on their websites. Is the argument here that when it comes to the newer African MDBs like Afreximbank and EBID, we must relax basic transparency and stakeholder governance standards?
Our understanding is that the President of Ghana has been apprised of these developments. His Finance Minister also chairs the Board of Governors of EBID.
We hope that he disagrees with the EBID President that there are no political undertones, because there are. Both political and geopolitical.
The two directors posted by E&P to the Board of Azumah Resources Ghana Limited are also officials of major state-owned entities appointed to their roles by the President. Their actions reflect on the government. Noel Nii Addo is the Deputy Director General of Ghana’s main pensions fund (SSNIT). Nana Dwemoh Benneh runs one of the country’s main sovereign wealth funds – the Ghana Infrastructure Investment Fund (GIIF).
The involvement of these two men, the fact that the current President of EBID worked for years at ARB Apex, another state-owned entity, and the well-known political connections of the Founder of E&P, all work together to give this entire affair hints of “political colours”.
I hope that the Ghanaian President’s expression of interest in resolving this matter before it degenerates further leads to wise outcomes we can all celebrate.
The Black Volta Gold Mine project seem quite exciting. With the price of gold where it is, the gross margins are now well north of 60%. It would be ridiculous if “buga buga” is allowed to create conditions in which it becomes bogged down in a protracted dispute.
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DISCLAIMER: The Views, Comments, Opinions, Contributions and Statements made by Readers and Contributors on this platform do not necessarily represent the views or policy of Multimedia Group Limited.
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