Anatomy of Agreement: Lessons from Bogoso-Prestea Mine in Ghana
Future Global Resources (FGR) completed its purchase of the Bogoso-Prestea gold mines in July 2020 from local producer Golden Star in a deal valued at USD 55 million with the possibility of rising to USD 95 million[1]. However, in the intervening year, the project has been hampered by a series of political, reputational, credit and ESG-related risk events affecting the operation itself and the agreement between the two parties.
Significance – Labour, Community & Contract Frustrations.
The deal between Golden Star and FGR was initially lauded as a win-win one for both parties. It was to give FGR its maiden mining sector project and allow Golden Star to finance and further focus on its only other productive mine, Wassa[2]. But since then, the project has been confronted by labour and host-community issues and subsequent, contractual dispute.
The first significant issue to arise was how to handle staff that were to be laid off in the restructuring process. Existing staff believed that they were due a severance package as part of the deal, though both FGR and Golden Star denied this as most staff were retained. To fight their case, mine workers formed Employees Affected by the Bogoso Prestea Sale (ELAPSE). However, neither Golden Star nor FGR would engage ELPASE as it was not a recognised body, unlike the Ghana Mine Workers Union (GMWU)[3]. ELAPSE sought relief from the High Court in November in a case that dragged until it was settled out of court in July 2021. The resolution came by way of an agreement brokered by the Joint Standing Negotiation Committee (JSNC) comprising four separate stakeholders. FGR Bogoso Prestea Limited, GMWU, Bogoso Gold Enterprise Based Union[4], and Exempt Staff of FGR Bogoso Prestea Limited[5]. The agreement was to pay three tranches of severance pay over the next two years and to engage the affected staff on full time contracts.
In recent weeks there has been a number of demonstrations at the mine by members of the local community. They claim that they were promised resettlement by Golden Star (agreed upon in 2013[6]) and, as a result, were told not to carry out any development activities in their area, Dumasi. The protests have resulted in the destruction of property and vehicles at the mine and at least two people were reportedly shot[7]. FGR has stated its willingness to engage the local community with the firm’s general manager saying in a statement: “it is our strong view that we need a collaborative approach to address these and other grievances in the short, medium and long-term, and in an environment of trust and mutual respect. Such an environment can only be developed through a long-term commitment to constructive engagement. We would, therefore, like to propose the setting up of a working committee comprising… Dumasi community representatives, the Municipal Chief Executive of PHVDA, and other relevant stakeholders, to gain a common understanding and agree on a sustainable way forward.”
Following on from these two issues, the agreement for the sale of the mine itself is now also under contest. In June, Golden Star and FGR agreed to a renegotiation of the share purchase agreement to delay some of the deferred consideration payments[8]. Following the resolution of the employment dispute, FGR is refusing to pay tranches of the purchase price that were agreed upon under the original contract[9]. Golden Star is now seeking to recover all amounts due to them by FGR[10] though it has yet to outline how it plans to do this.
Outlook – External risks manageable but lingering threat of international arbitration.
This will be watched closely by other mining actors, specifically Asante Gold and Resolute Mining who have just agreed a USD 90 million sale of the Bibiani mine. Bibiani has been unproductive since it was purchased in 2014[11] and faced a license suspension earlier this year around the time of the planned sale to a Chinese firm. Notwithstanding the Bogoso-Prestea experience, it is more often community than employee relations that cause shutdowns. For example, mismatched expectations on local job creation and/or development for the area, clashes with illegal miners or issues over pollution. On projects where there have been long periods of inactivity, encroachment will be a particular concern - to new owners and the small scale miners for whom it has been a source of income alike.
For now, the dispute between Golden Star and FGR is set to deepen. FGR is seeking to claim the costs of the employment settlement from Golden Star. Conceivably, they may seek the same for any eventual costs resettling the residents of Dumasi and/or a substantial renegotiation of the sale agreement. International arbitration could follow.
Meanwhile, Ghana remains the largest gold producer in Africa. Mining is the largest single source of export revenue, and features prominently in industrial strategy and recent policy statements by the current government. For private entities partnering in those plans due diligence will be critical. Forward and backward-looking, integrity and ESG-related. And where disputes do occur, the amicable conclusion reached by the JSNC in Bogoso-Prestea shows the viability of stakeholder engagement and alternative dispute resolution mechanisms for addressing community and employment concerns[12].
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[1] http://www.gsr.com/investors/news/news-details/2020/Golden-Star-Completes-Sale-of-the-Bogoso-Prestea-Gold-Mine-to-Future-Global-Resources/default.aspx
[2] In the Western Region of Ghana
[3] GMWU is part of the Trades Union Congress (TUC), and itself did not recognise ELAPSE. GMWU called on Bogoso-Prestea workers to follow laid down processes.
[4] Part of the Ghana Federation of Labour
[5] Golden Star neglected to be part of the negotiation.
[6] http://www.gsr.com/investors/news/news-details/2013/Golden-Star-Announces-Signing-of-the-Negotiated-Resettlement-Agreement-for-the-Community-of-Dumasi/default.aspx
[7] https://www.modernghana.com/news/1095292/two-shot-during-protest-against-mining-company.html
[8] https://www.prnewswire.com/news-releases/golden-star-announces-amendment-of-agreement-for-the-sale-of-bogoso-prestea-301302696.html
[9] https://blueinternational.com/news/bpl
[10] http://www.gsr.com/investors/news/news-details/2021/Golden-Star-Provides-Update-Regarding-the-Sale-of-Bogoso-Prestea/default.aspx
[11] Resolute has carried out exploratory drilling but not settled on a viable operational strategy.
[12] Especially since the passage of the Alternate Dispute Resolution Act in 2010
*Image credit: Shane McLendon, @kctinman
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