27.02.2024 Features

Ignore the Ugly Noises and Tweak the Plan to Invest Minerals Royalties in the Stock Market

Ignore the Ugly Noises and Tweak the Plan to Invest Minerals Royalties in the Stock Market
27.02.2024 LISTEN

The ability to quickly raise potentially large amounts of capital from the Stock Market place without increasing a Company’s or a nation’s debt is the key reason many Companies including State Agencies seek to list in the Stock Market. So, in 2020, the Government of Ghana planned to leverage Gold Mineral Royalties to raise capital in both the London Stock Exchange and Ghana Stock Exchange through Special Purpose Vehicles ((SPV) namely Agyapa Royalties Ltd and Asaase Royalties Ghana Ltd respectively. This was as the result of the establishment of the Minerals Income Investment Fund (MIIF) by an Act of Parliament that is Act 2018 (Act 978). Government in 2021 suspended the Deal, as a result of public outcry, to allow for more consultation.

Of late, due to the investigation into an alleged financial irregularities as reflected in the Auditor General’s Report brought the plan to leverage the Ghana’s Gold Royalties to raise capital from the Stock Markets to the front burner. This resulted in some persons with the misconception that it will not inure benefits to Ghanaians and want it to be discarded.

Other misconceptions as listed in an article in the internet by a member of CSOs by name Mr Bright Simon, one of the versatile Vice Presidents of Imani include (a) Issues of front loading of future streams of revenue regarded as unacceptable. (b). Sales of gold rights for a paltry one billion US Dollars, (c).Duration issues or no expiring date or no gold restrictions meaning that investors are going to have control of royalties from future gold mines discovered in the Country, (d) That it is the private investors who are going to benefit more after the Country’s royalties from its gold resource have been listed on the Stock Market, (g). That it is not the public market that was going to set the price of Agyapa and that this will be done by the Underwriters,.(h) issue of 10 percent of the expected return from the planned Initial Public Offering going to underwriters.

I beg to differ with these persons with the Misconceptions on the listing of Agyapa Gold Royalty Ltd and so I wish to disabuse the misconceptions by this submission with a strong view that the deal if tweaked to remove the hazards and reduce the associated risk to the barest minimum, it will be a smart one (thinking outside the box) to get some capital from the Stock Market which will not increase the public debt.

The accrual capital without increasing the National Debt could be used for infrastructural projects, development of the economy especially investing in Agriculture, Industrial and Tourism Sectors to ensure inclusive growth as well as boost the Ghanaian stock market by an additional profitable trading portfolio when listed in the Ghana Stock Exchange.

By investing in the Ghana Stock Exchange with funds from Gold Royalties, it will give a resemblance of sense of ownership of the minerals to the Citizens (participants) in the Initial Public Offering by a novel of national mineral wealth distribution. So I consider the deal as God send. Consequently, I hereby recommend a relook into the matters on the plan to leverage Gold Royalties to raise Capital from the Stock Market.

To drive my message home, I will be using my research on details on Initial Public Offering of some firms especially MTN Ghana on the Ghana Stock Market and my wide experiences in the IPOs and the trading of stocks including Ordinary Shares in the mining sector especially shares of ex-AGC Obuasi as in 1994 and ex-Golden Star Resources between 2002 and 2022.

Pardon me to digress in order to make some relevant disclosures as one of the investors of the shares of ex-AGC Obuasi in 1994 and that I worked at Bogoso Gold Ltd in 2002, then a subsidiary of Golden Star Resources where the Security Department under my able leadership and with the support of Mr. Shaddrack Adjetey Sowah, then Financial Manager and now the MD of Golden Star Wassa Mine, one Mr. Jerry Agala, then a staff of Bogoso Mine who was then as Mining Superintendent before he became a General Manager of the Company. Special thanks go to Mr. Stephen Piedu, then Chief Inspector of Mines, the Second Infantry Battalion Takoradi especially then one Lt Stephen Opoku-Agyeman and one William Mason of the Safety Department all of these persons and my security personnel made me to help the Bogoso Gold Ltd to prevent and to reduce to the barest minimum the security and safety hazards and associated risks respectively relevant for sustaining and surging the price of the Shares of the Company by enabling environment which made financial analysts to give good report on the Mine business operations.

I made this disclosure because I want you to take note that the enabling environment so created made it possible for the parent Company of the then Bogoso Gold Ltd namely Golden Star Resource (GSR) to raise capital from both in the Gold Commodity Market and the Stock Exchange Market that facilitated the effective and efficient operations of Golden Star Resources in Ghana.

The good work of the Security Department resulted in the Company retaining the staff and employment of additional staff and the acquisition of Satellite Goldfields in 2002 with the resulted establishment of the Wassa Mine by April 2005. This was followed with the acquisition of St Jude Concession with the final establishment of Golden Star Wassa Mine Akyempim.

The investment of GSR in the Stock Market made it to operate effectively and efficiently in Ghana, thus demo the very huge benefits that will inure to a listed Company. So for Ghana’s inclusive growth, let us unite and come out with good suggestions for a relook into the Deal and for investing part of the expected proceeds in building Hospitals and Schools and name them as Gold Royalty Schools and Gold Royalty Hospital that will keep on ringing bell in the Nation about gold mining.

Let me also draw your attention to the importance of effective security and safety measures for effecting operation of a Company and making it possible for raising capital from the Commodity Market and Stock Market. So, please Google in the internet for an article published in dated 23 January 2019 on ‘AngloGold offered Obuasi Mine to me at One US Dollar by Otumfuo’ the Ashantehene, His Royal Majesty King Osei Tutu II of the Ashanti Kingdom and lastly, let me also echo the words of His Excellency President Nana Addo that ‘Sika Empe dede’ to wit money does not want noise and with regards to the financial market noise about the state of foreign exchange or speculation is also one major factor that may drive the market up or down.

So, Members of the affected CSOs especially Mr Bright Simon, one of the versatile Vice Presidents of Imani need to tone down the rhetoric on national issues especial the Gold Royalty Deal by ensuring to conduct wide research on National issues before running amok with the National issue in an attempt to mobilize public support against an important National policy.

Let me reiterate that the affected members of the CSOs and their associates must be educated that some Mining Companies in Ghana without sufficient funds for their operations starting with former AGC Obuasi in 1994 and currently Atlantic Lithium Ltd have been leveraging on their proven ore reserves to raise capital in the Stock Market (external and local) available for Companies and individuals for listing and trading.

So, why not allow Ghana using a smart way to do so through a Statutory Agency by an Act of Parliament which granted it the independence in Commercial and administrative functions or decision making to undertake appropriate investment ventures with funds reportedly approved by Parliament of Ghana (not Parliament of NDC or Parliament of NPP but as stated the Parliament of Ghana) in August 2020. Thus made this system in line with the ruling of the Supreme of Ghana in 2021 in the case of Klomega vs. the Attorney General, Ghana Ports and Harbors’ Authority and others. Thus the deal passed or will pass the Political or Constitutional Litmus Test, this is authenticated by the ruling of the ECOWAS Court on the case on the Agyapa Royalty Ltd. So ignore the ugly noises and let us relook into this good scheme through a good risks assessment to identify the hazards to prevent them and reduce the associated risks to the barest minimum.

Affected CSOs must be informed that Stock Markets are reputable institutions and thus have their integrity at stake and their operations are guided by both International law and National Laws and to some extent by the Constitution. As such they have good regulations including the requirements of adherence to the dogma of Probity, Transparency and Accountability hence a requirement of a viable financial Company registered with Directors in any jurisdiction and or in the Nation, underwriters fees (between 8 to 10 percent of the expected returns), duration, good disclosures including audited accounts on the assets, liabilities/all incomes and expenditures, issuance of prospectus, the Closing Price of the Company’s Share, good governance etc. as Condition Precedent before Company is listed.

It must be noted that an approved company for Initial Public Offering is listed effective one year subject to yearly renewal, it has to meet the Minimum Market Capitalization or minimum stated capital for floating also termed as the minimum Principal listing and Maintenance fee requirements/Working Capital Statement, then payment of yearly subscription. Administrative fees, rule on the number of public float or free shares to be issued to the Citizens/public, in Ghana it should not be less than 25 percent of the shares of the Company.

Furthermore, there are also the payment of initial listing fee and annual fees depending on the number of shares to be or being traded. For instance to be listed in the London Stock Exchange, the expected aggregate market value of all securities must be not less than 30 Million British Pound (approx. 40.3 Million US Dollars as the minimum principal listing requirement. For the New York Stock Exchange, the aggregate market value of 40 million dollars is the minimum required for Initial Public Offering Companies, also the requirement of closing price of at least 4 dollars per share, sufficient capital to cover the price of a stock also as IPO Value of the Company.

At this juncture, let us use MTN Ghana’s Initial Public Offering in the Ghana Stock Exchange in 2018 as a case study. MTN Ghana went to the Stock Market in 2018 with the intention to raise GHC3.48 Billion against a share subscription of 4.64 Billion Ordinary Shares at an offer price of GHC0.75 per share. So MTN Ghana after meeting other requirements, was required to demo Market Capitalization or IPO value of the Company, and this was reported as GHC9.94 Billon at the time of listing, MTN was also required to provide a certain percentage in terms of sales by existing shareholders, this was reported as 2.15 Billion Shares and then a percentage of not less than 25 percent as minimum free shares or new issuance of shares for the public which was 2.49 billion Shares as the new shares to be purchased by the public.

MTN Ghana’s Initial ;Public Offering lasted from 29 May 2018 to 31 July 2018 and raised only GHC1.5 Billion out of the expected GHC3.48 Billion. For MTN’s IPO to be a successful one, Shares bought must exceed a minimum of 10 percent of the expected target of GHC 3.48 Billon representing 348Million of the total required in the offer. Hence the GHC1.5Billion raised by MTN Ghana was regarded as successful.

A message from Mr Bright Simon revealed that Paragraph or Clause 4 (a) of the Agyapa Royalties Deal stated that the value of Rights assigned to the Royalties Company is a Royalty value of 1Billion dollars in consideration of the subscription. I presumed this may be the Market Capitalization of Agyapa for the listing. If I am right, then Mr Bright Simon has no case because the threshold of the Royalties have been defined so Agyapa Deal as misconceived by some of my compatriots is not acquiring the Rights to all of Ghana’ Royalties. If listed in the London Exchange, the Mineral Income Investment Fund owned by Ghana will retain 51 percent, so Ghana stands to gain majority of dividends while 49 percent is to go to the public including interested Ghanaians both Outside and inside Ghana through electronic platform, Mr Bright Simon and others must be told that we are in the IT Revolution through Digitization and Digitalization

Please take note that all listing fees and transaction related cost are to be stated in the prospectus which shall be issued by the brokers to prospective buyers of the shares before the IPO, so that one reads it before buying the shares as a mandatory requirement of the Stock Market. The issue of the registering of Agyapa Royalties in Jersey Channel Island is to make maximum gains due to tax free issues in that Country.

Agyapa Royalty Ltd through MIIF is to leverage the expected revenue as Royalties etc from the affected Mining Companies based on part of their Proven Ore Reserves as proclaimed to the Capital Market and to the Minerals Commission/people of Ghana (the owners of the Gold) as well as revenue from Small Scale Mining Companies. So, it was not based on the probable gold ore reserves in Ghana. But as stated it is to be based on the expected royalties to be obtained from part and not all of the proven gold reserves as declared by the individual Mining Companies to the World or External Capital Market in order to attract equity and or more shareholders.

It must be noted that Ghana by International law or protocol on Foreign Direct Investment and which is the same as in the Ghana Investment Promotion Center Law, the proven gold reserves are the bona fide assets to the affected Mining Companies which normally leverage these proven ore reserves and their reputation to source for capital from the Stock Market.

Let me also add that if listed in the Stock Market, Ghana through Agyapa Gold Royalty will have the option to issue non-refundable investment or no requirement of the payment of the principal to be used to buy the Shares, if and only if Common or Ordinary Shares are issued and bought by Companies and Individuals, a risk known to affected investors. Ordinary shares afford voting right but no return of investment when a Company goes into liquidation and do not give the Shareholders the right to receive or demand dividends, these investors get less dividend as against what is paid to the Preference shareholders.

Ghana may also decide to issue Redeemable Preference Shares and under this portfolio, the Shareholder gains dividends and the return or repayment of the principal share capital. Furthermore, Companies may have Stock Option Plan or equity option for Employees , consultants, Directors , which gives an investor the right but not the obligation to buy or sell stock at an agreed upon price (striking Price) before an agreed expiring date. So investors mainly employees, Directors, and Consultant of the listed Company with the Option Plan may incur the risk of not getting the entire principal and only gain revenue from exercising their stocks through trading at a striking price and at specified date before the expiring date as against preference shares who gain revenue from both dividends and trading of their shares and gain return of the principal share capital.

Let me stressed that the Agyapa Gold Royalty is to deal with Gold Stock at the Stock Market and not Physical Gold Metal with Spot Price in the Commodity Market. Hence, there is a difference between Gold Metal Market or Commodity Market (as determined by London investors as the Spot Price or by demand and supply or the exchange rate/the price of US Dollars, public sentiments etc) and the Gold Stock Market which deals with securities.

Research revealed that the Gold Metal Price and the Gold Stock Price have reverse relationship that is when the Price of stock rises the Price of Gold falls or vice versa. But some school of thought claimed that the possibility of positive relationship exist, thus suggest that the reverse relationship may not be consistent for various reasons.

The problem I envisaged is a wrong nomenclature, so I am of the view that since the Capital Market which deals with among others involves the Commodity Market and Stock Exchange Market, the name should have been or should be Agyapa Gold Royalty Ltd to include the name of the affected commodity herein Gold to make it very clear and attractive globally to win massive subscriptions or over subscription in the IPO and make the subsequent stock trading or the trading of securities between buyers and sellers to be a very vibrant one as pertain to Gold Stock Market.

Let me also make it very clear to Mr Bright Simon and others that the initial price is determined by the Company to be listed through the help of the Underwriter or Book runners or syndicated Banks but the price in the trading of shares on the Market Platform is basically determined by the Market by investment perception of the next Stock market and only deals with return on value, hence the vibrant interactions between buyers and sellers of securities helps a lot, so as stated there is vast difference between the Metal Market say the gold Market where physical gold is sold filifli that is with eyes opened and the Stock Market which deals only with the transfer of securities from a seller to a buyer or vice versa mostly through a broker or broker account, hence no transfer of gold metal.

Let me also make it clear that in the Stock Market you start with the Initial Public Offering with a reasonable low rate to make it to be very conducive for the next stages which involves trading of the Stock to be very vigorous. The participants involves in the IPOs and Trading of Shares are mainly individuals (persons and Companies) no Government. Hence reason for establishment of the Company dubbed as Agyapa.

With the establishment of Agyapa Gold Royalty Company which initially will be 100 percent owned by the Minerals Income Investment Fund (MIIF), but when listed, the ownership percentage will change to make Ghana as only the Majority Shareholder with Ghana through MIIF as 51 percent owner and 49 percent to the public

Let me recap that the Deal does not need to go to Parliament for ratification since it involves a Special Purpose Vehicle set up as an Independent Statutory Body with commercial functions, hence an Agency which is not part of Central Government. Thus has the power to take independent decision concerning commercial operations and administrative functions. So, the approval by Parliament in August 2020 satisfied section 2 of Article 178 of the 1992 Constitution on withdrawal of funds from Public Fund herein Mineral Income Investment Fund. So the suggestion that the Deal should go to Parliament again after the approval in August 2020, suggests a legal absurdity for a commercial agency as stated in the ruling of the Supreme Court of Ghana in 2021 in the case of Klomega (No2) v Attorney General, Ghana Ports and Harbours Authority and others.

Enter the former AGC Obuasi, to drive my point home on the benefits to a listed Company AGC in 1994 that inured to the benefit of Ghana. In 1994, AGC Obuasi owned by the Government of Ghana, leveraged on its ore reserves and reputation and floated shares in the London Stock Exchange at 25 dollars per share and in the Ghana Stock Exchange around 18 Dollars per share which was payable in Cedis by an Initial Public Offering,. Together with other compatriots, I also bought the Shares at this price in Cedis. Reports indicated that the Government of Ghana bagged a profit of over 350 Million US Dollars from the IPOs of the shares of AGC.

Unfortunately, some of us or the individual investors in the former AGC Shares woke up one morning and saw our daylight turned into darkness when the Share price dropped drastically to 3 US Dollars. We never received a cent or pesewas as dividend and lost our share principal or investment presumably as ordinary shares. The matter went to Court but as stated the prospectus on the Shares as issued by the brokers stated all including the risk involved. You may wish to read more, so Google in the Internet for ‘In the matter of the Golden Shares’ as published in Modern Ghana in 2002. These situation aside the arithmetic relationship between the price of Gold Metal and Gold Stock had nothing to do with sales of gold metal in the Gold Commodity Market as accrued to the then AGC Obuasi.

Enter Golden Star Resources with her operations in Bogoso/Prestea. Bogoso Mine in 2002 and 2005 leveraged her real or proven gold ore reserve which was declared globally to both the Toronto Stock Exchange and to the New York Stock Market and made substantial capital that helped it to expand its operations with acquisition of Satellite Goldfields and established Golden Star Wassa Gold Ltd and the entering into a joint venture with an Australian Company which owned the St Jude Concession which metamorphosed into a special purpose vehicle called Wexford Gold Ltd, as part of the concessions of Golden Star Wassa Ltd respectively.

Gold Star Resources as part of winding up her activities in Ghana, sold the hen namely the Bogoso Mine to Future Global Resources in 2020 for 40 Million US Dollars and retained the golden egg laid by Bogoso Gold Ltd namely Golden Star Wassa Mine Ltd until 2021 when this Company was also sold to Chifeng Jilong Gold Mining Group of China after initial payment of 470Million Dollars and finally bringing the total sum to 600 Million Dollars by January 2022 to cause the delisting of Golden Star Resources from Toronto Stock Exchange and the New York Exchange and the replacement by Chifeng in the mentioned Stock Markets. This was upon the approval of the Shareholders of GSR in the External Stock Markets. This was possible after GSR entered into a definite agreement for Chifeng to acquire all the common and outstanding common shares of GSR. The Ghanaian shareholders were asked to tender in their shares or share certificates to GCB etc and be paid their considerations with a time table provided.

So, some of the Shareholders of GSR in the Ghana Stock Exchange Market were very lucky with the refund of their principal presumably by the kindness of GSR, so GSR was delisted or existed from the local and foreign stock markets and mining in Ghana by January 2022 without depleting her gold ore reserves and brought it shares trading to a closure.

So, delisting from the Stock Market for whatever reason is permissible, so Agyapa Gold Royalty could exist from transacting business in the Stock Market as a matter of time if any future Government decides not to be sensible to maintain the Deal or keep Agyapa Gold Royalty in the Stock Markets, if listed and enjoy dividends, and the possibility of raising more Capital through Follow-on Offering of new Shares which is acceptable in the Stock Market

Let us ignore the ugly noises and unite and tweak the Deal to raise capital through the IPO, trading and follow-on Offering for raising further capital for infrastructure (roads, schools and Hospitals) or Agriculture Infrastructure (fish ponds, Warehouses, Greenhouses for tomatoes farming, irrigation dams or combination of Agric and Power/Energy Infrastructures by the combination of Hydroelectric Power Dam and Irrigation Dam say the planned Pwalugu or Ajena Dam in the Eastern Region as Multipurpose Dam in Eastern multipurpose Dam that may also help to check the perennial flooding from River Volta and boost a 24 hour economy in the affected areas for socioeconomic national development for Inclusive Growth. .