The Government of Ghana has stated that it will not mortgage future income today for a lump sum in cash. According to the government, the Minerals Income Investment Fund, a 51% shareholder, will hold two seats on Agyapa`s board of directors, exercise its voting rights for the other directors and receive the majority of future dividends. However, an agreement defining the relationship between the Fund and Agyapa contains several clauses that may limit the future control of the Fund (and thus the Ghanaian government) over Agyapa`s decisions. These clauses include an obligation for the Fund and the Government not to use voting rights to prevent Agyapa from making decisions for the benefit of the shareholders of the company as a whole or in a manner that would require the company to make decisions exclusively in favour of the Fund or Ghana. Generally speaking, the relationship agreement aims to establish Agyapa as an independent business entity, free to pursue its own profitability, regardless of Ghana`s budgetary needs. It is questionable whether Agyapa will be able to diversify its portfolio by buying new assets (the state`s stated objective for the company), while paying the fund the proceeds of the IPO and distributing significant dividends each year (at least initially) while the fund eventually holds 51% of the shares. A stability clause, which is contained in at least one version of the royalty investment agreement, prevents any change in the royalty rate that would have “a significant negative impact” on ARG (since investors would rely on the royalty stream). For decades, this clause would limit the government`s ability to reduce royalties on mining leases contained in the agreement, although such a reduction would encourage, for example, companies to maintain gold production in times of financial hardship. Meanwhile, Ghana`s mining law limits stability agreements with mining companies to 15 years. While the government has drawn attention to private sector precedents, public financing based on raw materials is more often in the form of resource-based credits. By way of comparison, typical credit agreements based on the resources examined by the NICs indicate either the total volume or the total value of the resources and interest to be repaid.
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