[SMM analysis] Ghana manganese mine is rumored to be shut down again? The essence is still a game of interests.

Recently, the world's largest manganese carbonate mining company, Ghana Manganese Mining Company, owned by Tianyuan Manganese Industry, has been caught up in rumors of being shut down. Rumor has it that Ghana's Minister of Land and Natural Resources ordered the closure of Ghana Manganese Mining Co., Ltd., in response to the company's failure to meet its financial obligations, which has cost the state more than $300 million in revenue.

For an introduction to the Ghana Manganese Mine Company and a previously on-the-spot summary of the incident, see the previous article by SMM, "[SMM Analysis] wish for a false alarm? It is rumored that the Ghanaian manganese industry has been asked to stop production audits.

According to the understanding of SMM, the manganese mine in Ghana is still in normal operation, and the enterprise is committed to achieving its target of 7 million tons in 2019. The relevant departments ordered the closure, the future short-term manganese mining companies do have the risk of temporary suspension of production, but the industry expects that even if the shutdown time will not be very long, there is still room for negotiation in the later stage. The main reasons are: 1) China is the main consumer of manganese carbonate, if the cooperation with Tianyuan manganese industry breaks down, it is basically impossible to find alternative customers of the same scale; 2) Manganese mining companies have promoted local employment and local infrastructure construction, and the long-term shutdown of production has done more harm than good to local governments; 3) in transnational investment, in the cooperative relationship between enterprises and local governments, conflicts of interests between different departments are very common, as long as the interests are still in the same direction, they can basically be properly dealt with without major changes in the political situation.

Because Ghana manganese ore is manganese carbonate ore, most of them are still used in the production of electrolytic manganese metal. At present, the main consumption place is only in China. SMM estimates that the consumption of Ghana manganese mine in the northern electrolytic manganese plant in 2019 is about 240-3 million tons. Although some of the other southern electrolytic manganese plants have also begun to use Ghanaian manganese ore, the quantity is not large. Under the high output of Ghanaian manganese ore, the demand of electrolytic manganese plant has little room to grow in the short term. It is necessary to open up the market of Si-mn alloy. Even if the market development of this part is not ideal in the later stage, a large number of unsalable, considering the existence of the rigid demand of the electrolytic manganese plant for this part of the manganese mine, it is more in line with the interests of all parties to reduce the production target this year than to stop production completely.

From January to June 2019, China imported a total of 2.579 million tons of Ghanaian manganese ore, an increase of 105 per cent over the same period last year, according to customs data.

Source: China Customs, SMM

At present, the manganese mine inventory in Ghana in China is still at a relatively high level. In addition to the manufacturer's own standing stock of about 6 months, Tianjin Port has 110000 tons and Qinzhou Port has 80, 000 tons.

The following is the original translation of foreign media rumors:

According to sources, the Minister of Land and Natural Resources of Ghana ordered the closure of Ghana Manganese Mining Co., Ltd., until further notice on Monday, 5 August. Kweku Asoma Cheremeh said the shutdown, in response to the company's failure to meet its financial obligations, had cost the state more than $300m in revenue. "We will allow them to find a friendly solution to the violations they have committed. If they do not have any good explanation for these things, then we will bring them up in court and, if necessary, the government will consider directly taking over the company or selling its assets to pay the debt. "

It is reported that, as recently as January this year, Ghana Manganese Mining Co., Ltd. was instructed to stop its mining operations to enable the state to conduct a thorough financial audit of its operations, the Ministry subsequently agreed with the company that the audit could be carried out while mining operations were under way. Upon completion of the preliminary audit, it was found that the company had failed to pay additional royalties ($12.8 million), additional corporate taxes ($79 million) and declared dividend losses ($6.1 million).

Since there was no transfer pricing audit prior to 2017, additional offshore income also decreased by $259 million between 2010 and 2017. The audit also noted major infrastructure deficiencies resulting from the operation of Ghana Manganese Minerals Co., Ltd.

Cheremeh says road and rail infrastructure is out of capacity. While the company continues to expand its manganese exports, the Ghanaian contractor who serves the company owes hundreds of millions of dollars. According to the Ministry's current data, the company currently produces and exports more than 3 million metric tons.

In addition, the company has defaulted on payments of more than $4 million in annual mining fees. These and other violations resulted in the closure of Ghana Manganese Mining Co., Ltd., until further notice. At present, the Ministry, together with the Minerals Commission and other relevant stakeholders, will immediately begin discussions with the company to resolve these and all other outstanding issues during the closure process.