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Economic Brief - Royalty Rates in African Mining Revisited: Evidence from Gold Mining
Several African countries have started to update their mining codes by increasing their royalty rates. In 2010, Burkina Faso indexed its royalty rates such that the effective rate varies positively with commodity (gold) prices. Specifically, the minimum royalty rate is 3%, which increases to 4% for gold prices between USD1,000 per ounce and USD1,300 per ounce, and to 5% for prices above USD1,300 per ounce. Ghana previously had an ad-valorem royalty rate that ranges from 3% to 6% for gold in its 2006 Minerals and Mining Act. However, every single mining company in the country paid only the minimum rate of 3% by taking advantage of loopholes that allowed for significant deduction of expenses.