The Lithium lease debate: let’s settle for the best

With the world moving towards clean energy, lithium has become a key mineral for nations and businesses, given that it is a critical ingredient in powering batteries for EVs, mobile phones, cameras, laptops and equipment in the medical field.

It is therefore understandable why the government signed the first-ever mining lease for the exploitation of lithium on October 19, this year, tongues have begun wagging with some individuals and civil society organisations questioning the agreement.

The granting of the lithium mining lease to Barari DV Ltd, a subsidiary of Atlantic Lithium Ltd, cleared a major hurdle for the company to mine the green mineral.

 The $250-million project located at Ewoyaa in the Mfantseman Municipality in the Central Region, is expected to commence production by 2025.

The concession is estimated to hold 25.6 million tonnes of probable ore grading 1.22 per cent lithium oxide (Li₂O), as of June 2023.

The Minister of Lands and Natural Resources, Samuel A. Jinapor, insisted at a news conference yesterday that the mining lease granted to Barari was among the best leases in the world.

(See our front page lead story).

He said it had improved terms such as increased royalty regime, more state equity interest, improved local content and a levy for community development, making it one of the best in the world.

 For instance, in the lithium mining lease, royalty rate has been increased from five per cent to 10 per cent while the state’s free carried interest had also moved from 10 per cent to 13 per cent.

Additionally, the government, through the Minerals Income Investment Fund (MIIF), will acquire additional six per cent shares in the mining company and 3.06 per shares in the holding company, which had been listed on the Australian and London stocks exchanges.

Consequently, the government’s interest in the company will be 19 per cent in the local company, and 3.06 per cent in the foreign holding company.

In addition to all taxes, royalties and levies, including one per cent growth and sustainability levy, the company will also pay one per cent of its revenue into a Community Development Fund.

The Daily Graphic believes that the government has secured better fiscal terms for Ghana’s first lithium mine compared to those on existing mining contracts.

We think that the terms of the lithium deal represent a credible step to actualising the increased Ghanaian ownership of the mining sector that we have long advocated.

The battery metals’ market has become highly competitive, with countries around the world fighting to secure investment to develop their resources.

We therefore urge the government to tread carefully to ensure that Ghana remains an attractive investment jurisdiction.

 Truth is, a number of states have similar or potentially even better lithium prospects and more attractive fiscal regimes.

Zimbabwe, for example, has a five per cent royalty rate for lithium production and no free carried state interest.

Namibia too has no compulsory government ownership and a maximum of 10 per cent royalty for mining projects.

At Ewoyaa, Ghana has the opportunity to position itself at the forefront of African lithium production, and that is why the government must support the project’s development as best as it can to capitalise upon favourable current lithium prices, while regularly revisiting its fiscal terms in order not to deter potential foreign investment into Ghana.

Ghana is ranked bottom on lithium prospects and high on fiscal terms for investors in a list of 14 lithium developers and producers that include Nigeria, Democratic Republic of Congo (DRC) and Zimbabwe.

As new and bigger prospects from Canada, the United States of America, Nigeria, Zimbabwe and the DRC, among others, prepare to come on stream, the fears of a lithium glut are real, with the tendency to drive prices down further.

Should Ghana delay in bringing its first mine on stream, which comparatively claims a resource of 35 million tonnes, we could be caught up in the lithium glut, leading to bearish prices for its exports and marginalised prospects for the economy.

Lithium is abundant in the world and unless Ghana can convince investors to risk tens of millions of dollars in investments on exploration and hundreds of millions of dollars on development, the electrification boom will pass us by.

All said, we appeal that all discussions on the lithium deal be based on purely nationalistic perspectives.

Such views must be devoid of parochialism.

The government must also accommodate dissenting views on the lithium mining lease.

That is the way to build the nation.