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Ghana’s mineral wealth: Blessing or curse?

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Picture: Atlantic Lithium Trucks driving from the mine site to the port. In October, the Ghanaian government signed a lithium mining agreement with an Australian company, and it has been widely rejected by broad sectors of society, the writer says.

By Stanley Kwabla Arku

Ghana’s lithium mining lease agreement with Atlantic Lithium of Australia, the first lease for lithium mining in Ghana, has ignited a heated discussion across the country. The deal, which was signed in October 2023 and defended by the minister of Lands and Natural Resources, Samuel Abu Jinapor, has faced mounting pressure from different sectors of society who question its fairness and transparency.

The government asserts that the agreement is the best mining lease for the country, citing a 13 percent royalty rate and a 30 percent stake in Atlantic Lithium as evidence of its benefits compared to other mineral agreements. However, critics, including renowned figures like traditional leaders, Civil Society Organisations, and the opposition National Democratic Congress (NDC), have raised compelling concerns about the deal’s motives and potential negative impact on Ghana’s resources and economy.

Civil Society Organisations, in particular, have called for more transparent and equitable procedures when negotiating resource deals, echoing the sentiments of many Ghanaians who believe that the country’s mineral deposits have not adequately benefited its people. Widespread poverty in mining areas and the nation as a whole have fuelled the desire for more just and inclusive agreements.

The NDC, through its National Communications Officer, Sammy Gyamfi, has launched a full-scale attack on the Ghana-Barari DV lithium agreement, deeming it “not in the best interest of Ghana”. The opposition party has demanded that Parliament block the ratification of the deal, citing concerns about transparency, fairness, and the ultimate benefit to the Ghanaian people.

Paramount Chief of Dormaa Traditional Area, Osagyefo Oseadeeyo Agyemang Badu II, has called on the government to temporarily halt the implementation of the agreement. The respected traditional leader believes that the current terms of the deal do not appear advantageous for the country. His plea aligns with previous calls from civil society groups, experts, policy think tanks, and sections of the public who have sought further clarity or a suspension of the contract terms.

Other Civil Society Organisations (CSOs) have also weighed in on the matter, concluding that while the Ghana Lithium Agreement is superior to prior mineral agreements, it necessitates a review of the Minerals and Mining Act, 2006 (Act 703) to reflect the current lease. They argue that the negotiated fiscal terms in the agreement differ from those outlined in Ghana’s existing law. To ensure consistency and avoid potential litigation, the CSOs recommend amending the law to align with the newly negotiated terms.

About the terms of the agreement

Under the terms of the Mining Lease, the Government of Ghana will be entitled to a 13 percent free carried interest in the project, an increase from the previous 10 percent. Additionally, the Government of Ghana will receive a 10 percent royalty rate, up from the previous five percent. These adjustments aim to address some of the concerns raised by critics but still leave room for further debate and examination.

History of lithium discovery in Ghana

The discovery of lithium in Ghana is a significant development in the country’s mining industry. Atlantic Lithium, a mining company, has been working on this asset since 2017. They gained access to the site in 2016 and conducted historic work in 2017, which led to the opening of trenches and test pits. In 2018, they drilled their first hole and discovered an impressive intersection of 128 meters at 1.2 percent lithium concentration.

Since then, Atlantic Lithium has drilled over 137,000 meters on the project, resulting in a resource of 35 million tons grading at 1.25 percent lithium. They also have a reserve of 26 million tons grading at 1.22 percent. The company recently released its DFS (Definitive Feasibility Study), which showed promising project fundamentals. The mine is projected to have a 12-year lifespan and generate US$ 1.5 billion in revenue. It will produce an average of 360,000 tons of spodumene concentrate per year, along with a secondary product of lower grade spodumene.

Atlantic Mining Company and its allies

The capital structure of Atlantic Lithium includes a market cap of AU$ 277 million and US$ 11 million in the bank. The company was formed in 2014 and initially focused on iron ore exploration in West Africa. However, they shifted their focus to critical minerals in 2016, leading to the discovery of lithium in Ghana.

Atlantic Lithium has formed partnerships with South African-based mining company Stage and American-based Piedmont Lithium. Stage holds 25 percent of the company’s register, while Piedmont Lithium holds almost 10 percent and is also a joint venture partner at the project site.

The company has applied for a mining lease and expects it to be approved this quarter. They also need to go through the environmental impact assessment and work with the local community to acquire the necessary land for the mine.

Piedmont Lithium is funding a significant portion of the project cost, with US$ 30 million already invested. They will fund the first US$ 70 million after the project and share the remaining capital expenditure equally with Atlantic Lithium. The company has off-take agreements with Tesla and LG Chem, providing leverage to close the funding gap.

The project’s infrastructure is well-positioned, with the site located 800 meters from a national highway and within proximity to two ports, Takoradi and Tema. Takoradi, which exports bauxite and manganese, is the preferred port for Atlantic Lithium.

As the conversation surrounding Ghana’s lithium agreement intensifies, it is clear that the fairness and transparency of such deals are crucial for the country’s sustainable development. The government’s defence of the agreement continues to be met with scepticism, prompting calls for a thorough review and a more inclusive approach to resource negotiations.

As the conversation surrounding Ghana’s lithium agreement intensifies, it is clear that the fairness and transparency of such deals are crucial for the country’s sustainable development. The government’s defence of the agreement continues to be met with scepticism, prompting calls for a thorough review and a more inclusive approach to resource negotiations.

This article was first published on Peoples Dispatch