The Institute of Economic Affairs (IEA), a policy think-tank, has expressed reservation over the recent lithium mining lease agreement inked between government and Barari DV Ghana Limited, a subsidiary of Atlantic Lithium Limited.
The IEA advocated a reconsideration of the deal, and said its fails to address historical mistakes in past minerals exploitation agreements. Ideally, the think-tank emphasised a model that places premium on national control, economic gains and strict adherence to constitutional procedures – and more importantly, value addition.
The IEA contends that despite claims that the agreement is more favourable to Ghana compared to other global lithium leases, it mirrors colonial-era agreements which have historically yielded minimal benefits for the country.
It will be recalled that the Minister of Lands and Natural Resources, John Abu Jinapor, recently announced a deal with Barari DV Ghana Limited, which includes a royalty rate of 10 percent and a free carried and participating interest of 13 percent.
The agreement awards Barari DV an inaugural mining lease for lithium extraction at Ewoyaa in the Mfantsiman Municipality of the Central Region. The lease covers a 15-year period and incorporates new and enhanced terms intended to ensure the country benefits optimally from this mineral, the minister explained.
This includes an increase in royalty rate, state and local participation, as well as value addition to the mineral mined; and follows the completion of prospecting and feasibility studies by the company, as well as a series of negotiations between the state and Barari DV.
The lease covers 42.63 square kilometres (sq km) and grants exclusive rights to produce lithium and associated minerals in the area, in accordance with mining laws.
However, former Chief Justice, Sophia Akuffo – a distinguished scholar of the IEA, at a press conference in Accra held that per Article 268 of the 1992 Constitution, for a contract to exploit Ghana’s natural resources to be legally effective it must be ratified by parliament.
To this end, she said, IEA notes a similar stance by the minority in parliament that the agreement “requires prior approval of parliament”.
She argued that in modern mining practices, the extraction of mineral resources is either covered by a joint-venture agreement wherein the host country takes a stake in the mining company or a service contract.
A service contract involves the host country contracting the mining company, which is selected through a transparent and competitive bidding process, to mine the mineral. The mining company is reimbursed for its cost of production plus a profit margin, she explained.
“The IEA is even aware of an emerging and more improved transactional model that has been adopted by major Lithium producers such as Mexico, Bolivia, Chile and Argentina,” she stated.
Against this backdrop, IEA proposed that the state set aside current arrangements and establish a Ghana Lithium Company (GLC) to develop the entire lithium value chain. This includes mining to manufacturing of batteries and other products in Ghana, adding that “per current international best practice, a local refinery must be established even before excavation commences”.
Based on the projection by Barari DV of annual production at 160,000 metric tonnes of raw lithium – which converts by a multiple of 5.323 into lithium carbonate, with a world market price of US$29,000 per metric tonne – the IEA projected a total annual value of approximately US$24billion.
For the entire 12-year mining period under the Lease, the projected value of the final product, lithium carbonate, is estimated to be approximately US$296billion.
“Thus, given the projected annual estimate at about US$24billion of lithium carbonate that can be generated from the Ewoyaa lithium deposit, the GLC can contract an international company with the necessary expertise, through competitive bidding, to develop and process Ghana’s lithium into its final products such as batteries and others.”
The IEA has stated that incorporating modern methods of natural resource development will lead to the creation of job opportunities, wealth, community development and technical advancement for Ghanaians across the entire lithium value chain. Additionally, it will provide Ghana with complete control over this valuable national asset.
To this end, they advised parliament to exercise caution and patience to secure a modern, best practice-based arrangement that will guarantee maximum benefit for the country – “instead of the usual colonial-type lease that benefits foreign companies, masquerading as investors, and their local cohorts”.
Source: thebftonline.com