It is safe to say that almost no Ghanaian is happy about the historical and contemporary reality of mining's contribution to the country. For a country that has a 500-year reputation for being a haven of gold was once the 5th largest producer of the metal, and currently the largest in Africa, many Ghanaians look around them and frown when they don't see the glamour of Johannesburg in parts of the country.
Therefore news that Ghana had signed a mining lease with an Australian junior miner to produce lithium from 2025 therefore raised hackles. Therefore coming just weeks before the COP28 Summit in Dubai, with all the hype around green energy and the climate transition", the question on every Ghanaian's lips was: "would lithium be the gamechanger when oil and gold appear to have disappointed"?
And so when discussing lithium economics, one should always be very clear about which chemistries, chemical pathways, and compounds and salts are involved. Much depends on how lithium combines with other substances, either naturally or during processing, to arrive at a particular economic use case.
What civil society observers are asking is whether the Ghanaian people, by law the ultimate owners of the resource, would be just as comfortable over the 12-year course of mining of these deposits in the Ewoyaa region of the country's central coast.
Zimbabwe is Africa's largest producer of lithium. It is believed to hold the world's fifth or sixth largest reserves of the metal. Yet, the country is on course to make just about $250 million from the mineral this year, out of total mineral earnings of about $5.67 billion (2022).
Bear in mind that Ghana, in a good year, can generate more than $6.6 billion from gold exports (how much of that actually stays within the economy is a different matter). Despite all the noise about Africa's lithium, the continent currently holds only about five per cent of the world's known reserves. All this to say that the lithium game is just beginning. Any premature excitement is likely to be, well, premature.
That notwithstanding, there are interesting aspects of the lithium value chain that requires that countries not take a business as usual approach. Compared to, say, cocoa, where the cocoa beans often struggle to capture even three per cent of the value of marketed outputs, things can be different in the case of lithium.
The government's big case is that it has secured concessions from Atlantic Lithium that no government has been able to obtain in the country's history. If this is based purely on how the gains from the resource are to be shared between the government and the investor, in ownership and monetary terms, then that fact is simply incorrect.
It is common knowledge in Ghanaian natural resource settings that the share to the state of resource gains was heftier in the 1970s and the early 1980s, and even after reforms came in the late 1980s, those terms were generally more favourable than what ensued in the subsequent decades.
In the 1970s, the Ghanaian government introduced policy to set a floor of 55 per cent under the ownership stake of the state in producing mining concessions. In recent comments, the Chief Executive of the Minerals Commission has sought to imply that this history does not count because it encompasses a period of wholesale nationalisation. Fact is, that is simply incorrect.
As eminent Ghanaian jurists, S.K.B Asante and S.K. Date-Bah have carefully chronicled in their work on joint ventures in the Ghanaian mining industry, the Ghanaian government negotiated an equity stake of 20 per cent in Ashanti Gold Corporation in 1969. How can a negotiated outcome be considered "nationalisation"? After the negotiated joint venture between the government of Ghana and Lornho, the parties went further to negotiate an option for the state to acquire a further 20 per cent in the future if it chose to do so. The government was also given the right to appoint four board members. Even this agreement was highly criticised by experts at the time due to the insufficient care paid to all the tax implications.
It is important to bear in mind that the action of the succeeding Acheampong government to ensure government's majority stake in the mining companies was based on a policy paper published in December 1972. The prescriptions of this paper were to be translated into action by an interdisciplinary committee of experts, drawn from across the different professional strands of society. It was chaired by Dr. S.K.B. Asante. This team went to London to negotiate with Ashanti Gold in respect of the government's desire to increase its stake. The passing of the decree was part of the negotiating tactics adopted by the government to strengthen the hands of the committee.
In substance, therefore, if we are to limit ourselves purely to the split of gains between the government and the private investor, then both the purely negotiated 1969 Ghana - Ashanti Gold agreement and the, decree-backed, 1972 agreements between the same parties were better than the recent lithium deal by having offered the State 20 per cent and 55 per cent (compared to the 13 per cent in the lithium deal), respectively, of the total equity in the concession.
Likewise, the various joint ventures that the government continued to enter into following the reforms of the late 1980s saw government take up large equity positions, as was the case in the Konongo Gold Project, where Southern Cross Mining held 70% and the state, 30%.
Confining ourselves to the narrow dimension the government of Ghana itself has selected, we can boldly assert that the claim that the terms of the recent lithium deal are the "best" in Ghana's history is factually inaccurate. It is important that senior civil servants of such high stature strive for objectivity in their public communications.
The heart of the matter though is that nice fiscal terms on paper, however "generous" to Ghana, however "resource nationalistic", would not mean much if overall management of the sector and/ or the investment climate is bad. Contracts and leases should thus be designed in such a manner that they will prove resilient even in the face of weak regulatory performance.
That is why the period when Ghana saw the most nationalistic contracts in the 1970s and 1980s was also the period when it lost its leadership in the African mining sector. Over the course of that era, Ghana's active gold mines declined from about 34 to just four.
On top of all the above is the obvious fact that Ghana's lithium prospects have been placed in the hands of a small junior miner with very limited experience. Atlantic Lithium, the only lithium lease-holder in Ghana, is so small that to raise $13.2 million on the stock market in mid-2022, it had to make up mining rights it didn't then have.
Everyone knows that the Atlantic Lithium mining lease was framed in terms of a victory of the US against China since this is the first time an American company has secured access to a significant source of lithium from Africa to feed an American refinery (the Piedmont facility in Tennessee). Chinese investors, on the other hand, have won quite a number of these hits. Could Ghana have leveraged these geopolitical stakes to secure more involvement by American suppliers of complementary inputs and resources to make the path to value addition much clearer?
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The issue of whether Ghana could have done better if it had used more competitive methods to allocate lithium mining concessions has come up and officialdom have tried to dismiss this concern by claiming that tenders or auctions would not have been viable as Ghana does not have any geological data and therefore owes it to Atlantic Lithium's data collection efforts to reward it with the mining lease. Such a lens is quite poor.
If this lithium situation has thought us anything at all, it is clearly that "good" may sometimes not be good enough. The government is to be commended for having the presence of mind to understand the citizenry's demands for "better than usual". It must now show readiness to deliver that "better" in this and upcoming mineral rights issues.
We therefore call on the government to support Parliament in scrutinising the signed agreement with a fine comb and to stand ready to make the necessary amendments to the agreement terms to satisfy a country that has grown more alert, more impatient for "better", and more sophisticated than politicians give it credit for.
In the 1970s, the Ghanaian government introduced policy to set a floor of 55 per cent under the ownership stake of the state in producing mining concessions.
