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May 3, 2024

Can Ghana’s lithium boom avoid the ‘gold curse’?

By Ghanaian journalist Jonas Nyabor. First published in Dialogue Earth (formerly China Dialogue Trust). This article was facilitated from the joint workshop on Critical Minerals for the Energy Transition Reporting Workshop, 22-23 November 2023.

The relatively recent discovery of lithium in commercial quantities in Ghana has generated hopes of an economic boom, especially through value-addition and foreign exchange revenue. However, some experts are worried about the prospects of a second “gold curse”.

The first has long plagued Ghana’s mining economy, causing environmental damage, social injustice and economic instability. Conscious of such worries, the government last year signed a policy on mining for a number of minerals critical to the energy transition, including lithium. Its main goal is to strengthen Ghana’s stake in what have historically been foreign-owned operations.

However, an early test of the policy has delivered results that are proving divisive. The government last year signed a lease agreement, with the subsidiary of an Australian mining compay, for Ghana’s first large-scale lithium project. The terms of this deal have been heavily criticised as too generous to the company.

Ghana’s ‘gold curse’

Commercially viable lithium reserves were discovered in Ghana in 2018 amid a global lithium boom. By 2021, global production had surpassed 100,000 tonnes annually. Demand in 2040 will be 40 times what it was in 2020, according to the International Energy Agency.

The worldwide push for renewable energy initiatives has put a premium on the mineral, which is a crucial element in electric vehicle batteries.

Currently, the most lucrative mineral in Ghana is gold, representing about 95% of mineral revenues and generating USD 7.6 billion in export earnings during 2023. Like many resource-rich countries, Ghana has struggled with the complex challenges brought by gold mining, including environmental degradation, social inequality and economic volatility.

Image attribution: Pixabay

This has been particularly true in the rural communities where mining – both legal and illegal – is conducted. For many, the associated deforestation and water pollution have caused huge problems. In 2017, the severity of water pollution stemming from illegal mining prompted the government to predict that drinking water may soon need to be imported.

Gold mining has also caused social tensions in communities that live with the industry’s presence and disruption but see few benefits. A number of Ghana’s oldest mining communities, such as Tarkwa and Obuasi, remain poor. Some have seen violence break out between companies and small-scale miners.

With lithium, also known as “white gold” due to its colour, the government has pledged not to repeat the mistakes of gold deals past, particularly with regards to Ghanaian involvement in the value chain and royalties.

A new act

Ghana’s lithium strategy is detailed in its green minerals policy. This policy, which was approved by the cabinet in July 2023, is expected to lead to amendments to the existing Minerals and Mining Act of 2006.

The lithium deal awarded by the government in October 2023 is a 15-year lease to Barari DV Ghana Limited, a subsidiary of Australia-based Atlantic Lithium Limited. The company will develop a mine in Ewoyaa, Mfantseman municipality, 120 km west of Ghana’s capital Accra.

Samuel Jinapor, the lands and natural resources minister, says the deal requires Barari to be listed on the Ghana Stock Exchange, with at least 30% of its shares made available for Ghanaians to purchase.

The government has also moved to ban the export of raw minerals, including lithium and bauxite. This move, designed to spur domestic industrialisation, echoes similar ones made by other resource-rich African countries such as Zimbabwe and Namibia.

Only selected details of the green minerals policy had been shared with the media at the time of publishing, however. The Minerals Commission acknowledged Dialogue Earth’s requests for a copy of the full policy, but this had not arrived.

The terms of the deal

Government officials have insisted that the Atlantic deal they secured is “the best in the world” and on par with global best practices. Meanwhile, a large number of civil society and political figures have taken aim at its available details, saying the project will leave Ghana worse off.

The Atlantic deal includes a royalty rate of 10% and a free carried interest (the government’s stake in Barari) of 13%. At the deal’s signing, Jinapor said that in Ghana’s prior mineral mining lease agreements, these figures were 5% and 10% respectively.

In December, the opposition National Democratic Congress party slammed the deal: “The 10% royalty rate secured by government could have been the baseline rate, subject to upward adjustment in cases of windfall revenue or profit by the company, if government had negotiated properly.”

The former chief justice, Sophia Akuffo, said the deal lacked a “transparent competitive bidding process” and harked back to “colonial” agreements, informed by extractive logic, with little benefit to Ghanaians.

NGOs have expressed concern over the environmental and social implications. In a press release, the citizen advocacy organisation BudgIT Ghana said: “Ghana might not obtain adequate revenue from the lease agreement and would be better off maintaining its lithium reserves and establishing its own lithium mining sector.” Additionally, BudgIT said the arrangement “may not provide adequate protection for local communities and workers, which could lead to exploitation or abuse.”

The deal has also been mired in accusations of secret agreements between the government and Atlantic Lithium. In a February 2023 presentation to investors, Atlantic highlighted its receipt of a 10-year tax holiday. This suggests its subsidary company Barari has been registered in Ghana as a “free zone” entity, a designation not typically granted to mining companies. In December, a government spokesperson dismissed this suggestion. Bright Simons, vice-president of Accra-based thinktank Imani, has argued that the discrepancy exacerbates “credibility risks to the whole arrangement”.

Opposition politicians have demanded the deal be scrutinised in parliament, which the government had promised would happen in the first quarter of 2024. Reports in late March that Atlantic Lithium was being registered for listing on the Ghana Stock Exchange indicates the deal could be progressing. Dialogue Earth contacted the lands and natural resources ministry for details of these proceedings, but a response had not been received at the time of publication.

Atlantic’s expected presence in the country has been welcomed by some. Ike Lord Ennu, chief executive of Mfantseman municipality, points to the economic benefits local communities stand to gain: “The royalties and taxes alone, which will be paid to the local assembly, is going to be huge and impact our communities positively. We’ll have more people coming in here with ancillary businesses.”

Among public voices, Ennu’s is in the minority. Ransford Gyampo is a political science professor at the University of Ghana and a Mfantseman native. Like Akuffo, he notes a lack of government transparency and consultation. In fact Gyampo accuses the government of longstanding corruption. Talking to Dialogue Earth, he pointed to the record of Ghana’s post-independence leaders accepting bribes for access to natural resources. “Otherwise, why were [the current ruling politicians] in a haste to disregard all civil society suggestions for renegotiation for a better deal?” Gyampo provides no evidence for his suspicions; Atlantic Lithium was accused of corruption in Ghana by the investment firm Blue Orca Capital in March 2023, which it denied.

Gyampo believes the current government will likely be defeated by the National Democratic Congress (NDC) in elections this December. The NDC has fiercely opposed the current terms of the Barari deal, Gyampo says: “It is their pledged renegotiation of the deal that, for me, would determine the future of lithium mining in Ghana.”

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