Lithium lease setbacks could jeopardise gains

Hopes for the ratification of Ghana’s first-ever lithium agreement, signed in October 2023, appear increasingly uncertain as parliamentary consensus falters.

Resource experts warn that while the delay may not be inherently wrong, it raises concerns about lost revenue opportunities, diminished investor confidence, and deferred local economic benefits.

“What matters is ensuring material scrutiny that justifies this delay, if any, on the part of Parliament. Ghana must look to optimize economic benefits from the lithium agreement in the short term while advancing value addition in the medium to long term,” says Policy Lead for Minerals and Mining Policy at Africa Centre for Energy Policy (ACEP), Eliasu Ali said

Citing a study by his outfit, Mr. Ali said it shows that the delay comes with economic risks: “Our sensitivity analysis shows that a 10 percent change in lithium prices leads to about a 27 percent change in government revenues. By comparison, a 10 percent change in royalty or carried interest rates only affects revenues by two percent or one percent, while a similar change in corporate income tax (CIT) rates impacts revenues by five percent”.

Given the high volatility of lithium prices, he cautioned that delays in the project could result in missed revenue opportunities. From December 2022 to December 2023, lithium prices have experienced a consistent downward trend.

“Even the feasibility study by Atlantic Lithium projects spodumene prices to drop, from US$3,000 per tonne in 2025 to a stabilised price of about US$1,500 per tonne between 2031 and 2036. This volatility means delays could significantly erode the project’s profitability,” he said.

Additionally, the all-in sustaining cost of the project, which represents approximately 45 percent of total revenues, underscores the economic stakes involved. These costs present significant procurement opportunities for local businesses—a crucial economic linkage that is now postponed, he revealed.

Corroborating ACEP’s stance, Africa Senior Programme Officer at the Natural Resource Governance Institute (NRGI), Denis Gyeyir, said: “Any further delays in ratifying the agreement, coupled with ongoing price declines, could dampen investor appetite—not just for this project but also for other lithium ventures in the Ewoyaa enclave”.

Mr. Gyeyir said an analysis of the fiscal regime for the Ewoyaa project by NRGI indicates that up to 70 percent of government revenue from the deal hinges on profitability. “Developments like falling lithium prices that erode profitability will significantly reduce revenue flows to the state”.

With Parliament resuming this December and ending in January 2025, the Africa Senior Programme Officer of NRGI warned that failure to ratify the agreement could reset the process entirely, further delaying progress.

“This will also have livelihood impacts, as chiefs from the area have already raised concerns about their inability to undertake farming and other economic activities since the area has been designated for mining,” he said.

Notwithstanding the earlier concerns, he argued that the country’s position in the global market for critical minerals will not be significantly affected, particularly given the growing demand for lithium driven by the energy transition.

“Ghana is not a big player in the global lithium market and so cannot significantly influence the market, whether by way of price or demand,” he added.

Despite this, he reckoned that investment in Research and Development (R&D) has also increased substantially over the past few years, largely from the US, China and the EU to find alternative materials to lithium-ion batteries.

The success of these efforts, he observed, will impact lithium demand but also the prospects of downstream value generation. “Ghana must, therefore, be mindful of all these dynamics and its effects on the country’s ambitions around lithium”.

Efforts to obtain responses from the ranking members of the Mines and Energy Committee of Parliament were unsuccessful.

Background

The government signed an agreement with Barari DV Ghana Limited, a subsidiary of Atlantic Lithium Limited, to mine lithium at Ewoyaa in the Mfantsiman Municipality of the Central Region.

The agreement includes a 10 percent royalty rate and a 13 percent free carried interest for the state, designed to maximize national benefits. Spanning a 15-year lease and covering approximately 42.63 square kilometers, the deal grants Barari DV exclusive rights to extract lithium and associated minerals.

The agreement followed extensive feasibility studies, prospecting, and negotiations, with enhanced terms such as increased state participation, local involvement, and value addition to the extracted minerals. However, the deal remains subject to parliamentary approval, as mandated by the country’s mining laws.