As the global demand for transition minerals like lithium soars, Ghana stands at a pivotal moment with its first lithium mining agreement. This landmark 15-year lease with Barari DV, a subsidiary of Atlantic Lithium, has the potential to significantly impact Ghana’s economy and environment. However, Ghana’s parliament must address some critical issues before ratifying the agreement to ensure the country’s long-term benefits and sustainability.
As required by Article 268(1) of the Constitution and Section 5(4) of Act the Minerals and Mining Act, the government has presented its mining lease with Barari DV to parliament for ratification. The Committee on Mines is currently considering the agreement before the wider parliament debates it.
Signed in October 2023, the agreement for lithium mining at the Ewoyaa mine sparked heated disagreements among key stakeholders about whether the government negotiated a fair deal for the country. In response, NRGI organized a stakeholder dialogue involving the Ministry of Lands and Natural Resources, the Minerals Commission, civil society organizations (CSOs), industry, academia and media. This dialogue resulted in two key outcomes:
- Need for policy revision. Ghana’s mining policy, developed in 2014, and the Minerals and Mining Act, 2006 (Act 703) require revisions to ensure that the country maximizes the benefits and minimizes the harms from its minerals, particularly in light of increasing demand for transition minerals.
- Commitment to further stakeholder engagement. The Minister for Lands and Natural Resources and the chief executive officer of the Minerals Commission committed to further engagement with stakeholders, both on the lithium agreement pending parliamentary ratification and on revisions to the mining policy and law.
In May 2024, the Minerals Commission, in collaboration with NRGI, held a consultation session with CSOs on draft revisions to the mining policy. CSOs subsequently submitted a memorandum conveying their inputs to the Commission and the Ministry for consideration. As parliament prepares to debate the lithium deal, key issues must inform the discussion:
1. Distinct nature of the Ewoyaa mine. Parliament should recognize that the Ewoyaa lithium mine differs from many of Ghana’s current gold mines, offering higher profit potential—Barari expects an internal rate of return of 94 percent before debt financing. However, as a conventional open pit operation, it also presents greater environmental risks, including impacts on land use, pollution, displacement, and social disruption.
2. Avoiding unnecessary concessions. Parliament should address concerns about possible concessions not specified in the mining lease agreement or law, such as a 10-year tax holiday and electricity tariffs of 30-50 percent below standard industrial rates. Our modeling shows that these concessions are unnecessary given the project’s likely profitability, even at lower prices or higher costs.
3. Safeguarding government revenues. To reduce the risk of revenue shortfalls, parliament should:
- Require lithium prices to be based on a pricing benchmark for tax purposes to reduce the risk of underpricing.
- Limit the amount of interest the mining company can deduct from taxable income irrespective of the debt-to-equity ratio of the project to reduce the risk of profit shifting.
- Introduce “non-dilutable” state equity language to protect government’s interest and eliminate the risk of dilution if Barari or Atlantic Lithium issues additional shares
- Establish clear rules in the shareholders’ agreement to reduce the risk of underpayment of state dividends.
In addition, parliament must ensure that the government institutes urgent measures to enhance the capacity of the regulator and tax authorities to effectively monitor costs and assess profits.
4. Value addition. Increasing the amount of mineral processing (“value addition”) in Ghana can help retain greater economic value via more government revenue, jobs and, in the case of some minerals, cheaper inputs for other sectors. The government hopes Barari or other companies will construct a lithium refinery in the country. Barari has submitted a “scoping study” on its viability to the government, as the terms of the mining lease require. Parliament should ensure this study contains a rigorous feasibility assessment. The government should also publish the study and consult with industry players, development partners, governments of other prospective lithium-producing countries in the region and civil society.
5. Community development obligations. Parliament should provide more guidance on the company’s community development obligations to ensure sustainable benefits for host communities. The agreement currently mandates a community development fund and a community development agreement (CDA) with affected communities, which is a positive step. However, the government should set basic parameters for the CDA to empower communities to participate in and oversee development for long-term gains. Leaving these obligations entirely to the company risks a flawed process that could undermine expected benefits to communities. The lithium agreement should specify that the CDA must:
- Provide for community oversight and monitoring of the CDA’s implementation.
- Include a grievance mechanism for communities to lodge complaints about Barari’s performance under the CDA or broader social and environmental performance.
- Include provisions on mine closure and provide for sustainable benefits under the CDA.
Parliament should ensure that the CDA is enforceable, with material breaches considered a breach of the lithium agreement. This agreement and Ghana’s mining policy review present an opportunity to set minimum standards for community development agreements and avoid variation based on company and community capacity. In developing these guidelines, Ghana should draw from the lessons learned from its own experience with CDAs, as well as those from other countries.
With the new opportunities and risks that increasing demand for transition minerals brings, the government and parliament must take a different approach to the processes for debate and subsequent approval of mining agreements. The government’s transparency and stakeholder engagement on the lithium deal is notable. It is now essential for parliament to prioritize meaningful consultations in the ratification process. Only through a genuinely inclusive approach can Ghana take the first step toward ensuring that the extraction of transition minerals benefits citizens, particularly communities, supports environmental sustainability and facilitates a just transition–a triple win for the country.
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Source: Denis Gyeyir I Thomas Scurfield I Nicola Woodroffe
