In a significant development surrounding the Ewoyaa Lithium Mining Lease controversy, Ghanaian mineral experts, Messrs. Kofi Ansah and Fui S. Tsikata, have continued to shed light on crucial issues that could enhance the country’s equity interest in the mining project on favorable terms.
On Monday, December 11, 2023, the experts addressed the ongoing controversy, and their insights received widespread appreciation.
In a follow-up statement issuedon Tuesday, December 12, 2023, they identified three additional issues that, if addressed, could substantially benefit Ghana’s position in the mining venture.
The first two issues, according to the experts, revolve around suggestions made by Bright Simons, which they acknowledged as having merit in principle. One proposal recommends a sliding scale formula for increasing royalty rates, with a minimum rate of 10 percent. The variation, they suggest, should be based on the market price of lithium carbonate, ensuring that the royalty rate never falls below the prescribed minimum.
The second suggestion supports the idea of the government having the option to increase its equity interest in the mining company on favorable terms after investors have recouped their initial investment. Both proposals aim to create a fair and dynamic framework that aligns the interests of investors and the Ghanaian government.
The third and perhaps most crucial issue raised by the experts dates back to a successful model from the 1970s when the government conducted feasibility studies on bauxite deposits at Kyebi and Nyinahin.
The studies, assisted by Hungary and the Soviet Union, established reserves, ore metallurgical characteristics, and other relevant data. As a result, the government was able to enforce a policy preventing the export of raw bauxite, ensuring that the initial stage of conversion to alumina took place within the country.
Applying this historical success to the current lithium and green minerals context, the experts propose that Ghana conducts comprehensive feasibility studies.
These studies would provide essential data on reserves, processing capabilities, and economic viability, strengthening the government’s bargaining position in negotiations with potential investors. This strategic move, they argue, would allow Ghana to implement policies preventing the export of raw lithium, fostering downstream processing within the country.
By adopting such policies, the experts believe Ghana can not only add value to its mining industry but also integrate it more fully into the national economy. This approach would position the country as a formidable player in the lithium and green minerals sector, fostering sustainable development and long-term economic benefits.
Below is what they sent The Herald titled “Controversies surrounding the Ewoyaa Lithium Mining Lease: additional comments by Kofi Ansah & Fui Tsikata”.
There are three issues on which we wish to make comments additional to those in our statement of yesterday, Monday, 11 December 2023.
The first two relate to suggestions made by Bright Simons (which he says are shared by some CSOs) about formulae for increasing royalty and state equity for projects which achieve higher than prescribed rates of return for the investor. We think both suggestions have merit in principle and wish to address them briefly.
We are in broad agreement with the suggestion that the royalty rate of 10% be a minimum, with a sliding scale formula which captures increased profitability along the prescribed scale. But we would propose that, for ease of administration, the variation should be simply based on price rather than on operating margin. That is, the royalty rate will vary with the market price of say, lithium carbonate, but never to fall below 10%.
We also agree with the suggestion that a formula be worked out by which the government has an option to increase its equity interest in the mining company on favourable terms after the investors have recouped their investment.
The third issue is one we raised in the last paragraph of yesterday’s statement, though not in detail. There we proposed that we should do for lithium and other green minerals as was done in the 1970s about the bauxite deposits at Kyebi and Nyinahin.
Then government with the assistance of Hungary and Russia (the Soviet Union then) had feasibility studies conducted on the deposits. Those studies established reserves, ore metallurgical characteristics and other relevant data, and concluded that commercially feasible projects could all be built in Ghana based on the bauxite deposits.
The projects included alumina and aluminium metal production plants, metal fabrication and other finished-product plants (such as that of Aluworks). With the reports of those feasibility studies the then government’s bargaining position was so strengthened that it was able to institute the policy that no raw bauxite from those two deposits would be allowed to be exported; that at least the first stage conversion from bauxite to alumina will have to be done in Ghana. No doubt it is on account of government being the owner of those feasibility data that today the government is able to maintain the policy of “no export of raw bauxite” in relation to those deposits.
That is the sort of policy that we think would be most beneficial for the country in relation to lithium and other green minerals, irrespective of the form of agreement under which the resource is mined.
In that case we would be in a much stronger bargaining position in negotiations with potential investors. This would be especially so when it comes to downstream processing of products which, apart from adding value, allows the local mining industry to be more fully integrated into the national economy.
Tuesday, 12 December 2023
