Lack of data could limit lithium’s impact on economy – Study

A recent study by two leading civil society organisations along the natural resources’ space has suggested that government negotiated its lithium agreement with Barari DV Ghana Limited, a subsidiary of Atlantic Lithium Limited, from a disadvantaged position.

With the state lacking advanced data of its own on the lithium find, the two-leading think-tanks – the Institute for Energy Security (IES) and Africa Centre for Energy Policy (ACEP) – said it [the state] was “incapable of challenging any geological data provided by the company licenced to undertake the reconnaissance and exploration”.

In the study, both civil society organisations noted that nearly all data and information on the lithium find – including the geological estimated quantity – was determined by the exploratory company or applicant company data, relying on baseline data from the Geological Department.

This reliance, however, was spotlighted as a potential stumbling block in the country’s pursuit of optimal terms and benefits from the burgeoning lithium sector, as it charts its course in the global lithium market.

It will be recalled that government recently announced signing a 15-year lease agreement for lithium extraction at Ewoyaa in the Mfantsiman municipality of the Central Region, with Barari DV Ghana Limited.

According to the Minister of Lands and Natural Resources, Samuel Abu Jinapor – who signed the agreement on behalf of government, the deal incorporates new and enhanced terms intended to ensure the country benefits optimally from this mineral.

However, the latest study on this critical mineral raised serious concerns over the approach adopted by the country to negotiate exploitation of the commodity.

“Ghana continues to rely on the open door, direct negotiation policy of allocating mineral rights that has been used for the past century of the mining sector. Even though this approach is within the remits of the law, it does not employ competitive bidding and selection of companies for the purpose of prospecting and producing minerals,” a portion of the report, titled Ensuring efficient and sustainable extraction and management in Ghana, read.

The 91-page document said there is also no industrial infrastructure in place to facilitate the process of ensuring value addition to produce batteries and other products from lithium – which suggests the country has yet to learn from the mistakes of gold mining.

“It appears the immediate revenue benefits outweighs government’s policy decision on the lithium find; like gold, another new mineral has been discovered and must be extracted and exported as raw material (Spodumene concentrate) – as is done in the case of gold mining, diamond, bauxite, and manganese.”

Against this background, the report advised that there must be a paradigm-shift from the existing system of mineral exploitation and exporting as raw materials, to one that processes it and adds value. “That is the best way to develop the country’s industrial capacity and increase the nation’s stake in mineral exploitation.”

The IES report was done with the support of ACEP, and further found some ownership structure issues in the latest lithium find. Given this, it said, there is a need for clarity and transparency in the ownership structure and relationship between the various entities, as this might have some implications for tax obligations and accountability purposes.

“Available information indicates that Green Metals Resources Limited, said to be a Ghanaian-registered company and granted the Mankessim South exploration licence, is wholly-owned by an Australian Mining company, IronRidge Resources Limited (AIM: IRR). The licence provides IronRidge with full ownership of a contiguous prospective lithium exploration licence adjacent to the company’s Ewoyaa Lithium Project (JORC Compliant maiden Mineral Resource Estimate of 14.5mt at 1.31% Li2O)2,” the report said.

The need to invest in data

The study recommends that mining licences be awarded through open and competitive bidding processes in an attempt to promote efficient and ‘just allocation’ of mineral rights, and reiterated that this approach should phase-out the first-come-first-served approach.

The report further called on state actors responsible for awarding mining rights to invest in data collection and mapping mineral-rich areas in the country.

Additionally, it said the need for competitive bidding requires strategic measures, including investment in geological data to reduce risks and lessen dependence on applicant-provided data. This approach is expected to increase competition for mining leases, attract more investors and help the country establish fair fiscal terms.

The report also recommended creating a specialised state institution to manage lithium and other industrial minerals separately, as lithium has the potential to significantly boost the country’s economy.