To ratify or not to ratify the Lithium agreement, the call for maximum caution

Sometime in December 2023, I had the opportunity to comment on Ghana’s position on the lithium lease agreement with Barari DV Ghana Limited (a subsidiary of Atlantic Lithium Limited).

My point then was that Ghana had missed a significant opportunity to secure optimal benefits from its lithium resources. I believed then and now that any agreement for Africa’s critical minerals should be anchored on deep critical analysis and leveraged on global demand to gain optimal benefit for the country, like approaches taken by countries such as Australia, Chile and Mexico.

Since my comments in 2023, things have changed in the global lithium market. Since the country's first lithium mine agreement was signed with the Sydney-based miner, Atlantic Lithium, prices have fallen from over $3000 to just $630.

Because of that, the operator of the Ewoyaa project argues that the 10% royalty stake many Ghanaians were unhappy with would now be slashed to 5%; otherwise, the mine will not be profitable. This situation has led our minister responsible for mines to submit a revised mining agreement to Parliament for ratification on much subdued terms.

When I made my comment some two years ago, I almost got myself into trouble with some senior people who disagreed with me.

I have also had the opportunity to read a comment by venerable Dr. Kwabena Donkor, a former Minister of Power and MP for Pru East, in the Herald Newspaper.

In the article, Donkor cautions the government to draw the line and balance public opinion and sentiments with firm leadership. He advises the government to focus on the best national interest of Ghana.

I tend to generally agree with him. In this writeup, I provide the basis for which parliament should exercise due caution in their review of the agreement to ensure that both the operators (investor) and the nation Ghana reap mutually fair and optimal benefit from the exploitation of the lithium resources.

Indeed, the current scenario presents a classic dilemma for resource-rich nations: how to balance national interest and the demand for high returns against market volatility and the need to maintain project viability.

In my view and based on the stated facts, Ghana’s optimal position should move away from simply ratifying the proposed fixed 5% royalty and pivot toward a strategic, conditional agreement that shares risk and maximises long-term value capture through industrialisation.

A critical analysis of the situation which informed my position is that, at the core, the proposed new agreement shifts almost 100% of the market risk onto the Ghanaian government while ensuring the company (Atlantic) can cap its obligations at the lowest possible rate.

Let’s look at the market volatility against the fixed royalty rate: There is no denying that the crash from over $3,000 to $630 is an unavoidable market reality.

If the price remains low, demanding 10% could indeed make the mine unviable, leading to project collapse, job losses, and zero revenue for the state. The company's claim is valid under current economics.

But here is the flaw in the 5% solution: Accepting a fixed 5% iwill be a significant strategic error. Lithium remains a highly cyclical commodity, and while prices have collapse, the global lithium market analysis suggest that the underlying demand trajectory remains robust especially when viewed through a 5-10 year lens rather than quarterly performance metrics.

The long-term demand forecasts (driven by electric vehicles and energy storage) remain robust. By locking in a 5% rate now, Ghana sacrifices massive future revenue when the market inevitably corrects and prices spike again.

By accepting the proposal willy-nilly, the government sells its share of the upside potential to solve a short-term cash flow problem for the investor. Furthermore, there should be no urgency to ratify the agreement.

My reason is that rushing the revised agreement to Parliament for ratification merely on the threat of non-profitability, a form of subtle duress, limits Ghana’s negotiating leverage and sets a poor precedent for transparency and resource governance.

Thus, Ghana’s optimal negotiating position is not to accept the fixed 5% royalty proposal willy-nilly.

The government should counter the proposal with an agreement that structurally aligns Ghana's revenue with the global market price and commits the operators to local value addition.

I propose the optimal position based on the following two pillars: 1. Risk-Sharing and 2. Value Addition.

1: Strategic Risk-Sharing via a Sliding Scale Royalty Ghana should propose a sliding scale royalty structure where the royalty rate is dynamically tied to the market price of the final product (lithium spodumene concentrate, or, ideally, lithium carbonate/hydroxide):

Lithium Price per Tonne Proposed Royalty Rate Rationale Below $700 5.0% (current requestor by the investor) To ensure the mine remains operational and profitable during the current trough. Ghana prioritizes operational continuity. $700 – $1,500 7.5% A medium rate that captures more value as the market recovers without stifling expansion.

Above $1,500, 10.0% – 12.5% (Higher than original)Captures fair value during boom cycles. This ensures the company cannot realize massive, untaxed profits at Ghana's expense during market peaks

This structure hedges against price volatility. Ghana gets guaranteed revenue during the downturn, and maximized revenue during the recovery, preventing the massive revenue loss that a fixed 5% rate would cause when prices soar above $3,000 again.

Local Value Addition as a condition If the miner insists on the fixed 5% rate, Ghana should demand a non-negotiable concession on local value addition.

1. Mandatory Processing Commitment: Any reduction in the royalty rate must be conditioned on a binding commitment to move beyond simply exporting raw spodumene.

Ghana should demand that Atlantic commit to building and operating a local processing plant (i.e., refining spodumene concentrate into higher-value products like lithium hydroxide or lithium carbonate) within a defined timeline (e.g., 5–7 years).

2.Phased Royalty: Ghana could offer the 5% royalty only until the processing plant is commissioned. Once the local processing plant is operational, the royalty rate should revert to the original 10% (or the higher sliding scale rate), reflecting the added economic security and industrial benefit Ghana gains.

As noted in various studies on critical minerals, the greatest way to mitigate commodity price risk is to capture value downstream. Local processing creates skilled jobs, uses local power/services, attracts ancillary industries, and positions Ghana as a manufacturing hub, capturing a far greater share of the final product’s value than any royalty rate alone could.

In conclusion, based on the existing facts and various analyses, it is my firm belief that Ghana should use the current price crisis as leverage to negotiate a smarter, more resilient contract.

The government must communicate to Parliament that simply accepting the 5% reduction is a failure of long-term economic stewardship.

The optimal position is to mandate a sliding scale royalty to share market risk and ensure future upside capture. If the miner refuses, then the 5% royalty must be granted conditionally upon a binding, time-bound investment in local refining capacity.