Plans and goals are a critical deployment tactic by individuals to measure not only their effectiveness at reaching their goals, but also the value and impact of same.
Fundamentally, it is critical for governments and thriving economies to equally have same plans for countries which desire to attain some level of development and progress in their dealings.
One of the ways which countries tend to capitalize on that growth margin is through the exploration and exploitation of natural resources in the country.
Many countries boast of the impact of such monumental discoveries with the likes of Dubai, outstandingly transforming their dull country into one of the most admired and highly sought-after countries when it comes to luxury, tourism and infrastructure.
Conversely, the reckless management of oil and other minerals discoveries can further deepen the poverty line in a country that fails to have a plan that ensures it delivers refreshing growth to its people.
Ironically, yet sadly, African countries which are blessed with such an appreciable amount of natural resources are rather languishing in poverty. Such state is usually attributed to mismanagement, ineffective leadership, among others.
The story of Ghana goes along the same trajectory, but not anymore since some staunch experts have refused to allow government sell itself short and be shortchanged for so much, especially since the discovery of lithium in the country.
For one thing, the increase in royalties to a sliding scale proposal from Bright Simmons, IEA and others have been welcomed. This is so because such increment has to be on price instead of operating margins – as the latter will make it difficult to administer, as Fui and Ansah suggest.
Economist, Theo Acheampong, believes that the agreement must clearly establish the pricing benchmark or reference, for instance, using spot or futures contracts on the Guangzhou Futures Exchanged GFEX to prevent base profit shifting.
Furthermore, he noted that an upfront higher royalty payment may compensate and possibly remove the need for any after-tax adjusted windfall taxes, which Ghana may never collect anyway due to the creative accounting that extractive companies sometimes employ.
To ensure Ghana benefits from the deal with Barari DV Limited, Dr Acheampong revealed that Ghana must also discuss whether the royalties will be ring-fenced for calculating corporate income tax (CIT). That is, whether the royalty payment should be a cost-deductible expense.
“For the estimated US$185 million capital cost of the project and its huge upside, I expect Ghana, through MIIF, to increase their additional participating stake from the 6% stake in the local assets to, say, 10% to 12%. Money shouldn’t be a problem as the Treasury could provide a block grant or loan to MIIF, which it must repay at an agreed interest rate.
“More value will be retained in Ghana with MIIF as a partner. The additional 3% in the shares of Atlantic Lithium [the holding company] is fine for me, subject to the anti-dilution clauses they’ve signed in the agreement with Atlantic Lithium.”
Dr Theo Acheampong
Ensuring local value addition to lithium
Moreover, Dr Acheampong indicated that local value addition beyond export of spodumene concentrate is fundamental. This, he stated, is because Atlantic Lithium lists a conservative US$1,587 per tonne as a baseline life of mine (LOM) concentrate price for FOB Ghana port, which is a fair figure given historical prices.
In this case, converting the spodumene concentrate via further processing to battery-grade lithium carbonate or lithium hydroxide will significantly increase the value added by over four to five-fold based on 5-year average prices.
Nonetheless, the economist reckoned that this requires additional investments.
“Local value addition must not necessarily be by Atlantic Lithium as their core competency is exploration and mining; also, the company has reportedly already sold 50% of the Ewoyaa output to Piedmont, which plans to construct a refinery in Tennessee, USA, leveraging recent Biden administration measures such as the Inflation Reduction Act [IRA].”
Dr Theo Acheampong
Undoubtedly, Ghana must engage other refineries who want to jointly develop that market with it and this is where the joint venture concept makes a lot of difference. Among other things, they can then use the other concentrates from Atlantic and other lithium mining companies currently exploring but have yet to commence production to feed their factory.
Based on further checks with people in the mining and metals industry, Dr Acheampong underscored that such refineries need about 2 to 3 large mining projects to be operational to achieve economies of scale.
“The volumes from only the single Ewoyaa mine may not be enough to justify any major refinery in the country. Luckily, most of the Central Region, from Mankessim, Saltpond, Apam, Winneba and Cape Coast, has lithium and other base metals like feldspar, columbite and tantalite [remember the defunct Saltpond ceramics factory built by President Nkrumah]. Setting up a refinery should be a possibility in the near future.”
Dr Theo Acheampong
Thus, beyond the fiscal regime, the conversation should focus on how Ghana and other players beyond Atlantic Lithium will be prepared to offtake the spodumene concentrate and produce battery-grade lithium carbonate or hydroxide for exports and local consumption to feed the nascent automotive industry.
Ghana must not repeat mistakes of the past with gold, cocoa, and other valuable natural resources it sold for ‘pittance’.
All of government’s dealings must be anchored on a Green Minerals Value Add developmental plan which maps out the whole value chain on how Ghana can meaningfully participate, leveraging the power of the African Continental Free Trade Area (AfCFTA) to become a regional precursor battery manufacturer.
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