Two legal and mining experts, Mr. Fui Tsikata and Mr. Kofi Ansah, have waded into the discussions surrounding the first mining lease for the exploitation of lithium in Ghana.
In a paper jointly published on Monday, 11th December, 2023, the legal and mining experts described the analysis by the Institute Economic Affairs (IEA), Professor Ransford Gyampo of the Political Science Department of University of Ghana, and the former Chief Justice, Mrs Sophia Akuffo, as suffering from “the error of promoting form over substance.”
Mr. Fui Tsikata, is a former lecturer of the University of Ghana Faculty of Law, and a legal luminary of many years experience in the mining industry, spanning over forty (40) years, while Mr. Kofi Ansah is the founding Chief Executive Officer of the Minerals Commission, under President Rawlings, from 1993 to 1999.
The two, while noting two areas where Government could have made improvements in the lease, said the “widely-publicised criticisms are patently wrong,” and based on a misunderstanding of the laws and practice in the mining industry.
In October this year, Government granted a mining lease to Barari DV Ltd, a subsidiary of Atlantic Lithium Ltd, for the exploitation of lithium in Ghana. At a short ceremony to mark the signing of the lease, the Minister described the lease as the best deal for Ghana, insisting that at no point will Ghana export lithium in its raw state.
However, the agreement was met with criticism from a section of the public, the lastest being the former Chief Justice, Prof. Gyampo, and the IEA.
At a Press Briefing on Monday, 11th December 2023, the Minister for Lands and Natural Resources, Hon. Samuel A. Jinapor, MP, the Chief Executive Officer of the Minerals Commission, Mr. Martin Ayisi, and the Chief Executive Officer of the Minerals Income Investment Fund (MIIF), Nana Yaw Koranteng, took turns to explain the processes leading to the grant of the lease and the terms of the lease to the public.
They insisted that the ten percent (10%) royalties rate, the thirteen percent (13%) free carried interest, the six percent (6%) interest secured by MIIF and the additional three percent (3%) in the Australian listed holding company, together with other benefits like the establishment of a refinery and the sale of by-products domestically, are unprecedented, and in the best interest of Ghana.
According to the Ministry and the Commission, the royalties rate and free carried interest secured are among the highest, globally, with the company still mandated to list on the Ghana Stock Exchange to increase Ghanaian participation to a minimum of thirty percent (30%).
Despite these explanations, commentary on the lease has continued. In the latest twist of affairs, the two experts believe a lot of the commentary on the lease is ill-informed, and borne out of lack of understanding of the mining industry.
According to them “there are fundamental flaws in the methods used by the IEA and Professor Gyampo in computing revenues and the allocation of potential direct monetary benefits from the project which undermine the conclusions they seek to draw.
The contention by the IEA and Ms. Akuffo that “joint venture agreements or “service contracts” are better than leases or concession contracts suffers from the error of promoting form over substance.”
They explained that the gross revenue from the project is US$688 million per year, and not the US$24 billion put out by the IEA and Prof. Gyampo. They, also, explained that putting all the negotiated terms together, Government will get a minimum of fifty-one percent (51%) of the revenue accruing from the project, and not the thirteen percent (13%) put out by the IEA and Prof. Gyampo.
They said this is the highest Government earning from mining operations, as normal operations tend to give Government an average of forty-five percent (45%) or less.
The two experts described calls by the IEA and the former Chief Justice for a joint venture as misunderstanding of the industry. “As for the argument relating to “joint ventures” and “service contracts”, making express the implication that they are inherently better than leases makes the error clear. The proposition does not even attempt to engage in a meaningful comparison of financial terms.”
They said they believe Government could improve on the pricing of the main product, namely, the beneficiated lithium ore, spodumene concentrate, as well as tighten the language for the possibility of establishing a plant to process concentrate from the mine.
However, they believe Government has made an excellent negotiation in this deal.
This analysis corroborates similar analysis by Dr. Sam Jonah, former President of Anglogold Ashanti, and Dr. Kwabena Donkor, NDC MP for Pru East, and former Minister for Power, Dr. Kwabena Donkor, that Government did extraordinary well in securing the negotiated terms.
Responding to the concerns from Mr. Fui Tsikata and Ansah, the CEO of Minerals Commission, Mr. Martin Ayisi, said the proposals by the two experts are welcomed. He said those discussions have, already, been considered, and there are more terms to be incorporated into associated agreements.
He clarified that the agreement with Piedmont is yet to be approved by Government. The CEO said the Commission welcomes all criticism to improve their work. He, however, called for those criticisms to be factual, as a lot are not borne out of the the facts.
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