Group raises red flag over Lithium deal - Asks government to tread cautiously

The Mass Action for Sustainable Development in Africa (MASDA), has cautioned the government to tread cautiously over the lithium mining lease agreement with Barari DV Ghana Ltd.

On October 10, 2023, Ghana through the Minister for Lands and Natural Resources signed its first-ever lithium mining lease agreement with Barari DV Ghana Ltd.

Addressing the media about the agreement, Executive Director for MASDA, Atik Mohammed observed that lithium and other green minerals represent the future, explaining that they are at the center of the green transition.

He also noted that the global shift to electric vehicles as a means of decarbonisation is made possible because of lithium batteries, adding that as a result, the demand for lithium has increased exponentially.

“According to the BBC, meeting the goals of the Paris Agreement would require an increase in global demand for lithium by more than forty times its 2022 levels. The fact of lithium being the mineral of the future is beyond debate,” he noted.

Due to these, Atik who observed that Ghana is a lithium-blessed nation suggested Ghana must position itself in a good stead to reap the benefits from these green minerals.

“Geological survey data have shown that Ghana has significant deposits of hard-rock and brine lithium. We must therefore avert the recurrence of the tragedy that has characterized the mining of gold, diamond, and related minerals in our country,’ he said.

He stressed that,“It is against this background that we find the mining lease agreement between the government of Ghana and Barari DV Ghana Ltd unacceptable and not fit-for purpose.”

Royalty Rate

Atik observed that the lease agreement stipulates in clause 20 that the company shall pay a royalty of ten percent (10%) of total revenue. He said although section 25 of (Act 703) as amended, creates room for setting of royalty rates higher than the earlier 5%, it does not set a specific rate, adding therefore that the 10% rate is discretionary and arbitrary.

“The implication is that Ghana might be earning less royalty income in the future from lithium when prices skyrocket; a phenomenon that is most likely in the light of the projected mad lithium rush. Again, this arbitrariness could mean different rates for different lease agreements in the future. This will be tragic for investment in the sector,” he said.

Hasty And Suspicious Grant of Lease

According to Atik, given that green minerals (especially lithium) will become substitutes for oil in the not-distant future, one would expect wider engagements and consultations at least in the likeness of those that characterised the discovery of oil prior to the grant of any mining lease.

However, he said it was obvious this did not happen.

“The curious question then is, why the rush? What does it profit Ghana to rush into signing lease agreements only to be hurt in the long run?” he quizzed.

He also stated that an important and quite disturbing issue is the fact that, a careful study of the approval of recommendation letter by the Minister and the mining lease agreement, revealed that they bear the same date, saying that this is suspicious because, it is impracticable for all the processes after the approval of recommendation to be fulfilled and a lease granted in one day. “This mystery casts a dark cloud on the transparency and propriety of the lease agreement. We attach herewith, copies of the relevant documents for your perusal,” He said.

Government’s Free Carried Interest

Atik noted that the Government is purportedly entitled to 13% free carried interest in the rights and obligations of the mineral operations of Barari DV Ghana Ltd according to clause 19(a) of the lease agreement.

He said this provision in the agreement flows from section 43(1) & (2) of Act 703. Section 43(1) entitles the government to acquire free carried interest of ten percent, adding that it can however further this interest in a manner agreed upon by all parties as stipulated in subsection (2).

“As a pioneer agreement that would guide future or subsequent agreements, the government’s desire for 13% should be secured in a watertight manner. This would require an explicit amendment of section 43 of Act 703. Failure to do so is equivalent to negotiating a half-baked agreement which does not serve our interest going forward,” he suggested.

What must we do?

Atik recommended that, “Article 268(1) of the 1992 constitution, presents us an opportunity to pull the brakes on the agreement as we work to rectify the leakages or concerns in the agreement. To this end, we are calling on our representatives in parliament (i.e. both sides of the aisle) not to ratify the agreement in its current form until the building blocks are laid. Furthermore, parliament must demand broader engagements from the Minister as a precondition before any lease is eventually granted.”

He continued that,“As has been stressed, lithium and other green elements must be treated as the “new oil”. Hence, we must either amend the Minerals and Mining Act (Act 703) to reflect the peculiarities of these green minerals or have a separate green minerals regulatory and fiscal regime before any mining lease for lithium is granted.”

He also recommended that, “With respect to the former, new percentages of free carried interest would be specified, requirements for value addition, royalty regime of processed lithium and other green minerals would be captured among others. An L.I. on lithium royalty would have to also be made as well.”

Atik again said,“The latter solution, however, means clear and specific provisions on royalty rates, carried interest, equity concerns, local participation, and value addition arrangements contained in a new legislation. In this regard, a Lithium and other Green Minerals Management Act for instance, will go a long way to help us streamline the management of lithium and other green elements in a manner that is beneficial and sustainable for Ghana.”

Meanwhile he said this issue must be of concern to every Ghanaian especially the ordinary Ghanaian.

“We in MASDA, will continue to canvas the issues and increase awareness on the need for adequate preparatory works before the grant of any mining lease on green minerals. We will be holding a public forum to engage stakeholders on the subject with a view to helping the government build a robust and sustainable framework for the management of green minerals in our country, “he said.

He also said MASDA will be sending its concerns in the form of a petition to its representatives in parliament for consideration as they prepare to receive the lease agreement sometime in March next year.