IMANI Africa has given assurances that Civil Society Organisations (CSOs) within the nation will champion the reason for Ghanaians on the Ghana Lithium deal.
IMANI, together with different stakeholders, has argued that the drafted settlement doesn’t meet public expectations.
In a pilot temporary, IMANI known as on the federal government to hearken to the calls of Ghanaians to make sure that the best royalties are supplied to the nation.
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The $250-million venture, positioned in Ewoyaa, Mfantseman Municipality within the Central Region, is about to begin manufacturing by 2025.
The deal features a 10% royalty and 13% free carried curiosity within the state, surpassing the present 5% and 10%, respectively, for different mining agreements.
“As Parliament gets ready to deliberate on the agreement, expect CSOs to champion the cause of Ghanaians. There can be no compromise on the position that the agreement, as currently drafted, does not meet public expectations. The government will do well to listen,” IMANI stated.
IMANI underscored the significance of the federal government and Barari DV spelling out the phrases and circumstances of the contract to allow monitoring.
“Our position is that the common expectations of both the government and the company as to what conditions must exist before refining will be possible must be indicated in some form to enable tracking. Whether it is profitability level, raw lithium availability, electricity pricing and availability, tax waivers for complementary imports, or whatever may be required, the text should be clear so that civil society and others can monitor progress towards value addition, which everyone agrees is essential considering Ghana’s history with mining.”
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IMANI, in its temporary pilot, sided with Fui Tsikata, a lawyer specializing in mining, and Kofi Ansah, the founding Chief Executive of Ghana’s Minerals Commission, on the necessity for a mechanism to be inserted within the settlement the place Ghana’s share and fairness will correspondingly enhance.
“We were very happy to read that Messrs Tsikata and Ansah are aligned with the rest of us on the need to insert a mechanism in the agreement such that if the economic gains change dramatically, which could happen given the huge uncertainties in the lithium and lithium products space, Ghana’s revenue share and equity will correspondingly increase. Likewise, we align with the two prominent commentators on the need to set up a price discovery index for the lithium sales to determine the revenue base from which royalties calculations are derived rather than leave it to opaque, non-arms length, transactions, which the current contract does,” IMANI acknowledged.
Read under the assertion by IMANI
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IMANI on the Atlantic Lithium Deal
A Green Economy Brief
thirteenth December 2023
IMANI has been following with eager curiosity the extraordinary debate generated by the choice of the federal government of Ghana to:
▪︎ Grant a lease to Australian mining startup, Atlantic Lithium, to mine and promote Ghana’s lithium in alternate for 13% possession within the mine and 10% of the gross sales (income); and
▪︎ Authorise the nation’s sovereign minerals fund, MIIF, to take a position $32.9 million of Ghana’s gold earnings in Atlantic Lithium to assist fund the venture in alternate for six% within the native asset and three% of the mum or dad firm.
These two transactions are linked and have to be analysed collectively always.
IMANI wish to begin off by congratulating the eminent residents whose involvement within the debate has really elevated it. Former Chief Justice, Sophia Akuffo, and Dr. Kwakye, each of the IEA, come to thoughts. As additionally do Professor Ransford Gyampo of UG-Legon, Dr. Sam Jonah, Messrs Fui Tsikata and Kofi Ansah, Mr. Sam Okudzeto, and, much more not too long ago, main Clergy and Sheikhs.
IMANI has been steadily constructing a “green economy” apply for a while now, so this debate may be very well timed. IMANI associates like Bright Simons, who wrote two essays (hyperlinks within the footnote), and, properly earlier than the controversy, Theo Acheampong, who printed a treatise on Ghana’s inexperienced economic system prospects (additionally referenced within the footnotes) proceed to help on this regard.
As the controversy will get broader and deeper, some residents might discover themselves misplaced within the weeds.
The objective of this pilot temporary is to recenter the dialogue on the important thing points which were raised by civil society organisations like IMANI, the IEA, and ACEP. In doing so, we may also react, albeit briefly, to a number of the arguments which have come up.
1. The IEA was proper to stress the relative beneficial properties to the investor, Atlantic Lithium, and to Ghanaians as a individuals. Nobody on this dialog disputes the truism that Ghanaians haven’t benefited from the nation’s mineral wealth. None can deny that since 1897 when Obuasi gold was signed away to overseas buyers underneath colonial rule, efforts so as to add worth to the nation’s uncooked supplies have failed. Everybody accepts this. Whilst there’s worth in acquiring exact numbers, any illustrative calculations will nonetheless come to the identical level.
2. The famous funding lawyer, Fui Tsikata, and former Minerals Commission chief, Kofi Ansah, have helpfully supplied a easy schema for calculating how a lot Ghanaians will earn from the lithium mined versus the investor assuming the overall income was GHC100. We reproduce it for individuals who have but to learn their essay: 1) Royalty plus levy equal to 11% of GHC100 or GHC11 2) Income tax of GHC24.5 3) Dividend of GHC6. These add as much as GHC41.5 for presidency vs. GHC39.5 for the buyers. The two quantities collectively totalling GHC81 might be taken as proxy for the annual direct financial profit derived from the venture for the federal government and the buyers. Whilst the simplification makes it simpler to comply with the logic, some important factors might be misplaced. For instance, the income could be 200 GHS however inflated prices and complex financing buildings might result in taxable revenue staying at 45.5 GHS. The 1% group fund that has been added to the contractual 10% royalty might not be managed by a public belief however by proxies of the corporate, lowering the quantity that really goes to the “people”. The dividend of 6 GHS relies on board management, and boards can select to not declare dividends, and many others. So, while the illustrative numbers are helpful, identical to the IEA’s, every little thing relies on the assumptions, and the way they’re refracted by means of the contract.
3. We had been very comfortable to learn that Messrs Tsikata and Ansah are aligned with the remainder of us on the necessity to insert a mechanism within the settlement such that if the financial beneficial properties change dramatically, which might occur given the massive uncertainties within the lithium and lithium merchandise area, Ghana’s income share and fairness will correspondingly enhance. Likewise, we align with the 2 outstanding commentators on the necessity to arrange a value discovery index for the lithium gross sales for figuring out the income base from which royalties calculations are derived reasonably than go away it to opaque, non- arm’s size, transactions, which the present contract does.
4. We additionally proceed to press the case that there’s nothing in the best way the contract has been drafted that may enhance the chances of lithium refining taking place in Ghana in a approach that may increase worth addition, high quality jobs, public revenues and native companies. The present drafting merely says that the corporate will solely refine based mostly on the “outcome” of a scoping examine. Our place is that the frequent expectations of each the federal government and the corporate as to what circumstances should exist earlier than refining shall be potential have to be indicated in some kind to allow monitoring. Whether it’s profitability stage, uncooked lithium availability, electrical energy pricing and availability, tax waivers for complementary imports, or no matter could also be required, the textual content ought to be clear in order that civil society and others can monitor progress in direction of worth addition, which everybody agrees is important contemplating Ghana’s historical past with mining.
5. In the identical gentle, “refining” ought to be clarified in order that the general public will know what end-products or intermediaries are consistent with the nation’s worth addition technique. There are a number of phases within the refining strategy of lithium. Value is sadly not added uniformly at each stage. Refining spodumene focus (the deliberate product from the Ewoyaa mine) into lithium sulphate monohydrate will rely as “refining” however the contributions that may make to expertise development, public revenues, inexperienced jobs and many others., are totally different from refining the focus into battery-grade lithium hydroxide. It is necessary that the expectations are set out clearly within the settlement in order that we are able to all keep vigilance.
6. A significant side of this complete transaction is Ghana’s determination to purchase, by means of MIIF, extra stake in Atlantic Lithium, at a value almost twice the amount of cash the corporate’s personal backers initially invested in Ghana earlier than getting their mining lease. In a doc circulated to the press known as, “Atlantic Lithium Equity Investment”, MIIF made the emphatic declare that, “Even before any disbursal, the value of MIIF’s equity investment is up 31% from the locked in price of US$0.26. MIIF has already made a 31% gain on its planned investment.” (Emphasis theirs). This evaluation, with due respect, is wholly inaccurate. The highest value of the inventory this 12 months was on January twenty seventh, when it bought for $0.417. MIIF dedicated to purchasing at $0.26 and although it hasn’t paid for it or bought any shares, it has already declared a “gain” of 31% as a result of for a brief time period, the inventory value was $0.34. By that very same measure, one can argue that the inventory is a money-losing asset since based mostly on as we speak’s (thirteenth December, 2023) value of $0.255, it has already misplaced almost 40% of its worth 12 months so far. MIIF must marshall extra rational arguments to persuade the nation of the sense in shopping for at that value when most of the firm’s administration held inventory choices whose expiry dates had been prolonged to permit them to purchase the inventory at a lot decrease costs (eg. $0.15).
7. MIIF additionally claimed that: “The proposed offer by Assore to buy Atlantic for £0.33 (US$ 0.42) per share in cash valued Atlantic equity at £222m (US$ 280.1m). This translates into a valuation of US$ 691.6m for the Ewoyaa Project. This places the current valuation of MIIF’s $27.9m investment into Ewoyaa at US$41.5m (6% of Ewoyaa); representing a 48.75% potential increase in value.” (Emphasis theirs.) Again, respectfully, this evaluation is porous. The provide to purchase, while an necessary sign, was not accepted. The extra tangible implied fairness pricing should come from the Piedmont transactions. Piedmont has been financing the venture in alternate for the best to purchase half the focus produced. It has to this point paid an implied value of lower than one-third of what MIIF is claiming the mine is price. The nation shouldn’t be in a headlong rush to overpay. Equally, IMANI argues for the necessity for a correct anti-dilution clause, not a proper to take part in future raises/placements since fiscal constraints imply that any such proper is not going to be usually exercised. Ghana will find yourself with its stake diluted as has occurred with all of the worldwide gold corporations we used to personal stakes in however at the moment don’t even come clean with 0.1%.
8. IMANI has seen copies of displays and advertising supplies shared by Atlantic Lithium at varied high-profile occasions and roadshows during which it claims to have been supplied a 10-year tax vacation and a particular electrical energy tariff that may reserve it as much as 50% of power prices. We have additionally heard some Ghanaian officers deny this. Either there are certainly such secret agreements or Atlantic Lithium, a listed firm on a regulated alternate, is blatantly deceiving buyers. Neither state of affairs bodes properly. It raises basic credibility points that have to be resolved.
9. As Parliament will get able to deliberate on the settlement, anticipate CSOs to champion the reason for Ghanaians.
10. There might be no compromise of the place that the settlement, as at the moment drafted, doesn’t meet public expectations. The authorities will do properly to pay attention.