The IEA made an error in their lithium transaction analysis, according to Kofi Ansah and Fui Tsikata.

Kofi Ansah and Fui Tsikata, two legal and mining specialists, have weighed in on the debate over Ghana’s first mining lease for lithium extraction. IEA

In a joint paper published on Monday, December 11, 2023, legal and mining experts criticized the Institute of Economic Affairs (IEA) and former Chief Justice, Mrs. Sophia Akuffo, for “the error of promoting form over substance.”

Mr. Fui Tsikata is a former lecturer at the University of Ghana Faculty of Law and a legal luminary with over 40 years of experience in the mining industry, while Mr. Kofi Ansah was the founding Chief Executive Officer of the Minerals Commission from 1993 to 1999, under President Rawlings.

While mentioning two areas where the government could have improved the lease, the two stated that the “widely-publicized criticisms are patently wrong” and are based on a misunderstanding of mining rules and practices.

The government granted a mining lease to Barari DV Ltd., a subsidiary of Atlantic Lithium Ltd., for the exploitation of lithium in Ghana in October 2023.

The Minister of Lands and Natural Resources, Samuel Abu Jinapor, characterized the lease as the finest deal for Ghana at a short ceremony to celebrate the signing of the lease, adding that Ghana will never export lithium in its raw state.

The accord, however, has been faced with criticism from a segment of the public, the most recent being from former Chief Justice Sophia Akuffo and the IEA.

At a press conference last Thursday, Abu Jinaport, Minister of Lands and Natural Resources, Martin Ayisi, Chief Executive Officer of the Minerals Commission, and Nana Yaw Koranteng, Chief Executive Officer of the Minerals Income Investment Fund (MIIF), took turns explaining the processes that led to the lease’s grant and the terms of the lease.

They insisted that the 10% royalty rate, the 13% free carried interest, the 6% interest secured by MIIF, and the additional 3% in the Australian listed holding company, along with other benefits such as the establishment of a refinery and the domestic sale of by-products, are unprecedented and in Ghana’s best interests.

According to the Ministry and the Commission, the royalty rate and free-carried interest secured are among the highest in the world, with the firm still needing to float on the Ghana Stock Exchange to achieve a minimum of 30% Ghanaian participation.

Despite these reasons, speculation about the lease has persisted. In the most recent development, the two experts believe that much of the discussion on the lease is inaccurate and stems from a lack of understanding of the mining business.

They claim that “fundamental flaws in the IEA’s methods for computing revenues and allocating potential direct monetary benefits from the project undermine the conclusions they seek to draw.”

The IEA’s and Ms. Akuffo’s claim that “joint venture agreements or “service contracts” are better than leases or concession contracts suffers from the error of promoting form over substance.”

They revealed that the project’s gross revenue is US$688 million per year, not the US$24 billion claimed by the IEA and Prof. Gyampo.

They further noted that by combining all of the agreed terms, the government will receive a minimum of 51 percent (51%) of the project’s earnings, rather than the thirteen percent (13%) stated by the IEA and Prof. Gyampo.

According to them, this is the largest government income from mining activities, as usual operations yield an average of 45 percent (45%) or less.

The two experts condemned suggestions for a joint venture by the IEA and the former Chief Justice as a misunderstanding of the sector. “As for the argument relating to “joint ventures” and “service contracts,” making explicit the suggestion that they are fundamentally superior to leases exposes the fallacy.

The argument does not attempt to compare financial terms in any meaningful way.”

They believe the government might increase the cost of the principal product, beneficiated lithium ore, and spodumene concentrate, as well as tighten the wording for the possibility of creating a factory to process mine concentrate. They believe, however, that the administration has made an outstanding bargain in this agreement.

This analysis supports similar findings by Dr. Sam Jonah, former President of AngloGold Ashanti, and Dr. Kwabena Donkor, NDC MP for Pru East and former Minister of Power, that the government performed well in securing the negotiated terms.

In response to Mr. Fui Tsikata and Ansah’s worries, Mr. Martin Ayisi, CEO of the Minerals Commission, stated that the ideas of the two experts are welcomed. He stated that those negotiations have already taken place and that further terms will be put into linked agreements.

He added that the government had yet to approve the agreement with Piedmont. According to the CEO, the Commission accepts all criticism in order to improve its work. He did, however, demand that those criticisms be based on facts, as many are not.

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