Lithium Deal: How Ghana was able to negotiate more for 10% royalty rate, 13% carried interest

Ghana, through its 15-year lithium mining lease agreement with Barari DV, a subsidiary of Atlantic Lithium, has negotiated for a 10% royalty rate and 13% free carried interest stake in the company.

This is relatively higher than the previous and usual 5% royalty rate and 10% free carried interest stake in mining companies in the courntry.

New developments indicate that Government was able to negotiate for a higher royalty rate and free carried interest rate because, it had repealed Act 749 of the Minerals and Mining Law and replaced it with Act 900 of the law.

It is then based on the new Act that Government was able to negotiate for the current 10% royalty rate and 13% free carried interest.

The repeal and subsequent replacement of the Act was disclosed by Executive Director of the African Centre for Energy Policy (ACEP), Ben Boakye.

He made the disclosure during a Stakeholder Engagement on the Lithium Agreement organised by the Natural Resource Governance Institute (NRGI) involving CSOs and the Minerals Commission.

In October 2023, Ghana signed a 15-year lease Agreement with Barari BV Ghana Limited, a subsidiary of Atlantic Lithium Limited for the mining of lithium in Eyowaa in the Central Region.

While government has hailed the terms of the agreement as historic, some civil society actors and individuals have raised concerns. The public discourse around this lithium agreement is understandable as the history of over a hundred years of mining has yielded little benefits for communities and the nation.

The mining lease agreement between Ghana and Barari DV Ghana Limited – subsidiary of Atlantic Lithium – for lithium extraction, is expected to be presented to Parliament for ratification by the first quarter of 2024.

The Lands and Natural Resources Minister, Samuel Jinapor, has emphasized that parliamentary ratification is a prerequisite for the lease, as specified in Clause 1E of the agreement, adding that failure to undergo this process would lead to the annulment of the lease.

The lithium mining lease, granted for 15 years to Barari, a subsidiary of Atlantic Lithium Limited, includes a 10% royalty and 13% free carried interest by the state, surpassing the existing 5% and 10%, respectively, for other mining agreements.

Ghana has unexploited deposits of lithium, iron ore, copper, chrome, nickel, limestone, silica sand/quartz, and mica in addition to its traditional minerals. A report by the Ghana EITI details the critical mineral potential of Ghana; second-largest reserves of bauxite deposits in Africa, significant deposits of iron ore, good quality silica and high-purity, low contaminant lithium scattered across the country.

These opportunities provide positive signals but portend to an even higher degree, fiscal, social, governance and environmental risks that could crowd out any benefits and steer the country on the old path of its traditional minerals.

Mining has been an integral part of Ghana’s economy for at least a century, with gold, diamond, bauxite, and manganese being the commercially producible minerals. On average, the mining sector has contributed 7.7 percent to total Gross Domestic Product (at basic prices) between 2013 and 2021. It also contributed on average, 38.23 percent of total merchandise exports and 16.47 percent to domestic revenues between 2013 and 2021.

According to data from the Minerals Commission, investment inflows into the mining sector has averaged some US$980 million annually over the past decade. The main mineral is gold and Ghana was the leading producer of the yellow mineral in Africa from 2018 until it was overtaken in 2021, a position Ghana regained in 2022. Gold consistently contributes over 90 percent of all mineral revenues annually.

Source:norvanreports

Lithium Deal: How Ghana was able to negotiate more for 10% royalty rate, 13% carried interest

The lithium mining lease, granted for 15 years to Barari, a subsidiary of Atlantic Lithium Limited, includes a 10% royalty and 13% free carried interest by the state, surpassing the existing 5% and 10%, respectively, for other mining agreements.

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