Bright Simons raises credibility issues about Atlantic Lithium
Honorary Vice President of IMANI Ghana and Vice President of mPedigree, Bright Simons has said Atlantic Lithium is currently faced with a fundamental credibility issue that must be immediately resolved.
According to Mr Simons, IMANI has seen copies of presentations and marketing materials shared by Atlantic Lithium at various high-profile events and roadshows in which it claims to have been offered a 10-year tax holiday and a special electricity tariff that will save it up to 50% of energy costs.
This, he notes, some officials of Government have denied.
Further asserting that, either Atlantic Lithum has signed secret agreements with Government to be able to make such claims in its presentations and marketing materials to investors or Atlantic Lithium is blatantly deceiving investors.
“IMANI has seen copies of presentations and marketing materials shared by Atlantic Lithium at various high-profile events and roadshows in which it claims to have been offered a 10-year tax holiday and a special electricity tariff that will save it up to 50% of energy costs. We have also heard some Ghanaian officials deny this. Either there are indeed such secret agreements or Atlantic Lithium, a listed company on a regulated exchange, is blatantly deceiving investors. Neither scenario bodes well. It raises fundamental credibility issues that must be resolved.
“If indeed Atlantic Lithium has signed secret agreements with the Government, then all the analysis we have done so far goes out the door, it becomes useless. Otherwise, the company has lied to investors and so we should be careful doing business with such a company.
“So the issues need to be clarified, if there is an explanation, it should be given,” he noted.
Mr Simons made the above statements speaking on the NorvanReports’ and Economic Governance Platform (EGP) X Space Discussion on the topic, “Voices from the Ground: Local Perspectives on Lithium Mining In Ghana”.
The lithium mining lease, granted for 15 years to Barari, a subsidiary of Atlantic Lithium Limited, an Australian company listed on the Australian Securities Exchange (ASX) and the Alternative Investment Market (AIM) of the London Stock Exchange, covers an area of 42.63 km² in and around Ewoyaa in the Mfantseman Municipality of the Central Region.
The $250-million project, located in Ewoyaa, Mfantseman Municipality in the Central Region, is set to commence production by 2025.
The deal includes a 10% royalty and 13% free carried interest by the state, surpassing the existing 5% and 10%, respectively, for other mining agreements.
Barari DV Ghana Limited is also required to contribute 1% of its revenue to a community development fund for the upliftment of the mining area.
Here is a brief summary of what a section of Civil Society thinks and recommends for a better Lithium Agreement
1. Changing the flat royalties provision in the agreement to a flat + variable royalty, whereby the 10% floor rate in the agreement is buffered by an extra, incremental, royalty layer once the operational margin crosses a certain threshold. In short, the more profitable the operation becomes, the more Ghana must earn.
2. Add “creative options” to the equity provision for the State such that once the economics of the project attain a certain trajectory, the State would have the right to exercise convertible securities and increase its ownership. In short, after the investors recoup their investment and make a good return, Ghana deserves additional say in the local company producing the lithium, Barari DV, plus higher dividends.
3. Addressing the state equity participation issue comprehensively is critical because the current project – Ewoyaa – is only a small fraction, just a little above 7%, of the total acreage licensed to the company directly or through affiliates to search for more lithium and other minerals, even as at least 50% of the lithium to be produced at Ewoyaa has already been committed to an American off-taker. Instructively, 7 other deposits, besides the main Ewoyaa formation, are being primed for development and re-licensing by Ghana (and in some cases for further exploration work). Furthermore, the global horizon for lithium is highly complex and volatile, requiring clever positioning by the State to benefit from any upside and to minimise risks on the downside.
4. To ensure that the chemical refinery shall be prioritised, the provision in the agreement for a scoping study to be conducted to determine whether Atlantic Lithium shall indeed proceed to do so must be tightened to specify what exactly would be the yardstick of satisfaction Atlantic Lithium shall use to decide whether or not the refinery can be built. Doing this will allow easy and transparent monitoring of the process.
5. Since the interplay between economics and chemistry is much more complex for lithium than for, say, gold or bauxite, it has been suggested that the types of refining acceptable to the State should be specified in order to set clear expectations about the actual degree of value addition.
6. Ghana’s sovereign wealth fund (MIIF) is co-investing alongside the central government through various commercial transactions. Shareholding protections necessary to secure the public interest have not been disclosed. Instead, the public has been treated to a stream of self-congratulatory praise about phantom quantum gains. We have called for this perversion to be corrected.
7. The fiscal streams expected from the lithium license are not as the country has been told. Further disclosures of extra-contractual engagements between various state entities and the investor is required to determine the full facts. Likewise, planned equity participation must be designed to manage various risks.
