Honorary Vice President of IMANI-Africa, Bright Simons, has described Ghana’s lithium deal with Barari DV as too simplistic.
He argues that taking into consideration all the uncertainties surrounding lithium and its future in the green revolution it was necessary for the government to position itself much favourably in the deal.
He said the government should have approached the deal from a real options point of view.
Speaking on JoyNews’ Newsfile on Saturday, Bright Simons explained the real options point of view as follows;
“What that simply means is that instead of this very simple agreement that they’ve done – in some cases there is a benefit in simplicity but in this case we don’t think so. We think there has to be more options in the agreement in some of the respect.
“We’ve talked already about royalties, when the operating margin changes we think that the royalties should be variable. We think even in the case of equity, the way they should exercise the equity is not the way they’ve done it now, which is they’ve done it in a two-pronged manner.
“For the government it’s a fixed kind of thing and we say in the future we may negotiate for more. For MIIF, which is the sovereign wealth fund, they’ve allowed them to use warrant which is a kind of option. So what it means is that they have the right and not the obligation to buy more if the price improves.
“But there are other options that we can use and why not use it for the state too? Because MIIF, given the fact that they can easily exit their position given the fact that they’re a sovereign wealth fund as opposed to the state where the regiment is much more stricter, we’re not too happy that the state is not using options, not using warrants. And not just warrants to exercise when the strike price is at a certain level, we want warrant that do other things as well.”
He added that, while lithium is the raging trend today, there are aggressive campaigns to find a more sustainable substitute for the mineral.
This he says puts the government in a precarious situation if it continues to be overly enthusiastic about the mineral instead of being objective as it forges ahead to ratify the deal.
“And we think that the agreement is too simplistic given the uncertainties in lithium. If you’re doing gold we’ll not have a problem. But lithium, a lot of crazy things are going on. For one thing there’s a lot of aggressive push, massive and aggressive push to look for alternatives to lithium based batteries.
“Laboratories all over the world, some of them funded to the tune of billions of dollars are experimenting with all manner of battery technologies. A time may come when lithium in batteries are not the big deal in electric vehicles, it’s possible. We don’t know that.
“There’s a recycling boom where after using the electric battery – remember that batteries for NMC for instance is just four years, after four years the charging ratios drops to as low as 20% and people just change it. So when you throw away the battery, nowadays people are recycling the lithium and that boom is increasing. A time may come when we’re getting more lithium from the discarded batteries than we’re mining afresh. We don’t know yet,” he said.
Bright Simmons noted that a recent crash in the price of lithium is also of major concern and buttresses points by the CSOs that the government needs to be extra careful before proceeding with any deal.
“All of those things plus of course, the thing that everybody is talking about, the massive crash in prices, prices have dropped from a high of about 81,000 dollars a tonne for lithium carbonate and hydroxide to something like 16,500 dollars this month.
“So that’s a massive drop in value, so we don’t really know what is happening with this lithium thing that therefore require that we’re very careful in the way we structure the agreement to take into account the uncertainty,” he said.
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