Ghana Risks Losing $500M in Revenue Over Domestic Lithium Refining Plans, Warns NRGI

Ghana faces the potential loss of up to $500 million in government revenue if it proceeds with plans to refine its lithium domestically, according to a report by the Natural Resource Governance Institute (NRGI). The analysis suggests that a state or privately-run refinery would only break even if it purchases lithium concentrate at below-market prices, which would diminish revenue from royalties, taxes, and dividends from existing mining operations.

The report compares two scenarios: exporting raw lithium concentrate versus processing it locally. It shows that exporting raw lithium yields higher revenue for the government, particularly when sold to Chinese refineries, which dominate the global market and operate at much lower costs. In contrast, the local refining option presents challenges, including higher capital costs, limited feedstock, and a lack of refining expertise.

In the medium-price scenario, refining locally could reduce expected government revenue by $500 million, from $2.7 billion to $2.2 billion. Even with a 20-year operational refinery, the country would face losses exceeding $300 million due to the high costs involved in setting up and maintaining a local refinery, combined with global competition from countries like China that control over 90% of global lithium refining.

NRGI recommends that Ghana focus on a “mine-and-monitor” strategy by prioritizing swift lithium production at the Ewoyaa site and supporting further exploration, while carefully tracking global refining trends. The report urges policymakers to weigh the economic feasibility and opportunity costs of local refining, as the projected $500 million loss surpasses Ghana’s entire 2024 education budget for basic schools.

Source: citi newsroom