The Minerals Income Investment Fund (MIIF) has agreed a two-part capital investment totaling $32.9 million in the first ever lithium mine to be developed in Ghana. MIIF announced its intention of investing in Atlantic Lithium, which trades on the alternative market on the London Stock Exchange(LSE) and the Australian Stock Exchange (ASX) at the Africa Down Under Mining Conference in Australia. The investment is broken down into $27.9 million for 6% stake in the local assets and US$ 5 million in the Holding Company representing a 3% stake of 19,245,574 Atlantic Lithium shares at a strike price of US$0.2598 against which a non-binding Heads of Agreement has been executed. The announcement follows almost 15 months of negotiations which also involved the Minerals Commission and other State interests. Atlantic’s shares in London jumped 25% on the news of MIIF’s investment, which investors consider as a de-risking mechanism for the Ghanaian Ewoyaa Lithium Mine
An outlay of MIIF’s strategic investment
MIIF’s investment is outside the compulsory Government of Ghana carried interest of at least 10% which will also be managed by MIIF. The Ewoyaa project alone is valued at $1.4 Billion with a capacity to power 1.4 million Tesla vehicles according to Bloomberg. On the US$27.9m investment in the local asset, MIIF projects an NPV of US$90m for its investment. It will also earn US$312 million in royalties over the life of mine (This could be higher on the back of Government of Ghana’s proposed increase in royalty rates). MIIF also projects a 600% upside on the listed equity in which it will hold 3%.
MIIF further expects future upsides to this investment as additional work is being done to upgrade the mineral resources, as currently only about 10% of the mineral resource is measured. Edward Nana Yaw Koranteng, the Chief Executive Officer of MIIF told journalists at the Africa Down Under Event in Perth, Australia that “MIIF is a statutory minerals sovereign wealth fund with a focus on supporting the growth of mining in Ghana, but its operations also provide a de-risking option for investors in the mining space. The investment in Atlantic Lithium underscores this underlying objective and projects Ghana as an investment destination of choice on the continent.” Mr Koranteng elaborated further that, critical minerals are now of important security and strategic interests to all countries with Ghana being no exception. The need for a fine balance between protecting the security and strategic interests of the state and incentivizing investors into the critical minerals space cannot be understated. This is why this investment by MIIF is a watershed moment not only because it is our first investment in the lithium space but because a commercial arm of an African Government is providing co-investment options on commercial terms”.
Mr. Koranteng further said, “MIIF is positioning itself to invest along the entire value chain with beneficiation as a core objective in line with the Government of Ghana’s proposed critical minerals policy”. Atlantic’s investments include the construction of a lithium processing plant in the Central region. Ghana’s automobile development strategy has led to six international automobile companies establishing assembly plants in Ghana with the region as the principal market. The government of Ghana can leverage this and on the back of the lithium investment make Ghana the EV and batteries hub in Africa, said Mr Koranteng.
Atlantic’s recently published Definitive Feasibility Study (DFS) for the Ewoyaa Lithium Project, concluded that Atlantic’s revenues over the 12 year mine life for just Ewoyaa Mine is $ 6.6 billion with a post-tax Net Present Value (NPV) of 1.4 billion dollars using a discounting Factor (DCF) of 8%, and free cash flow over life of mine of $2.54 billion. The Projects Internal rate of Return (IRR) which measures the potential profitability of investments is 105% with a payback period of about 19 months.” Mr Koranteng stated that, with the support of the Minister of Finance, the Minister of Land and Natural Resources, the CEO of the Minerals Commission, and the Managing Director of the Ghana Stock Exchange, MIIF’s investment has certain conditionalities which have all been agreed to in principle. These are the construction of a processing plant in the Central Region, the joint development of Feldspar which is a lithium by-product used to produce ceramics, board representation, consideration of MIIF as an offtaker on commercial basis for 40% of the lithium spodumene and the cross listing of Atlantic Lithium on the Ghana Stock Exchange.
MIIF, EV batteries and Tesla
The Electronic Vehicles (EV) batteries industry is estimated to be about $7 trillion dollars globally. With the energy transition drive and targets of energy transition to limit the effects of climate change and over reliance on fossil fuels, the industry will quadruple in the next 25 years, according to watchers of the Lithium market space.
Tesla Inc., perhaps the largest EV manufacturer by market capitalization predicted that Lithium production may not meet demand over the next 15 years moved early to acquire an interest in the Ewoyaa project through Piedmont Lithium, which has signed a 50% offtake agreement with Atlantic Lithium for onward supply to Tesla Inc and LG Chem. According to Bloomberg NEF, “Ewoyaa could produce about 65,000 metric tons lithium carbonate equivalent, enough to power about 1.4m Tesla Model 3s.
The Chairman of Atlantic Lithium, Neil Herbert applauded MIIF’s decision to invest in Atlantic and recognized it as a new approach to working in Ghana. “We consider Ewoyaa as a Ghanaian project for Ghanaians. Having MIIF as a shareholder not only de-risks the Project from a funding perspective but, equally importantly, further aligns the Company with the best interests of its Ghanaian stakeholders, who we are proud to represent. “Furthermore, an investment by Ghana’s sovereign wealth fund demonstrates the Government of Ghana’s conviction in the Project, showcasing its intent to support the critical minerals agenda and position the country as a leading mining investment jurisdiction in Africa. In Ewoyaa, Ghana has a new pillar in its diversified minerals offering, further developing its esteemed mining credentials, which date back over a century. “MIIF’s investment in the Company’s Ghanaian subsidiaries will be used towards ongoing development, exploration and study expenditure across Ewoyaa and the Company’s broader portfolio. MIIF’s contributions will significantly derisk the success of the Project. In this way, we feel MIIF will share ownership in Ghana’s efforts to drive the country’s position in the global EV supply chain.”
MIIF is Ghana’s sovereign minerals fund mandated by the Minerals Income Investment Fund Act 2018, (Act 978) as amended, to maximise the value of dividends and royalties income accruing to the Republic in a beneficial, accountable and sustainable manner and to monetize Ghana’s mineral wealth in a manner that will secure the future wealth of the country.
At present, MIIF receives royalties from at least ten minerals currently being mined in Ghana including Gold, Manganese, Limestone and Diamonds. MIIF has equity stake in Asante Gold Corporation, a Canadian company trading on the Canadian, Frankfurt and Ghana Stock Exchanges. All of Asante Gold’s assets including the Bibiani and Chirano gold mines are domiciled in Ghana. The Fund also recently invested in the Injaro Venture Capital Trust Fund targeting the value chain delivery process for Ghanaians in mine support services