The Government of Ghana may forfeit up to $500 million in potential revenue if it advances its current strategy to refine lithium locally, a recent report by the Natural Resource Governance Institute (NRGI) has cautioned. The report highlights that exporting raw lithium concentrate offers far greater returns for the state, whereas a domestically operated refinery would only be financially viable if it procures lithium concentrate at prices well below the international market rate.

The NRGI study modelled two key scenarios: exporting raw lithium spodumene concentrate and refining it within Ghana. The results revealed a stark difference, with local refining potentially slashing government earnings from $2.7 billion to $2.2 billion over a 20-year horizon. The estimated revenue loss could exceed $300 million, driven by high capital expenditure, limited supply, and a lack of technical know-how in lithium processing.

The report's findings are particularly significant given the global context. China currently processes over 90% of the world's lithium, leveraging massive economies of scale, low input costs, and government subsidies. The NRGI notes that most new refinery projects outside China, including those in Australia and Europe, have either stalled or been abandoned due to similar cost-related challenges.

In light of these findings, the NRGI recommends that Ghana pursue a "mine-and-monitor" strategy, commencing lithium extraction at the Ewoyaa site while keeping an eye on international refining developments. The think tank advises against committing public investment to a potentially loss-making refinery until more favourable conditions emerge. This approach would allow Ghana to capitalize on the growing demand for lithium while avoiding the financial risks associated with local refining.

The report's conclusions have significant implications for Ghana's economic development. The projected $500 million shortfall exceeds the country's 2024 budget allocation for basic education, highlighting the need for policymakers to carefully consider the economic trade-offs. As the report notes, "The desire for value addition is valid, but it must be economically sustainable."

The NRGI's report serves as a timely reminder of the importance of evidence-based decision-making in the energy and mining sector. As Ghana seeks to diversify its economy and capitalize on its natural resources, it is crucial that policymakers prioritize sustainable and financially viable strategies that benefit the nation as a whole.

In the coming months, it will be interesting to see how Ghana responds to the NRGI's report and whether the country will reassess its approach to lithium refining. One thing is clear: the decision to pursue local refining has significant implications for Ghana's economy, and policymakers must carefully weigh the pros and cons before making a decision.