ESG Pressure for Miners - A Transition Material Opportunity
The COP26 commitments and the global focus on ESG are also mixed news for the mining industry.
On the one hand, investors and stakeholders are holding mining companies to ever more stringent standards and it is becoming more difficult to earn and hold-on to a social license to operate. In Ghana, effective workforce and community engagement is increasingly critical. In recent years, a number of significant mining M&A transactions and projects have been affected by labour or social issues. For example, following the sale of the Bogoso-Prestea mine by Global Star Resources to Future Global Resources, the operation of the project was interrupted through a labour dispute relating to the payment of any severance packages claimed to be due under the Labour Act, 2003 (Act 651) as part of the transaction and protests from local community members alleging breaches of a historic resettlement agreement.
On the other hand, however, the energy transition is driving significant demand for transition materials, with copper, lithium, nickel and rare earth mineral prices scaling new heights. Diversified miners with exposure to these commodities are best placed to capitalise on the opportunities the energy transition presents.
In Ghana, lithium has been discovered in potentially commercial quantities in the Western, Volta and Ashanti regions and Ghana could well become West Africa’s first lithium producer. On 26 May 2022, Atlantic Lithium (formerly IronRidge Resources) announced the mobilisation of three additional drilling rigs at its Ewoyaa project, where it has a JORC compliant mineral resource estimate of 30.1Mt at 1.26% Li2O34, and on 7 June 2022, it announced positive initial metallurgical profiling results.35
The rest of the industry will be watching these developments closely, and with the Ghana’s state owned Minerals Income Investment Fund recently taking steps to increase the state’s interest in its gold assets, transition materials could be the next frontier.
For further information on the legal regime applicable to mining projects in Ghana more generally, please see our guide to Mining Laws and Regulations, Ghana 2022 published by International Comparative Legal Guides, available here.