Why Ghana's industrial minerals and lithium are forecast for growth

Mining is a key component both of Ghana’s national economy and the global extraction industry. The country overtook South Africa as the continent’s largest gold producer in 2018 and has held the title since. The Covid-19 pandemic highlighted the mineral’s prominent role, as gold is seen as a safe investment during uncertain times. Although hampered by the pandemic’s impact on daily mining operations, demand for the resource helped ameliorate the declines in oil and gas prices during the initial part of the health emergency, helping the government finance its response.

While the sector faces challenges in modernising practices – particularly among small-scale miners – diversification efforts are forging ahead. Industrial minerals including bauxite and manganese have received significant amounts of foreign investment in recent years, with demand for the resources likely to grow as the world recovers from the pandemic. Infrastructure development could also support future expansion. “Ghana has the benefit of significant natural resources, which make the country an attractive place for investment,” Alex Obu-Simpson, vice-president and head of human resources and corporate affairs at Gold Fields Ghana, told OBG. “To build on this, there needs to be continued investment in infrastructure, as well as further progress on formalisation.”

Oversight

The Ministry of Lands and Natural Resources (MLNR) is the chief government policy-making and regulating authority for the sector, with a deputy minister that has sole responsibility for mining. A series of agencies fall under the purview of the MLNR: the Minerals Commission (MC); the Ghana Geological Survey Authority (GGSA); the Precious Minerals Marketing Company (PMMC); the Minerals Development Fund (MDF); the Ghana Integrated Aluminium Development Corporation (GIADEC); and the Ghana Integrated Iron and Steel Development Corporation (GIISDEC).

The MC is responsible for regulation of the sector, including registering operators, advising the MLNR on licence issuance and inspecting mining operations. The GGSA advises on, promotes and researches geoscientific issues pertaining to the environment, groundwater, land use and mineral resources. The PMMC is a state-owned enterprise that grades, values, buys and sells precious minerals. The MDF, meanwhile, supports mining communities and local authorities in mining areas with financial resources and programmes.

GIADEC is the holding company for all government assets in aluminium. These assets are the Volta Aluminium Company and the Ghana Bauxite Company, as well as the mining rights to the country’s bauxite reserves. Lastly, GIISDEC, established in March 2019, leads the development of the steel segment across the value chain, which is key to national industrialisation strategies. In 2021 it completed a draft Iron and Steel Master Plan for future development that was under review by government technical committees in early 2022.

Structure

The Ghana Chamber of Mines (GCM) represents private sector mining companies, including exploration, production, processing and mining support service providers. The largest labour organisation is the Ghana Mine Workers Union, which had approximately 13,000 members as of mid-2021.

Sector operators are generally categorised as part of large-scale mining (LSM) or artisanal and small-scale mining (ASM), with ASM firms having concessions no larger than 4000 sq metres. “ASM miners are not active in the mining of industrial minerals such as bauxite and manganese,” Christopher Nyarko, manager of research and analysis at GCM, told OBG. “However, there is a preponderance of smaller entities mining for precious metals and minerals. Diamonds, for example, are now mined exclusively by artisanal miners.” A 2016 report by the International Institute for Environment and Development found that ASM directly employed about 1m Ghanaians and indirectly supported around 4.5m more.

Some of the smaller-scale activities are done in informal or illegal mines, which have been linked to environmental degradation, deforestation and water contamination. “ASM has a long history and is essential to the livelihoods of many,” Kwasi Osei Ofori, CEO of local mining solutions provider Rocksure International, told OBG. “It will be necessary to educate ASM entities on the importance of environmental protection for the sector to meet its full potential.”

Formalising these operations has been a pillar of the government’s development policy, and the 2022 national budget contained a recommitment to sustainable community mining, reforestation and land reclamation (see analysis). The spending package also included provisions that reduced the withholding tax on ASM firms’ unprocessed gold, from 3% to 1.5%, to help them manage the effects of the pandemic. Because ASM entities lack their own refineries, they generally sell their output – at times below-market prices in 2020 and 2021 – to licensed gold-buying firms, which sell it to third-party buyers or refineries that are mainly in Asia.

Ghana’s LSM companies are mainly multinationals, which benefit from a clear and long-standing legal framework. There are constitutional guarantees against nationalisation and expropriation. LSM firms have the right of resort to international fora in dispute resolution, and there are clear regulations on health, safety and environmental protection.

Performance

Provisional figures from the Ghana Statistical Service show that mining and quarrying – excluding oil and gas – accounted for GHS11bn ($1.9bn) of GDP in 2020, or around 7% of the total. This was down from GHS13.3bn ($2.3bn) in 2019, reflective of the pandemic’s impact on production. Health protocols such as social distancing severely impeded production, as did periodic lockdowns to combat outbreaks among workers. Fiscal receipts from mining rose by 4% in 2020 to GHS4.2bn ($718.2m). The budget projected the sector would contribute GHS11.1bn ($1.9bn) to GDP in 2022.

Gold

The mining of gold in Ghana dates back at least to the 15th century, reflected in early European descriptions of the region as the Gold Coast. Gold has long been the most lucrative mining subsector, and in recent years Ghana became Africa’s leading gold producer, with around 5m oz of output in 2020. Underscoring the mineral’s importance to the economy, in 2020 gold accounted for GHS7.8bn ($1.3bn) of GDP, or 71% of mining’s contribution. The segment is a key export, accounting for $6.8bn of Ghana’s $14.6bn in merchandise exports that year. Indeed, in 2020 gold accounted for 97% of total minerals exports by value. Exports maintained pace in the first quarter of 2021, with Ghana exporting $1.4bn of gold.

Both LSM and ASM companies are active in the segment, with the latter’s share of production rising from 2.2% in 1989 to 41% in 2018. However, recent efforts to formalise ASM have led to a series of closures that saw ASM’s share of production fall to around one-third in the years since. In 2020 LSM firms saw a 6% decline in gold output and ASM entities experienced a 20.4% drop – despite the rising price of gold. Overall, gold production declined by 11% in 2020. Output in other subsectors fell as well, with diamond and manganese production down by 25.2% and 63.3%, respectively.

The top gold producer in recent years has been Gold Fields’ Tarkwa mine, with 526,000 oz of output in 2020 from a 20,800-ha concession, the fifth-largest in Africa. Other large fields include Newmont Mining’s Ahafo mine and Akyem deposit in the Ashanti Region, Kinross Gold’s Chirano mine and Asanko gold mine.

In late 2021 Ghana’s third gold refinery neared was nearing completion. It is a state-owned facility developed as a partnership between the governments of Ghana and India. The other two facilities are Gold Coast Refinery, the second largest in Africa, with a capacity of up to 480 kg per day, and the Sahara Royal Gold Refinery in Accra. Boosting domestic refining capacity has been a key priority to add value and provide employment.

Industrial Minerals

As a vital ingredient in iron and steel production, manganese has been mined in Ghana since 1916 at the 170-sq-km Nsuta mine. The mine is ran by the privately owned Ghana Manganese Company, the country’s sole producer and exporter of this product. Other areas with manganese deposits include the north-west and south-west coast.

Ghana also has deposits of around 900m tonnes of bauxite, according to GIADEC, located in the Awaso, Nyinahin and Kibi regions. GIADEC is pushing for the development of bauxite in line with its integrated aluminium industry initiative. As part of this drive, in September 2021 GIADEC signed an agreement with Rocksure International for the development of a $1.2bn bauxite mine and refinery. The facility will be capable of converting bauxite into aluminium products.

Iron ore production is concentrated at Opon-Mansi, in the south-west; Shieni, in the centre-east; and Pudo, in the north. GIISDEC and GGSA have been working to identify and develop new deposits. In December 2021 the GGSA announced the discovery of high-grade iron ore in the Oti Region. Ghana has also been exploring the potential of other base metals, with work ongoing in the Buem formation in the Upper East Region. The area is home to deposits of copper, nickel, zinc and chrome.

Lithium

Lithium has been discovered in commercial quantities in the Volta, Western and Ashanti regions, and Ghana is on course to be West Africa’s first lithium-producing country. While lithium deposits were first identified in 1962 in the Yenku Forest Reserve on the west coast of Accra, it was not until May 2017 that IronRidge Resources – now Atlantic Lithium – secured exclusive rights to the site. With lithium becoming a valuable mineral used in electronics and electric vehicles, in July 2021 the company entered a conditionally binding agreement with Piedmont Lithium to fully fund the Ewoyaa lithium project near Egyasimanku Hill in the company’s Mankessim asset. The area is estimated to contain some 14.5m tonnes of the mineral. In November of that year Atlantic Lithium obtained an exploration licence for an additional 139.2 sq km within Mankessim.

Diamonds

Ghana was one of the largest producers of diamonds in the world from the 1950s to the 1970s. Production now averages 150m carats a year, with most mining concentrated in the Birim River field. For many years the main facility was the Akwatia mine, managed by Ghana Consolidated Diamonds, which was placed under state ownership after a contractual breach and renamed Great Consolidated Diamond Company in 2019. However, production was suspended in 2021 and the government was debating its future as of early the following year. ASM now dominates the segment, although many smaller firms have switched to gold mining. The enforcement of the Kimberley Process Certification Scheme, which increased production costs, and higher gold prices were largely behind the shift.

Outlook

Despite uncertainty over the pandemic, there is widespread hope that mining activity will pick up, with supply and demand increasing as the world moves towards recovery. The government’s efforts to align ASM with best practices, while cracking down on illegal mining, are expected to attract investment, and support more efficient and sustainable production. The development of new resources such as lithium, investment in industrial materials such as bauxite and the establishment of stronger certification processes may also contribute to growth. “Junior exploration businesses are at a disadvantage due to high land ownership taxes and value-added tax,” Samuel Gyan, managing director of testing, inspection and certification firm SGS Ghana, told OBG. “Because of this, many exploration companies have relocated to nearby countries, leaving an underserved market for testing mining samples. It will be important to improve the fiscal conditions for junior exploration companies to thrive.”

Given that economies around the world will continue to require the minerals that Ghana provides, investment in the sector should grow in step. Demand from countries such as China is likely to keep rising in the years ahead, further supporting expansion. “Given the appetite the world market has for manganese and bauxite, Ghana is in a strong position for future growth,” Nyarko told OBG. “Moreover, demand for gold typically remains constant, thus the segment will continue to be a significant driver of growth for Ghana’s mining sector.”