Atlantic Lithium asks Ghana for tax relief to save mine

Australia’s Atlantic Lithium (ASX: A11) has appealed to the Ghanaian government for fiscal concessions to keep its Ewoyaa lithium project afloat, warning that the collapse in lithium prices has put the country’s first lithium mine at risk.

Since 2016, the company has invested roughly $70 million (C$97 million) in developing the project. But lithium prices have plunged over 80% since peaking in November 2022, driven by a global oversupply and slower-than-expected electric vehicle (EV) adoption.

Ghana, Africa’s top gold producer, granted Atlantic Lithium a 15-year lease to develop Ewoyaa by late 2024, aiming to tap into the growing EV sector. However, current market conditions could derail those plans.

“While current lithium prices present headwinds, we believe that through collaboration and prudent fiscal measures, we can advance Ewoyaa to production and deliver lasting value for all stakeholders,” executive chairman Neil Herber said in a statement. 

He added that the company remains committed to working closely with the Ghanaian government and local communities to make Ewoyaa a regional flagship.

Cautious EV outlook 

Despite a slight recovery in lithium prices thanks to normalizing auto production, analysts remain cautious. Additional tariffs in the US, including a 25% levy on auto parts expected by May 3, have further clouded the demand outlook.

Shares in Atlantic Lithium gained 7.1% on Thursday in Sydney to close at A15¢ apiece, giving the company a market capitalization of around A$103 million (C$91.5 million) 

Atlantic Lithium is seeking concessions on Ghana’s new mining revenue framework, which includes a 10% free carried interest for the state and a special 13% royalty on gross revenue from lithium production.

General manager Ahmed-Salim Adam told Reuters the project’s internal rate of return has plummeted from 105% to just 13.6%. He said it needs to be 30% to make economic sense.

In response to the financial strain, the company laid off 25 employees in October and plans to cut about 50 more in May.

Half of Ewoyaa’s lithium output is earmarked for a U.S.-based refinery owned by Piedmont Lithium (Nasdaq, ASX: PLL), Atlantic Lithium’s second-largest shareholder, which has also agreed to finance most of the mine’s construction.

Atlantic Lithium aims to produce 3.6 million tonnes of spodumene concentrate over 12 years — roughly 350,000 tonnes annually — which would rank Ewoyaa among the world’s 10 largest lithium projects.