What’s Really Up For Grabs: Guinea’s Counter Attack Against Resources Companies Explained
By John Helmer
minesite.com
The Guinean government in Conakry has decided not to despatch a Foreign Ministry delegation to Moscow for the time being, while it gives negotiators from Russia's aluminium monopoly, United Company Rusal, the chance to discuss issues relating to privatisation, tax and accounting next week. Guinean sources have told Minesite that a planned trip to Russia, agreed with the Russian Foreign Ministry for last week, has been postponed on Conakry's initiative. The Guinean proposal to Rusal aims at a meeting next week in a European city.
Rusal mines bauxite at Kindia, and holds the mining right for the undeveloped Dian-Dian bauxite deposit. The company lost its Friguia concession and the Friguia alumina refinery after a privatisation process held in 2006 was ruled invalid by a Conakry court last month. According to Fassine Fofana, who was the Guinean Minister of Mines and Energy between 1994 and 2000 and is currently chief executive of London-based Energy Equity Resources, the media reporting in Europe and the US has been mistaken in its coverage so far of the Guinean action towards foreign mining concession-holders.
"Rusal paid only US$19 million for an asset that was independently valued at the time by Ernst &Young at US$257 million", Fofana said. "Rusal refused to follow the prescriptions of the privatisation decree that directed them to negotiate the particulars of the sale with the Government Privatisation Commission. Such negotiations would have resulted in a parliament-ratified agreement that would have been legally binding on the Guinea Government. That never happened, because Rusal thought that their relations with the former President could give them cover."
Fofana said media interpretation of the Conakry government's revocation in July of half of Rio Tinto's Simandou iron-ore concession is just as wrong. Rio Tinto has been told it can continue mining on 50 per cent of the reserve, but must remove its equipment and cede the remaining half of the licence area to BSG Resources, owned by the Israeli miner and African heavyweight, Beny Steinmetz.
"Rio converted the exploration licences, which I granted them in 1997”, that have maximum seven-year duration, into a 25-year concession”, Fofana continued, “without meeting the basic requirement for such conversion: submit a bankable feasibility study to the Ministry, according to Article 41 of the Guinea Mining Code. Having failed to present a bankable feasibility study, the conditions for securing a concession were not met. The former President, who had issued it, rescinded the concession decree, and Rio’s Simandou titles reverted to being pure, but still exclusive, exploration licenses. As such, they were subject to the relinquishment provisions of the mining law – 50 per cent at each renewal, until such time as a concession has been granted, if the concession conditions are met. What the law does not allow for is for anyone to take the asset off the market by securing a concession before meeting the conditions set out in the law. This is what happened with Rio."
Fofana added the following warning: "if Rio does not move fast, they may have to relinquish their remaining 50 per cent of the Simando deposit, if the conditions are not met by the time the next licence renewal comes up. There will be many takers for any portion of Simandou".
The western media, he said, fall for "all the old clichés on Africa. Everything done by African governments is presented as an attempt to defraud 'innocent and well meaning' investors, and to scare off the companies allegedly best suited to develop the resources. The companies can do no wrong. As a former Minister of Mines from Guinea and as a leader of several resource projects across Africa, I beg to differ."
According to the former minister, the prospects for international mining companies are much brighter in practice than western media reports have intimated. "No other licenses are affected or under threat in Guinea. Quite to the contrary: some of the world’s best-known metals and mining players, like AngloGoldAshanti, BHPBilliton, BSGR, Crew Gold, Mitsubishi, Newmont, Vale, and a group of Chinese players, are busy producing or exploring for new resources. Only the non-performing licences, regardless of the licence holder, are at risk." Of course, the political risk relating to the recent unrest in the country remains. Bauxite mining was reportedly brought to a standstill this week, one of the results of a nationwide general strike. But there's not much the mining companies can do about that, innocent or otherwise. |
