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African Minerals projects $1 billion earning for Sierra Leone by 2015

Commentary

The name African Minerals might make us believe that this multi-national corporation is owned by African moguls and entrepreneurs.

The truth is it is a British owned company, doing business around the world and also Africa-centric. It was the British who helped Sierra Leone to end its decade long brutal civil war, considered the most brutal in history waged against humankind; a genuine humanitarian deliverance of a nation under siege, who could never have delivered itself from carnage by its own people. I mean the heartless and self centered power hungry Sierra Leonean rebels and despots.

Yes, the war was over in 2002 and seemingly the Brits are in charge in Sierra Leone, investing, making the important calls, and pushing all the right buttons in resurrecting and promoting economic renaissance in this war battered nation, which they considered an economic risk to capital intensive investment.

The potentials are enormous for high rate of return on investment in this mineral rich nation that’s endowed with one of the best deposits of iron ore in the world. It was during Tony Blair’s rule that a genesis of events started, then at the embryonic stage. Today, Blair is a powerful businessman and millionaire, highly respected in Sierra Leone, despite his shortcomings. Was it not one of his military generals who characterized Sierra Leone as a “Wretchedly poor country,” whose people are miserable, if not a human eye-sore?

The African Minerals company, born in 2010 is becoming a household name in this poor, tiny West African nation. Job opportunities are advertised all the time, listing vacancies they have available to be filled by qualified people, mostly Sierra Leoneans. But do the local employees get the same opportunities as their British counterparts? The government of Sierra Leone needs to be more transparent about the short term and long term deals it is making with this powerful entity. For it owes its people a duty of accountability and more openness, to dispel whatever doubts the people might have about the fairness of the trade agreements entered into as a custodian of the people’s trust and authority. The government said that negotiations are still ongoing and would be handled in phases. The miners told the Ernest Koroma led government that the country is projected to receive about $1 billion in revenue from its iron ore project in 2015. But government prefers to work with a more modest and realistic estimate that they’ve already documented. African Minerals says its Tonkolili site is the world’s largest deposit of magnetite, with 12.8 billion tonnes of the ore, and said in April, initial production in this West African country was due to start later in 2011.

Phase 1 would incrementally ramp up to an annual output of 12 million tonnes of ore. Phase 2 is expected to increase production to 23 million tonnes, though the timing depends on financing arrangements which have yet to be agreed on. ’Subject to variables such as iron ore pricing and the timing of the company’s development of Phases 1 and 2, payments to the government could reach $1 billion over the next few years,’ African Minerals told the media recently. They also announced that Phase 2 could begin 30 months after finance is agreed on. Key iron ore indices, based on spot Chinese deals and which global miners use in setting contract prices, rose on Tuesday. Metal Bulletin’s 62% index gained 28 cents to $181.73 a tonne, the highest since April 12. Documents made available to the press by the Finance Ministry gave a more detailed breakdown of African Minerals’ prediction of revenues, which would represent a huge boost to the nation’s impoverished economy and its people. Based on African Minerals’ model, the documents predict a government take over 2011-15 of $1.52 billion, of which 69 % is income tax and 18 percent royalty.

’I can only say they provide serious opportunities for accelerating the country’s growth and development,’ Finance Minister Samura Kamara projected. An official of the Finance Ministry said that government had not completed its own modeling, but is expecting about $50 million in the early years of the deal. Africa Minerals has not commented on the obvious differences in the projections between the nation and its own.

President Koroma said in March that his administration is optimistic in improving contracts with the miners and others. However, the company said in April that no talks actually took place on this important issue. IMF chief to Sierra Leone Jan Mikkelsen, said that the government take depends on factors like what fraction of the miner’s profits are ploughed back into infrastructural development that’s also tax-deductible. He added that an IMF model based on the company’s data suggested yearly revenue to Sierra Leone of $300- $500 in the next 3-4 years. ’These are huge projects, and potentially they can have very significant impacts on economic growth and economic activity in Sierra Leone,’ he said, adding that revenues could add up to 8-10% of national output by 2014-15.

Sierra Leone currently has its gross domestic product (GDP) around $2 billion. Neither the African Minerals deal, ratified in August last year, nor another smaller lease agreed by another British firm London Mining do conform to a new mining act. And both companies argue that their fiscal arrangements and other opt-outs are justified by the challenges and risks of investing in a post-conflict country. Sierra Leoneans at home and in the Diaspora are firing a lot of salient questions, concerning this ongoing deal that their government is enticed into on their behalf, which might not turn out to be very rewarding: And sugar-coated into signing away vital and wealth generating resources that could yield maximum returns if negotiated properly and carefully.

What the negotiators are not asking is: How much would the miners earn as projected yield employing the resources, and whether this would be the best and fair share of such enormous and profitable project that could change the life and destiny of Sierra Leoneans? Compatriots need to caution the government to be more transparent and forthright in all its dealings. Sierra Leoneans are the real stakeholders and shareholders who elected Koroma and his team into office. The people have the power to fire and hire them when their term ends. Among the president’s mantra during his 2007 election campaign was his promise to run the nation as a business. But there are apparent instances when such ideals have not been followed to the book.

Roland Bankole Marke 2011

www.rolandmarke.com

Photo: African Minerals’ Frank Timis (right) and President Ernest Koroma of Sierra Leone.