Mining and Agriculture: Guinea Plans to Launch Stock Exchange within Two Years

GUINMINING

Guinea plans to launch stock exchange within two years

By: Reuters

19th March 2013

Updated 20 minutes ago

ABIDJAN – Resource-rich Guinea plans to launch a stock exchange within the next two years to raise financing for its struggling mining sector, a senior central bank official said on Monday.

The West African nation is already the world’s leading exporter of the aluminium ore bauxite and is seeking to develop other mining potential including the Simandou mine, one of the world’s largest untapped iron ore deposits.

“Guinea is an important mining and agricultural country … There is a financing problem. Traditional financing through the banks is no longer effective,” said Mamady Fofana, director of lending for the central bank.

“So we must find other methods both to finance these companies and for the country’s growth,” he told Reuters on the sidelines of a conference in Ivory Coast’s commercial capital, Abidjan.

Fofana said that Guinea’s government was in the process of creating a shortlist of companies to be traded on the new exchange. “We’ll start with a maximum of 10 companies, mainly from the mining sector as well as a few industrial firms and banks,” he said.

He declined to name any potential candidates.

Guinea has been plagued by political instability and corrupt leadership for much of its history since gaining independence from France in 1958. Despite its abundant mineral wealth, it remains one of the world’s poorest nations.

Economic growth has been held back by uncertainty surrounding the delay of parliamentary elections, the government said. Its economy grew by 3.9 percent last year, roughly one percentage point less than forecast.

Miners BHP Billiton, Vale and Russia’s RUSAL have begun backing away from planned investments, partly because of a government review of mining contracts.

Guinea’s government last week dismissed concerns raised over the future of Rio Tinto’s Simandou mine after the company’s CEO asked for confirmation of the state’s financial contribution to the project’s infrastructure.

Edited by: Reuters

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Who Owns Guinea’s Bauxite? Certainly Not Those to Whom It Belongs — The People

Having more bauxite than any other country on the planet, is it any wonder that mining companies from four continents breathlessly bang on Guinea’s door to get a piece of the action? If you add the sleight-of-hand management of the industry by Conde , his son, and assorted mining ministry schemers and top it off with “guidance” from flim-flam artist and Iraq war criminal, Tony Blair, how the hell could the people of Guinea receive any benefit?

The following article is from Deutsche Welle as well as the above video.

WHO OWNS GUINEA’S BAUXITE

November 22, 2012

Who owns Guinea’s bauxite?

No other country has as much bauxite as Guinea-Conakry. The government is planning a new law to secure 30 percent of shares in the mines, against the wishes of foreign investors.

With a proud smile on his face, supervisor James Camara points to one of his excavators with a rotating shovel that is digging deep into the earth. The machine does three jobs. It first takes the rock out of the ground, then crushes it and loads it on to a truck. Camara says up to 750 tons of rock per hour can be extracted. “That’s enough for seven truckloads.”

The trucks belong to the Moscow-based company Rusal which also owns the Balandou mine in Debele, a small town in the region of Kindia in the west of the country. Mangroves and mango trees grow around the open mine. The earth is red and smells burnt. Within it lies Guinea’s greatest treasure – the aluminum ore bauxite.

No processing industry in Guinea

The red earth contains Guinea’s greatest treasure

Trucks take the bauxite earth to the station where it is loaded on to freight trains which take it to the provincial capital Kindia. It will then leave the port of Conakry to travel by ship to Ukraine. There aluminum is produced from bauxite and exported all over the world. In Guinea itself, there is still no industry to transform the red treasure into the coveted metal, even after 53 years of independence.

With a new mining law, the government plans to increase the benefits from the mining business. In September 2011, the National Transitional Council approved the new law. The idea is for the state to get up to a 30 percent share of the mines which make large profits from the extraction of bauxite and iron.

Enforcing this law is not easy as most of the mining companies are owned by foreign companies. The Guinean government is currently negotiating with the World Bank and the International Monetary Fund about now it can be implemented. They do not want to violate international law and scare off foreign investors, many of whom are already apprehensive.

Pavel Vassiliev, Africa representative of the Russian company Rusal, sees the mining companies adversely affected by the new law.

“Given the global crisis in the aluminum sector, a number of investors have already seen no alternative but to leave Guinea,” said Vassiliev.

A fraction of profits for the people

Neighboring countries like Sierra Leone and Liberia have already fought for greater shares in the extraction of their resources.

But so far Guineans have had little benefit from their country’s mineral wealth. About 200,000 people live in the provincial capital Kindia, less than an hour’s drive from the mines. Even from far away the green hills that frame the city can be seen.

At the provincial administrative office in Kindia the corridors are in total darkness because there is no electricity. The officials are all middle-aged. Thick layers of dust cover the files. An agreement between Guinea and the mine operators states that Rusal should give back 0.01 percent of the profits from its bauxite production – which is about one US dollar (77 euro cents) per ton. This money was supposed to go to the province, but for a long time now nothing has come in, says provincial administrator Dramane Conde. “This is not the fault of Rusal. The army came to power in 2008 and people did not want the money to go to unauthorized channels,” he said. The company had been waiting for democratic structures to become established before releasing the funds.

Struggle for lost wealth

Rusal is now investing and making a direct contribution to the region. In 2012 the company paid 350,000 euros to supply two villages with electricity. One of them is Mambia, a small community of mud houses which lies between the mines and the capital, Conakry. In addition to bauxite mining, the people here live mainly from agriculture. The green leaves of the cassava plant shine in the fields. “Rusal has built schools, a health center and has brought electricity to the village,” says community leader Kande Oumar Camara. “That has been a great help for people with small businesses.”

But for many politicians that is not enough. They want as much as possible of the bauxite profits to remain in the country. According to Ousmane Kaba, Minister for Strategic Issues, Rusal should dig deep into its pockets. “First of all, the mines belong to Guinea,” he says. Currently there are differences of opinion with Rusal. Preliminary studies had shown that Rusal should transfer almost a billion dollars to Guinea – for payments not made.

Bauxite for development?

The biggest problem for Conakry, however, is that the law can not be applied retroactively. That means that the major raw material deals of recent years, in which foreign companies have secured thick slices of the bauxite cake for themselves, are not affected.

But the bauxite, which will be extracted at the Balandou mine in Debele and elsewhere, could soon make a greater contribution to Guinea’s development. If the state would ensure that the mining revenue does not end up in dark channels but, for example, is used to build better roads, then the new mining law would benefit the Guinean people.

GUINEA MINING: Oh, What a Tangled Web is Weaved, When Alpha Conde and His South African Buddies Practice to Deceive

SOUTH AFRICAN OLIGARCH BEATS OLEG DERIPASKA TO THE POT IN GUINEA

John Helmer, Dances with Bears, June 13, 2012 7:29 am

TOKYO SEXWALE, SOUTH AFRICAN RICH GUY

Guinean officials who have tried to persuade Conde to continue the reforms initiated by former Mining Minister Mahmoud Thiam had hoped the new code would establish a transparent foundation for renegotiation of many of the Guinean resource deals. Those have enriched the country’s rulers, deprived the country of taxes and investment, and left its resources in the ground. The reformers suspect Conde of appearing to endorse the public goals while secretly bargaining for private gains to be channelled through newly created entities backed by fresh alliances. Sexwale, said a Conakry source, “and the South African gang were [President Conde’s] business partners through the ANC [African National Congress, the ruling South African political party] from before he became president. There is that trust and an agreement to do business that predates everything.”

MOSCOW—A group of South Africans, led by Tokyo Sexwale, has devised a scheme to take over mineral assetsand mining concessions in the west African republic of Guinea, which the government plans to renationalize after revoking deals struck by previous Guinean governments. The Sexwale scheme is a growing threat to Oleg Deripaska’s Rusal in Guinea, as the offers Deripaska has proposed to Guinean President Alpha Conde and his family miss their mark.

On the eve of Rusal’s annual general meeting of shareholders in Hong Kong, due on June 15, there has been no fresh warning to Rusal shareholders that their Guinean bauxite mines and alumina refinery are facing confiscation, and transfer to a state mining company controlled, indirectly, by the South Africans. These Guinean assets account for more than half of Rusal’s global bauxite reserves. On last year’s production results, the Guinea bauxite mines represent 36% of Rusal’s annual bauxite production of 13.5 million tonnes; 7% of Rusal’s alumina output of 8.2 million tonnes. Both totals were down below past-year volumes.

In its latest challenge, the Guinean government charges Rusal with fraudulent under-reporting of output figures. A billion-dollar claim by the Guinean government dating back to 2009 accuses Rusal of under-counting the volume of its bauxite and alumina exports, and under-paying on taxes.

The only reference Rusal has made to the potential losses is this line in the annual financial report for 2011: “Operations in these countries involve risks that typically do not exist in other markets, including reconsideration of privatisation terms in certain countries where the Group operates following changes in governing political powers.” In its May 2012 financial report, Rusal also claims that the government’s position in the Guinean courts “has no merit and the risk of any cash outflow in connection with this claim is low and therefore no provision has been recorded in this regard in these consolidated financial statements.”

The collapse of Rusal’s position in Guinea this year is one of the targets for legal challenges against Deripaska’s management by shareholding partners, Victor Vekselberg, Len Blavatnik, and Mikhail Prokhorov.

Rusal’s share price is currently fixing in the Hong Kong market at an all-time low of between HK$4.20 and HK$4.60 (54 and 59 US cents). At US$9 billion, the company’s value in the market is $2 billion less than its bank debts. The Russian government’s official and unofficial stake in the company is now worth about $2.6 billion, two and a half times less than it was worth when the Kremlin agreed to bail Rusal out of insolvency and default in November 2008; then underwrite Deripaska’s initial public offering of shares on the Hong Kong Stock Exchange in January of 2010.

Sexwale is one of South Africa’s wealthiest black leaders, with substantial holdings in the minerals and mining sector through his Mvelaphanda Group . He is also the Minister for Human Settlements (slums) in the current South African government, a critic of President Jacob Zuma, and a potent challenger at the next presidential election in 2014.

According to sources in Johannesberg, Sexwale is discussing with Eurasian National Resources Corporation (ENRC) a plan to buy into mining interests in Guinea. London-listed ENRC is one of Kazakhstan’s dominant mining companies, producing iron-ore, ferro-alloys, copper, coal, bauxite and alumina. Although ENRC is smaller than Rusal as a global bauxite and alumina producer, if Sexwale manages to oust Deripaska from Guinea, that would change dramatically. Currently, ENRC’s market capitalization is $8.1 billion.

Sexwale is believed to be the power behind two obscure British Virgin Island vehicles, one called Palladino Holdings and another called Floras Bell, which are managed by Olaf Walter Hennig. An investigation by David Gleason in Business Day of Johannesberg reports that a year ago Hennig arranged for a loan of US$25 million to finance the start-up of a new Guinean state mining company. The new mining code, drafted by Conde’s advisors, would grant that new state entity a free 15% stake in the country’s mining projects, and the option to buy another 20%.

Behind Hennig and the $25 million loan, according to Gleason and confirmed independently by sources in Conakry, the Guinean capital, are Sexwale; Mark Willcox, the chief executive of Mvelaphanda, and several other businessmen of South African, Polish, and British extraction. One of them reported by Gleason is Ian Hannam, a City of London financier who tried to arrange Rusal’s float on the London Stock Exchange in 2007, but failed.

Guinean sources say Sexwale, Willcox and Hennig are the control shareholders of the BVI entities. A report in the Sunday Times of London in May claimed that Hennig was a “shadowy middleman”, and that the Palladino loan had been signed in April 2011 by the Guinean finance minister and a local proxy for Palladino. The terms look as if they were copied out of the Russian loans-for-shares book. If the Guinean state entity defaults on repayment of the Palladino loan, Sexwale and his pals would be eligible to convert the debt into a 30% stake in the state mining company and its assets.

A senior Guinean official says this is one of several non-transparent deals arranged by President Conde which have convinced BHP Billiton to withdraw from concessions they currently hold in Guinean bauxite and iron-ore. Rusal’s concessions are a target, the source adds, because of the personal falling-out between Conde and Deripaska chronicled here.

Guinean officials who have tried to persuaded Conde to continue the reforms initiated by former Mining Minister Mahmoud Thiam had hoped the new code would establish a transparent foundation for renegotiation of many of the Guinean resource deals. Those have enriched the country’s rulers, deprived the country of taxes and investment, and left its resources in the ground. The reformers suspect Conde of appearing to endorse the public goals while secretly bargaining for private gains to be channelled through newly created entities backed by fresh alliances. Sexwale, said a Conakry source, “and the South African gang were [President Conde’s] business partners through the ANC [African National Congress, the ruling South African political party] from before he became president. There is that trust and an agreement to do business that predates everything.”

Other Guinean sources contend the Palladino loan is illegal, because it hasn’t been ratified by the Guinean parliament; because violations of US and UK anti-corruption laws are suspected, and because the government in Conakry has pledged that in return for debt relief from the Club of Paris government creditors, the World Bank and the International Monetary Fund (IMF), it cannot pledge or transfer national resource assets bilaterally.

“The [share] pledge made in this [Palladino loan] agreement by the Government cannot be implemented. Under Guinea’s procurement and asset disposal law, any transaction with state-owned assets with a value exceeding 800 million Guinea francs ($120,000) has to be made through a public tender process. [The Palladino loan] also violates Article 150 of the new mining code which says the same things. Perhaps the [Palladino] consortium, aware of the provisions of the mining code, part of which they may even have drafted, secured their agreement five months ahead of the release of the mining code in the hope the new law would not be retroactive. Too bad! The public procurement law overrides the mining code.”

A high Guinean source describes the Palladino scheme an “an attempt to seize the assets of the Guinean Government by the back door, on the cheap and risk free. Essentially, whoever is behind Paladino has found it easy to penetrate the higher echelons of the new Guinean administration. The $25 million loan, far from being a loan, can actually be perceived as ‘entry ticket’ or ‘signature bonus’. All the consortium has to do is bide their time seat and wait.”

An advisor in Conakry says that for Rusal to wait for Conde’s relationship with Deripaska to improve plays into the South Africans’ hands now. “Deripaska and Conde had a marriage of convenience that worked in the beginning and each side thought it would extract maximum value for very little in return. Neither was able to deliver to the other’s expectations.”

Guinea Lacks Running Water and Electricity, Yet Bauxite, Gold, Diamond, and Iron Ore Mines are Booming – Articles

Guinean students forced to study under the lights at Gbessia-Conakry airport because of lack of electricity at home

As the people of Guinea wait for basic services such as water and electricity, Guinean government functionaries suffer perpetual writers’ cramp from signing one lucrative mining contract after another.  Here are a few mining articles from the last couple of days.

From Africa-Asia Confidential, in-depth coverage of Chinese infrastructure projects and iron ore mining.  Also, insight into the murky world of Guinea’s mining ministry:

Conde Wants Quick Results

From Market Watch, we learn that Strategic Mining Corp. has won renewal for its gold concessions in Siguiri. The Siguiri  Basin contains several producing gold mines including operators Anglo-Ashanti, SEMFRO and Lero:

Strategic Mining Corporation Announces Approval of Siguiri Exploration License Renewal by Guinea Government in Gold Rich Birimian Trend

From Proactive Investors USA-Canada, Guinea’s diamond mines keep on giving and giving:

Stellar Diamonds Reports Maiden Resource for Droujba Shares Rise


Mining Plot Thickens: Guinea Rejects RUSAL Proposal to Dig Dian-Dian Slowly, Keep Bauxite in Ground

John Helmer, author of the article on Guinean mining featured in a post on this blog yesterday, has learned additional information about RUSAL negotiations with the Guinean government concerning the Dian-Dian site.  Helmer has written a second article about this aspect —  a few excerpts of which appear below followed by a link to the full article.

The Guineans say they insist that Rusal stick to their agreement and build the alumina refinery, as was agreed in 2006. If not, they say there are rival aluminium companies who will do so, and also agree to share with the Guinean treasury the tenfold gain in revenue from alumina exports. Deripaska, according to a Washington-based source, “is well known to have made his career at taking, not sharing.”

Another source says: “This is a waste of a major bauxite resource that could feed multiple refineries while exporting as much bauxite as CBG, thus transforming the country’s revenue profile. They are telling Guinea they will operate Dian-Dian at less than 10% of capacity so no one else can have it. They were laughed out of the room.”
Full article:

Guinea Rejects RUSAL’s Proposal to Dig Dian-Dian Project Slowly, Keep Bauxite in the Ground

“Mining Turbulence” Raging in Guinea

Bracing for Changes in Mining and Infrastructure Codes in Guinea

April 23, 2011

Summary

A “mining turbulence” is raging in Guinea as sweeping changes to mining & infrastructure laws are planned for the first time in 16 years. A 33% “blocking minority” state ownership and cleaning up decades of corruption and bureaucratic nationalism are souring relations between government and miners scrambling to reassure the market their Guinean assets are safe. A new market-friendly regime that helps miners build social licence to operate & protect shareholder value will be mutually beneficial.

Analysis

Guinea is the world’s largest supplier of bauxite (between 25 & 40bn tons, spread across much of the country), the raw material refined into alumina that is then smelted into aluminum metal. Tragically, much of this wealth has been frittered away in corruption and bureaucratic nationalism for decades while mining companies smiled to the bank.

In January, newly elected President Alpha Conde announced plans for a 30% state participation rate. Under current law, the government does not have a right to participate in bauxite and iron ore, let alone share in the profits; instead, it has to pay mining companies to take the ore. It’s only in gold and diamond mining that the government has a right to a 15% share in the assets. The new regime will bring all mineral resources under one participation rate. All current mining contracts would be renegotiated, just as the government will become more rigorous in its application of licensing terms. Significantly, the new mining code will punish companies caught bribing officials and would retroactively punish current license holders if it was established that they were involved in any bribery. Remarkably, George Soros is assisting with these reforms “because Guinea could not afford to pay international consultants.”

The January announcement alarmed the market, hitherto used to back-rubbing between massively corrupt past regimes and mining multinationals, namely Vale SA, Rio Tinto, Global Alumina, Rusal, Chinalco, South Africa’s BSG Resources, and Bellzone Mining. Since then the government has tried to calm nerves by saying that its quest for “blocking minority” stake was not a hard and fast plan.

Last week’, the government canceled the 640 km Kankan-to-Conakry railway project targeting Rio Tinto’s Simandou iron-ore project under construction. Simandou has been dubbed “the largest integrated mine-and-infrastructure project ever developed in Africa” expected to top the $10bn mark. Vale’s Zogota mine at Simandou, scheduled to begin production in 2012 is expected to reach 95mn ton a year within five years. The project is being built in partnership with the Chinese State-owned company Chinalco, the World Bank’s International Finance Corporation (IFC) and Rio Tinto.  Simandou alone will make West Africa one of the world’s foremost iron-ore exporters, comparable with established producers like Brazil and Australia.

Analyses are solely the work of the authors and have not been edited or endorsed by GLG.

Contributed by a Member of the GLG Legal, Economic & Regulatory Affairs Councils

Guinea: All Part of Master Plan — Mines Minister Wants the Steinmetz, Bellzone and Rio Tinto-Chinalco Deal Resolved Before Final Round of Elections

Guinea:  All Part of the Master Plan

 Written by Honoré Banda in Conakry 

  Wednesday, 27 October 2010 13:16

Guinea is one of the world’s leading producers of bauxite, and its government plans to make it the biggest producer of iron ore. In the final days of President Lansana Conté in December 2008, the regime announced it had revoked 50% of the rights to Rio Tinto’s huge iron ore concession at Simandou and transferred them to Israeli diamond magnate Benny Steinmetz, a friend of former Israeli Prime Minister Ehud Olmert. Officials had warned Rio Tinto six months earlier that it had held Simandou for too long without developing it, a breach of the mining code.


The key official behind this more muscular approach is mines minister Mahmoud Thiam. A former banker with Merrill Lynch and UBS, Thiam was asked to return to his native Guinea to take over the mining portfolio after the palace coup in December 2008 that brought Captain Moussa Dadis Camara to power. A canny and well-connected operator, Thiam carries a US passport and contributed to President Barack Obama’s election campaign.


Thiam has masterminded deals with companies from Israel, Brazil, Australia and China to expand iron and bauxite production. Sometimes the new alliances work as a political insurance policy: In October 2009, the military junta signed an infrastructure and minerals deal worth $7bn with China International Fund just days after soldiers killed 150 demonstrators at an opposition rally which triggered calls for international sanctions.


In June, Thiam brought in Brazil’s mining giant Vale to take a 51% stake in a venture with Steinmetz for $2.5bn. That suddenly made the Steinmetz project look serious and added to pressure on Rio. Under a special deal, the Steinmetz-Vale consortium would be able to use a railway on the Liberia side of the border to transport their ore but Rio would have to part-finance a multi-billion-dollar railway project in Guinea.
In June, the Conakry junta told Rio that if it did not accept the transfer of 50% of Simandou to Steinmetz and Vale, it risked losing the remaining 50% of the concession. The following month, Rio strengthened its agreement to invest in Simandou by partnering with Beijing’s Chinalco. Rio’s engineers have also started assessing railway routes through the mountainous interior.


According to a message sent by Thiam to a friend in August, he wanted the Steinmetz, Bellzone and Rio Tinto-Chinalco deal resolved before the final round of elections in September when the military is due to hand power back to civilians. “Then I can go home,” 
he said.

This article was first published in the October-November 2010 edition of The Africa Report.