Guinea Reaches Historic Mining Agreements
With a third of the world’s reserves of aluminum ore bauxite, the mining sector in Guinea has been fraught with disagreements between multinational corporations vying for rights to various mines. An important step to further Guinea’s transition and economic development is to reform the mining contracts that were haphazardly handed out, revoked, and altered during the reign of Lansana Conté and the military junta. Recognizing this need, Alpha Condé, Guinea’s first democratically-elected president, began updating the national mining framework in order to make the government a more equitable shareholder, and thereby increase state funds available for development.
Simandou Project
Guinea has begun to settle these disputes, starting with the $10 billion Simandou project, which Beny Steinmetz Group Resources Ltd. (BSGR), Vale, Rio Tinto and Chinalco, have been fighting over since 2008. In the case of Simandou, the government revoked half of Rio Tinto’s ownership of the mine due to slow and inadequate progress and sold the two blocks to BSGR, Israeli diamond billionaire Beny Steinmetz’s natural resources company, who in turn partnered with Brazilian mining giant Vale, the world’s largest miner of iron ore. The other two blocks remained under Rio Tinto and their Chinese state-owned partner, Chinalco. Many of these mining companies have seen record-breaking net profits in 2010, with Vale tripling their net profit to $17.26bn (revenue of $26.48bn) and Rio Tinto tripling their net profit to $14.32bn (revenue of $23.5bn).
On April 22, 2011 Rio Tinto, agreed to pay the government of Guinea $700 million and rights of up to a 35% stake in Simandou’s concessions to resolve all outstanding issues with their remaining half of the mine, in order to start iron ore shipments by mid-2015. The Simandou project is expected to create 4,000 full-time jobs when production begins. A new rail line and port, to aid in exporting the iron ore, were also part of the agreement, and the Guinea government has a right to take up to a 51% stake in both projects. The agreement further stipulates that the terms of the settlement will not be affected by the upcoming review of, or any future changes in, the mining code.
Mining Reforms
Guinea and mining companies will discuss a new mining code during a conference and exhibition from May 10 through May 12. This conference will create a space for dialogue between the mining corporations and Guinea’s new government on issues such as mining policy, legal reform, and Guinea’s development. President Condé will be implementing a policy that gives Guinea at least a one-third stake in mining projects. This policy is aimed at rectifying the paradox of Guinea being one of the poorest countries in the world, yet one of the richest countries in terms of natural resources, as Guinea’s Minister of Mines, Mohamed Fofana, told the Financial Times last month.
Map of mining projects and corporate stakeholders in Guinea.
