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“The heart of the policy is that it will last beyond one administration. The people are aware of the collective buy-in, with the miners working with the unions and the people,” said Condé, speaking to Steel First at his presidential palace in Conakry.
“It is the best protection for the miners – the people will hold them and the government accountable for any changes.”
Guinea is a paradox. Boasting over a third of the world’s bauxite reserves and home to Simandou, the largest untapped reserve of iron ore on the globe, the West African nation remains one of the poorest countries in the world.
More than 50 years of under-investment, mismanagement and corruption in the mining sector, which accounts for 80% of the country’s exports but just 20% of its GDP, is the reason why Guinea has failed to realise its economic potential, said Condé.
“We had a peculiar situation to deal with when we came into office. Simandou is the world’s best-quality iron ore deposit, but in fifty years, Guinea did not manage to export a single tonne of iron ore,” he said.
“We have two thirds of the world’s bauxite deposits, but we only have one plant to refine it and that dates back to colonial times. Decades of deep-seated corruption have led to this scandal. Guinea is one of the most mineral-rich countries of the continent while being one the poorest of West Africa.”
Voted into power 2010 in the country’s first democratic elections on a largely anti-corruption ticket, Condé has made cleaning up the mining industry a top priority.
Under his administration Guinea has launched a new mining code, audited all licences in the country and instituted a review of all mining contracts granted under previous regimes.
With the support of non-governmental organisations run by former UK prime ministers Tony Blair and international financier and philathropist George Soros, Guinea is building institutions that its government hopes will lay the groundwork for sustainable economic development.
Election tensions Yet the past six months have seen political tensions heighten ahead of long-awaited legislative elections, which will vote-in the country’s first ever democratically elected parliament and complete Guinea’s transition from a military regime.
More than 50 people have died in police clashes with opposition supporters at protests in Conakry, Guinea’s capital, since January. Another 350 have been injured.
Guinea’s opposition coalition has repeatedly threatened to boycott the elections over the government’s choice of South African firm Waymark as election services provider and over voting rights for the country’s sizeable diaspora.
However, recent United Nations-mediated talks between the opposition and government have raised hopes, with the expectation that, if the current election date of June 30 is not met, the poll will go ahead without much further delay.
“The upcoming elections are extremely important for the country and the investment climate,” said Condé. “An elected National Assembly will represent the last step needed to finalize the Democratic transition started in 2010.”
Contract review Miners have paused activity while they wait for the results of the review committee. Rio Tinto’s shiny new office building in the centre of Conakry is all but empty and hotels, which only a year ago were charging inflated rates to the hordes of contractors and engineers pouring into the city, have slashed prices to fill empty rooms.
Facing soaring project costs, a lower pricing climate and increasing shareholder demands, the mega-miners have changed their attitude towards multi-billion dollar greenfield projects, such as Simandou, in the past year.
Iron ore prices have tumbled from record highs of close to $190 per tonne cfr China reached in early 2011 to lows of under $90 per tonne in August 2012.
Lower iron ore prices, depression in the European steel markets and a slowdown in Chinese steel consumption have led to many new mining projects being delayed or cancelled. Metal Bulletin iron ore index prices have ranged from $111-118 so far in June.
Vale, BHP Billiton, Anglo American and Rio Tinto have all entered a new phase of top management, with caution and cost cutting being the key catchphrases for the ceos who have stepped in to fill the shoes of deal-driven innovators like Cynthia Carroll, Marius Kloppers, Tom Albanese and Roger Agnelli.
Speaking to investors at an industry event in London this week, Guinea’s mining minister Mohamed Lamine Fofana said that the country was being realistic about the wider investment climate and that it would work in partnership with investors to make sure projects came into production.
While new systems are being put in place and macro-economic milestones – such as 2012’s completion of $2.1 billion in debt relief from the World Bank and the International Monetary Fund – are being reached, life for much of Guinea’s 10 million strong population remains a struggle.
Despite boasting some of the most fertile land in the region, Guinea lacks a large-scale agricultural sector and the infrastructure needed to support it, meaning that those living in cities face food shortages and high prices.
Electricity supplies are erratic and it is rare for a night to pass without Conakry being plunged into darkness as the grid cuts out until back-up generators hum into action.
A fair deal for all Change, Condé points out, takes time. The government is laying the foundations for an even partnership with Guinea’s investors, ensuring the country’s population gets a fair deal on its resource wealth for generations to come.
“The population of Guinea is aware of the potential of the country’s resources. They have very high expectations and are impatient to overcome the difficult living conditions they face,” Conde said.
“Thus, they have a short-term focus. We have to manage expectations and ensure the strategic growth of the country.”
The new 2011 mining code, which has been largely well received by miners since the government published amendments to it earlier this year, will promote fair deals that benefit the people of Guinea while keeping the country’s economy competitive, Condé said.
Reviewing mining contracts granted under the regimes of previous military rulers will put miners on a level playing field and root out long established patterns of corruption, according to the government.
“Since 2010, we have introduced unprecedented levels of transparency to our vast mining sector – all against claims from critics that such transparency would only drive away investment,” said Condé.
“The challenge we faced was our limited resources, we had to rely on NGOs for funding to get the process going, which took some time. This led some to question Guinea’s mining policy.
“Renegotiating the contracts has been a human resources challenge. The other side could afford the very best advisers so our focus became finding the right expertise.
“It was important for us to take the time to strike the right balance with the code to make sure the population benefits [while ensuring that] the mining companies are content,” he added.
While Condé’s transparency initiatives have been praised by many in the international community, the contract review process has seen mining investment in the country slow down as miners await the findings of the committee.
Anglo-Australian mining major RioTinto – Guinea’s single largest foreign investor – holds the rights to half of Simandou and is developing the project with joint venture partners Chalco and the International Finance Corporation (IFC).
Rio has been working on Simandou since 1997 and held the right to explore the whole project until 2008 when former dictator Lansana Conte stripped the miner of half the licence and handed it to BSG Resources (BSGR), the mining arm of Israeli diamond billionaire Beny Steinmetz’s group of companies.
BSGR went on to sell a 51% stake in its share of the project to Brazilian mining giant Vale in 2010 for $2.5 billion.
How BSGR came to acquire its licence to Simandou is currently being reviewed by the CTRTCM. If the miner is found to have acquired the licence by corrupt or illegal means, the government could strip BSGR of its mining rights.
A total of 18 contracts and licences are being reviewed, with the committee aiming to complete the process with all parties by the end of 2014.
Nava Touré, head of Guinea’s review committee, Comite Technique de Revue des Titres et Conventions Miniers (CTRTCM), last month appointed a panel of four global law firms to help speed up the review process.
All new mining contracts will be published on a government website, alongside existing conventions, in a move widely lauded across the international community for being a huge milestone for transparency in the sector.
“We want to follow the example of De Beers and Botswana and engage in negotiations to find the best way to benefit both parties and become global players,” said Condé.
“We are looking to do this with the key players in the iron ore and bauxite industry, such as Rio Tinto, Rusal and Vale.”
To make sure Guinea gets the maximum benefit from the mining sector, the country’s new mining code stipulates conditions regarding local development, community projects and enterprise.
Companies have to commit to employing Guineans at all levels of the business, and for Condé, the goal is simple.
“We want to make sure that these partnerships withstand cycles. We want companies that will be here for the long term – 40-50 years, not just four or five years, ensuring that mining companies find Guinea attractive and to create long-term partnerships – all in a fully transparent manner.”
Creating partnerships, not just with global multinationals but with companies and governments from across the African continent, will be the key to Guinea’s success, according to the president.
“African integration is [the] key and is essential for the sustainable development of the continent’s resources,” said Condé.
With infrastructure-sharing talks already under way with neighbours Liberia and Sierra Leone, cross-border mining co-operation could lead to development of downstream industries across the region and beyond.
“We will be able to develop steel industries across not just West Africa, but across the continent,” Condé added.