COMMENT: Is time running out for BSGR in Guinea?

Steel First revealed this week that BSG Resources was suing UK peer and former UN deputy secretary general Lord Mark Malloch Brown and global business adviser FTI Consulting on claims including defamation and breach of contract.

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FTI Consulting took on BSGR as a client in 2009 to advise the miner in its dispute with Rio Tinto.

At the time, Rio Tinto held the concession to the whole of the multi-billion-tonnes Simandou iron ore project in Guinea. But the country’s former dictator, Lansana Conte, stripped it of half the concession and handed it to BSGR just days before his death in 2008.

BSGR claims that Lord Malloch Brown’s close relationship with financier and philanthropist George Soros prompted him to pressurise FTI – in his capacity as Europe, Middle East and Africa chairman at the firm – into dropping the miner as a client in November 2012.

Soros is an adviser to current Guinean president Alpha Condé and funds a number of non-governmental organisations including Global Witness, which BSGR has accused of running smear campaigns against it.

Convoluted history
The claim against FTI and Lord Malloch Brown is the latest episode in the increasingly convoluted history of Guinea’s mining sector.

Vowing to stamp out corruption, Condé, Guinea’s first democratically elected president, instituted sweeping reforms including a review of all mining contracts agreed under previous regimes.

The legitimacy of BSGR’s presence in Guinea has been questioned by the review committee, which has alleged that the group used illegal means to acquire the concession to mine blocks 1 and 2 of the high-grade Simandou deposit, in the rainforest-covered south-east of the country.

BSGR has vehemently denied the claims, saying that the Guinean government is trying to expropriate its concession and that it is ready to go to court to defend its interests in the country.

BSGR’s increasingly heightened rhetoric of claims and counter-claims comes at a time of growing political pressure for the government.

Condé’s government needs projects to come into production to show Guinea’s largely impoverished populace that progress is being made in terms of realising the country’s material wealth. Long-delayed parliamentary elections are scheduled for the coming months and there will be a general election in 2015.

Ratification of new code
Guinea’s national transitional council (CNT) ratified a revamped version of the country’s 2011 mining code this week, making tax and royalty concessions to miners after more than a year of intense consultation with miners and development partners.

While the majority of the miners involved in the country have been positive about the amended code, BSGR argued that the new code is not legal because it has not been ratified by a democratically elected parliament.

“Since we don’t have an elected parliament, the CNT replaces the national assembly. Since 2009, every single law in Guinea has been passed by the CNT,” mining minister Mohamed Lamine Fofana told Steel First.

“While an elected national assembly could in theory demand to review the mining code again, on the basis that the ratification of the code by the unelected CNT was unconstitutional, this is unlikely,” Tom Wilson, an analyst at Africa Practice, told Steel First.

“Whatever the concerns over the CNT’s capacity and independence, it has performed the role for which it was created. The code will be treated as legitimate and the review process will proceed on the back of it,” Wilson added.

Investment deterrent
With mineral development in neighbouring Sierra Leone and Liberia gathering pace, as major mining projects by ArcelorMittal, African Minerals and London Mining ramp up production, further regulatory delays to projects in Guinea will be embarrassing for the government and could deter investors from committing to the country.

Whatever the outcome of BSGR’s licence review and its case against Lord Malloch Brown and FTI, the country’s government needs to remain focused on delivering the right framework for its other mining partners, and ensuring that the Guinean people start to feel tangible benefits from the country’s vast mineral wealth in the very near future.