Guinea minister Fofana refutes Sunday Times’ claims about Palladino deal

Guinea’s mining minister Lamina Fofana has refuted press claims that a $25-million deal signed by members of the government could gift billions of dollars of mining assets to investment company Palladino Capital.

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Guinea’s mining minister Lamina Fofana has refuted press claims that a $25-million deal signed by members of the government could gift billions of dollars of mining assets to investment company Palladino Capital.

British Virgin Island-registered investment firm Palladino, which includes South African businessman Walter Hennig among its founders, signed a $25 million loan with members of the Guinean government in April 2011.

A story published by The Sunday Times on June 3 claimed that the terms of the loan included a default clause which would allow Palladino to convert the debt into a 30% stake in the operations of Guinea’s national mining company, Soguipami, threatening Guinean assets held by BHP Billiton, Vale and Rio Tinto.

“This is false,” Fofana told Metal Bulletin in an interview in London on Friday June 15.

“We are not children, we are not going to take a $25-million loan in exchange for a third of our mineral resources.”

Fofana noted that the loan was not taken out by the Republic of Guinea, but by Soguipami, a parastal entity that was set up in September 2011 to manage the government’s stakes in mining contracts. Nor is it collateralised by Soguipami itself, but by one of its subsidiaries.

Soguipami acts as national “holding company” for a number of commodity specific organisations, which manage the country’s stake in its iron ore, bauxite, alumina, diamond and gold resources respectively.

“Collateral is to be determined in the form of an appropriate share in a Soguipami subsidiary, at a value linked to the loan amount and accumulated interest,” he said.

The collateral for the debt is an “appropriate percentage” in a Soguipami affiliate, said Fofana, adding that it would be much less than 30 percent.

“There is no automatic convertibility to a 30 percent stake in Soguipami in case of default, and in any case the probability of Soguipami defaulting on this loan is minimal,” he said.

The $25-million loan Soguipami took out is set to be repaid over 15 years, as rate of two-month Libor, plus 3%, he noted.

“If we were corrupt we wouldn’t have built transparency into the new code,” said Fofana.

“We are putting in place a structure to publish all new contracts,” he added.

Palladino sent a statement to press on June 11, which also refuted the claims made by The Sunday Times.

The investment company said that it agreed to a long-term financing deal for Guinea National Mining Co, at the request of the West African country.

“The loan agreement…has no reference to any default provision which would or could result in appropriation by our company of 30% of private or national assets.

“Any allegation of such a default is completely incorrect,” Palladino Capital said.

Guinea announced plans to institute wide-sweeping reforms of its mining code in September 2011, following the election of president Alpha Conde as the West African nation’s first democratically elected head of state in December 2010.

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