Guinea mining firms face year of uncertainty
By Daniel Magnowski
Tuesday, December 30, 2008
DAKAR, Dec 29 (Reuters) - Mining firms doing business in
Guinea face uncertainty after the West African country's
newly installed military leadership vowed to revise contracts.
Companies such as Rio Tinto, Alcoa and Rusal have spent
billions in the country, which is the world's biggest bauxite
exporter, a gold producer, and has the potential to be a
major source of iron ore.
Junta leader Capt. Moussa Dadis Camara singled out the
state's contracts with mining companies in his first public
indications of economic policy on Saturday, saying defective
deals would be revised, a line that was later toned
down.
"It is a question of opening negotiations to set the basis of
a collaboration that is advantageous for all parties," Nouhou
Thiam, spokesman for the National Council for Democracy
and Development (CNDD), said on Sunday. The CNDD
has not named any companies or mining concessions that
might be a risk, not has it said what might constitute a defective
contract.
Camara's CNDD took power after the death of long-serving
President Lansana Conte last week, and although there appears
little internal opposition to the coup, it makes for
anxious times for companies spending money in Guinea.
"There is going to be operational uncertainty," said Rolake
Akinola, senior analyst, West Africa at consultancy Control
Risks. "Relationships and dynamics are highly fluid. There
will be a lot of uncertainty and lack of clarity in the short to
medium term."
A key policy question is whether the Conte administration's
practice of using foreign resources firms as cash machines
will be reversed, analysts said.
This enriched powerful individuals, but left Guinea's public
finances in tatters, a situation which led to local people
attacking mining firms in frequent protests about lack of
electricity and water.
Camara has said fighting corruption will be a priority of his
government.
"It remains to be seen whether the Camara regime will seek
to redress the historical imbalance in the country's finances
by setting up a credible ... contract review process as has
recently largely happened in the Democratic Republic of
Congo or seek merely to extort monies from the country's
foreign operators," said Sebastian Spio-Garbrah, Middle
East and Africa analyst at Eurasia Group.
If the new administration does not stick to its anti-graft
word, foreign investors could find the faces changing, but
the policy remaining the same.
"It is possible that new commercial interests in the mining
sector will emerge in the new administration," Control
Risks' Akinola said.
Lack of clarity is not a new phenomenon in the former
French colony, and mining firms there are accustomed to
dealing with shifting political and economic allegiances.
In August, Guinea said it wanted to cancel Rio's licence to
the $6 billion Simandou iron ore project, then in September
the company said the two sides had agreed to "move forward".
This month, Rio said it was postponing development of the
project as a result of the global economic downturn.
Then a company belonging to an Israeli diamond trader
said it had obtained the rights to the northern part of Simandou,
which Rio contests.
Rio said it has not yet been contacted by the CNDD, and
wants to know where it stands on Simandou.
"We want to fix up a meeting with the new government as
soon as possible to discuss the situation," Rio spokesman
Nick Cobban said.
Africa's top gold miner AngloGold Ashanti, whose Siguiri
mine in Guinea produced 5 percent of the firm's gold last
year, said it was also waiting to hear from Camara.
"We would be very happy to discuss operations with the
new government, with the proviso that the existing interests
and rights of both parties are respected," spokeswoman
Joanna Jones said.
One firm has received word from the new leadership.
Toronto- and Oslo-listed Crew Gold said the military told it
on Sunday to stop mining at its Lefa operations, then later
the same day to restart work on Monday, instructions with
which it complied.
"We will continue to operate under the laws of the country
and to support our people and the Convention de Base
which we and the government have operated under for the
past 15 years," Crew said in a statement.
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