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Iron Mountain: The New “Scramble For Africa”? (Part 1 of 2)

Image courtesy of Rio Tinto Simandou

One of the world’s largest untapped iron ore reserves, a mountain of iron, is at stake in a remote part of south-eastern Guinea. Late last year, Rio Tinto’s CEO, Sam Walsh, announced an imminent agreement with Guinea’s government to secure the southern part of the $20 billion Simandou Iron Ore Project by early 2014. Chinese giant Aluminum Corporation of China Limited (Chalco) had just submitted paperwork to sell their stake in the Simandou Project to their state-owned parent the Aluminum Corporation of China (Chinalco), thus facilitating additional investment to bring forward first iron ore exports. Open pit iron ore mining with massive excavators, crushers, trucks and conveyors must not be taken lightly in a biodiversity hotspot with Endangered West African chimpanzees, Endangered monkeys and thousands of documented plant and animal species. This mining development along the Simandou Mountains has the world’s attention.

Timneh grey parrots. (Steve Boyes)

Chinalco is the largest shareholder in Rio Tinto plc after spending $14 billion in just five hours for a 9% shareholding. This was the biggest ever such “raid” on the London Stock Exchange and by far the largest offshore investment by a Chinese company. Brazil’s Vale, the world’s largest iron ore producer, is committed to securing the northern section of the Simandou iron ore deposit this year, proposing the use a new port in Liberia. A move that has delayed government negotiations. President Alpha Condé’s government, mentored by Tony Blair and George Soros, represents Rio Tinto, Vale and Chinalco’s best chance at bringing Simandou iron ore to port by 2018. The rush to mine the Simandou Mountains is on. The new “Scramble for Africa” has begun.

International media is abuzz with stories about new momentum in the Simandou Iron Ore Project (e.g. 1,2,3,4 and 5) – one of the world’s largest privately-funded mining developments. All reports are very upbeat and supportive of a reformed, developing Guinea with a democratically-elected government that supports growth in the mining sector.

There is, however, no mention in the media of the potential threat posed to endangered species like West African chimpanzees, Timneh grey parrots, and colobus monkeys. Little mention of the potential displacement of thousands of people to accommodate the railway link taking iron ore to port.  Little mention of the Guinean government’s concerns around the transfer of mining rights along the Simandou Mountains. Little mention of reports of discontent in nearby villages. Little mention of the projected influx of 110,000 people into this remote, ecologically-sensitive part of Guinea. Little mention of frustrations within Guinea’s own government fuelled by allegations of rigged elections and financial mismanagement. Little mention of two failed assassination attempts on President Condé. How can social and environmental impacts, as well as biodiversity conservation, possibly get adequate consideration in amongst all of this?

Image courtesy of Rio Tinto Simandou

 

The new “Scramble for Africa’s resources” has begun

BHP Billiton have just sold their stake in the massive Nimba Iron Ore Project in the same region, pulling out of Guinea altogether to focus elsewhere in West Africa. Abu Dhabi state-owned investment fund Mubadala MUDEV.UL has signed a $5 billion agreement with Guinea to develop a new bauxite mine and aluminium refinery.

Burkina Faso has 17 mining and resource companies discovering apparently endless new gold reserves that could eventually challenge South Africa’s supremacy in gold exports. Niger has been the world’s fourth largest uranium producer for many years and recent mining exploration has discovered new gold and coal reserves. Sierra Leone has an over-abundance of illegal gold mines and Chinese investment has funded exploration for diamonds, quartz and uranium.

Nigeria has abundant oil reserves that have been managed by corrupt officials and resulted in the ecological and socio-economic disaster that is the Niger Delta region. Nigerian coal reserves could quadruple West Africa’s coal production opening opportunities for power generation and the production of West African steel. This should be the dream. New oil fields have been found in Ghana, Liberia, Cote d’Ivoire, Guinea, Mali, Liberia and Sierra Leone. To date over 1,500 oil wells have been drilled in West Africa. These countries are going to need the Simandou iron to build new cities with oil revenue.

Image courtesy of Rio Tinto Simandou (Photographer: Piotr Naskrecki)

This level of exploration and development is happening across the continent. Africa is rising. At what cost and benefit? Billions of dollars are changing hands as governments and mining investment companies focus on some of the world’s largest “greenfield” mining prospects. In this example, an estimated 2.25 billion tonnes of high-grade iron ore from the Simandou Mountains will make Rio Tinto the world’s largest iron ore producer. An iron mountain is at stake in south-eastern Guinea, as every other corner of West Africa is explored for exploitable mineral reserves. It is almost as if we are auditing the value of Africa’s natural resources. African leaders needs a unified policy for greenfield mining developments, outlining ownership, rights, tenure, environmental and social standards, as well as direct support for local manufacturing and processing industries in source countries. These norms and standards do not exist and need to be supported by International Union for Conservation of Nature (IUCN) and United Nations Environmental Program (UNEP).

Fetish market in Benin. (Steve Boyes)
(Steve Boyes)

New government, new opportunities?

In 2008, then-President Lansana Conté revoked half of Rio Tinto’s mining licences due to the apparent non-delivery of development milestones. Since then the media has been reporting unconfirmed and comprehensively disputed accusations of misconduct linked to the acquisition of mining rights for part of one of the world’s largest untapped iron ore reserve. The late General Conté had come to power after leading a military coup that toppled Prime Minister Louis Lansana Beavogui’s government in 1984, and had initiated civilian rule in a new multi-party state. The republic never prospered and democracy never really happened in his 24-year rule. Conté did, however, attract significant foreign investment through effective realignment with developed countries, well-timed currency devaluation, and drastic reductions in government spending.

His life’s work and death paved the way for his longtime rival, Alpha Condé, to be declared Guinea’s first democratically-elected president in 2010. President Condé took over power from a military junta that had ruled since Conté’s death. He has faced his fair share of obstacles since coming to office and, on 20th July 2011, had to publicly reassure international investors that the threat to the Republic of Guinea posed by two failed assassination attempts was under control. In October 2013, the main opposition party, the Union of Guinean Democratic Forces, and others disputed the 2013 election results after allegations of vote rigging, pre-election violence, and the use of security forces to disperse opposition protesters. Investors interested in Guinea must have a very long-term view and be focussed on curating political and economic stability. Many still contest the election results and fear The Republic of Guinea has not yet emerged from decades of corruption.

Guinea is located in the poorest, least-developed region in the world and shares its borders with the bottom three ranked countries. The new republic is stabilising and urgently needs financing for infrastructural development and job creation. All policies need to support sustainable development through better education and healthcare, industrial development, best practices in environmental management, and biodiversity conservation. There is a lot at stake and no room for error in this emerging part of Africa. Guinea and Simandou’s vast iron ore deposits became an important topic of discussion in Davos last month. There are treasures in West Africa that we have not yet been discovered and relative stability is bringing significant investment. This part of Africa needs decades of steady, sustainable development and shared prosperity to emerge from hundreds of years of exploitation, violence and mismanagement.

West African leopard skin in a market in Ghana. (Steve Boyes)
(Steve Boyes)

The burden of bribery and corruption

The historical and socio-political landscape in Guinea has been turned upside down repeatedly of the last few hundred years. First the slave trade and then nearby conflict and the influx of thousands of refugees. The wide gap between rich and poor has further hindered sustainable development and continues to undermine political stability. This volatile environment is not ideal for billion dollar investments in high stakes “greenfield” mining developments like the Simandou Mountains.

President Condé’s government has pushed the development of the mining sector since coming to office, insisting, for example, that Rio Tinto commence iron ore production by 2015 or face more fines. Guinean politicians and policymakers are meeting with governments and private investors from United Arab Emerites, Brazil, United States, Australia, South Africa and elsewhere. Young democracies in Africa are more often then not unstable and are often overshadowed by a recent history punctuated by coup d’état, military juntas, genocide, war atrocities, and civil unrest. Government officials often cannot guarantee that they will have their jobs in six months time or even a month from when you speak to them. Sadly, yet understandably, their attitude is to get as much cash, rights and properties, commensurate with your position, out to offshore tax havens as quickly as possible.

Bribery at all levels has unfortunately been the traditional way of conducting business and running industrial or mining developments in West Africa. Specialist contractors and local “fixers” all used to complain about having to “bribe” truck drivers to drive, casual labourers to work, police to let you move along without delay, local communities to keep roads open, and local “governors” to simply be there. West Africa is rising and this halting “pay-as-you-go” system is all but gone, paving the way for sustainable development and a new future. We do, however, still have a some way to go. The Guinean government recognises that they are unable to effectively police corruption and lack the capacity to monitor offshore entities, funds and accounts linked to bribery and corruption scandals.

President Alpha Condé explains:

“We are trying to address a problem (corruption) that has its source in Western countries. We need to deal with places where the problem arises. Most of the countries involved in corruption in Guinea and more widely in Africa are of Western origin so the West has to be part of the solution. It is not that we are relying on Western countries to solve our problem, it is that we want Western countries to be part of the solution.”

West Africa children
(Steve Boyes)

Slowdown and re-evaluate

The scramble to mine the iron mountains is on… Vale are committing themselves. Rio Tinto continue investing more. Chinalco want to bring forward iron ore exports. Guinea’s government want something to happen soon. These are high risk, high return investments that can attract profiteers keen to make big money. Rio Tinto is probably Guinea’s best chance at developing Simandou sustainably right now, but a better opportunity will probably appear in the coming decades as the country stabilises.

The Guinean government should maybe listen to an old African saying: “There is no rush in Africa…”. This is usually used in reference to rush hour traffic in our big cities, but can be used for all aspects of life on the continent. Slow and steady is what we are. There is no room for wasted food, water or energy on this hot, dry continent with a centre of dense, green forest. Our knee-jerk reaction has always been to wait until conditions are optimal before acting. Fast-moving, big money investors, booming demand in emergent markets, and the global mining media have created unnecessary urgency around the Simandou Project. Good advice to President Condé right now would be to take a step back and re-assess the situation.

Simandou community (Tim Geysbeek)
(Tim Geysbeek)

Debt relief with no strings attached

The International Monetary Fund (IMF) and World Bank provided $2.1 billion in debt relief for Guinea last year. The West African nation will still, however, have external debt for the next 50 years. Africa is drowning in debt. The Grand Inga dams in the Democratic Republic of Congo, for example, have left this unstable central African country in debt. Most of the hydro-electric power is currently going to nearby developments and most of the local communities that were displaced to accommodate these dams are still sitting in the dark with no power or livelihoods. The devastated and terminally-polluted Niger Delta has been destroyed economically, socially and ecologically by oil extraction and exploitation for over a century. Africa has been plagued by big ideas and big investment followed by exploitation, broken promises, debt, and failure. African countries need to structure development deals that result in local ownership and no debt. The option value of Africa’s natural resource and rich biodiversity far exceed any present-day investment, taxes, levies and offsets.

Africa should hold onto our “iron mountains” until the day we are ready to build our own great cities with skyscrapers and wonders of art and engineering.

“Silent incubator” African paradise flycatchers are common resident breeder in open forests and savannah habitats across sub-Saharan Africa. (Chris Krog)

Debt relief for rights to mineral and natural resources, where and if it exists, is the highest form of international bribery. African countries have in the past been forced to take on massive international debt to be part of their own mining and industrial developments, delaying shared benefit for decades and undermining long-term sustainability. Add to the debt burden, the tens of billions of dollars in national assets and profits from state-owned enterprises that are stolen by corrupt officials and their international partners each year, and you can see why desperate African governments “sell” mountains, fisheries and forests to foreign powers. See this Al Jazeera insert called “How to rob Africa” to get an idea of the scope of this problem. We need a new model that relies less on debt and control, and focusses more on sustainable development, the protection of natural and cultural heritage, long-term local job creation, and shared insitu benefit.

“Net Positive Impact” only solution

Simandou community (Tim Geysbeek)
(Tim Geysbeek)

Guinea needs development partners that have a long-term view towards sustainable development through better education, zero-tolerance for corruption, advances in healthcare, and small enterprise development. Rio Tinto are most likely Guinea’s best opportunity this decade to develop an iron ore mine in the Simandou Mountains that delivers “Net Positive Impact” on biodiversity and local communities after mine closure. This will require a record-breaking upfront investment in social, environmental and biodiversity offsets and will set Rio Tinto apart from all other mining and resource companies. They have the SEIA reports. They have the experts and capacity. All they need now is suitable social, environmental and biodiversity offsets, as well as corporate approval from head office. We have to live in the hope that this is possible…

If the global mining industry does not invest heavily in advanced, new technologies that minimise mining impacts at all stages of development, then the world is going to run out of suitable places to mine very soon and start tearing apart what remains of our own or someone else’s natural heritage. If debt-burdened African countries are not careful, the new “Scramble for Africa” will destroy this continent and, along with it, the one thing that makes us special – our grand wilderness areas that remain, our “Great Work” – the Serengeti, Okavango, Congo, Selous, Kruger, Lower Zambezi, Luangwa, Sudd, Bangwuelu, Ruaha, Selous, Gorongosa, Kafue and many others.. Millions of tourists come to Africa every year to experience this wild, primordial continent before it is tamed forever…

Previous blogs in series:

Rio Tinto Simandou: Exporting iron mountains (Part 1 of 2)

> Rio Tinto Simandou: World’s Richest Poor Country!? (Part 2 of 2)