By John Helmer in Moscow
Mahmoud Thiam, the US-trained banker turned resource policymaker for the Guinean government (pictured right), says that the nine-month review he has initiated of the country’s major mineral and mining concessions is not intended to reopen or renege on every deal done with foreign miners during the 25-year rule of Lansana Conte, Guinea’s president until last year. When Conte died suddenly in December, he was replaced by the Guinean Army, led by Captain Moussa Dadis Camara. Thiam, who was educated in France and the US, and worked at Merrill Lynch and UBS, was appointed Minister of Mining, Energy, and Hydraulics last January.
“We view concessions as legally binding,” Thiam told Minesite.com, and “we intend to respect them.” Distinguishing his approach from mine licence and privatization investigations under way elsewhere in Africa, Thiam said: “we have tried to avoid a blanket questioning , which can be time-consuming and expensive. Freezing everything and putting everything in question is not the right approach. We didn’t come to renege.”
The first priority of the new government policy, Thiam emphasized, is “to move from a plethora of exploration permits into mine operations as soon as possible.” To that end, concession agreements that fix investment or production timetables and targets are being reviewed to determine whether the concession holders are meeting their obligations. If they are not, Thiam says negotiations are called for.
Several government bodies are now at work probing the use-or-lose provisions of Guinea’s mining concessions, as well as clauses which “are clearly inequitable or not even legal, under Guinean law.” An audit committee has been created in the presidential office to supervise the process. The Mining Ministry is in charge of analyzing the performance of mining companies in line with their formal undertakings, while two ministries, including the state auditor, are checking financial filings, tax and customs declarations to ensure that the revenue entitlement of the Guinean treasury has been met.
According to Thiam, the Russian bauxite miner and alumina refiner, United Company Rusal, was not singled out. “Compagnie des Bauxites de Guinee (CBG) is the largest bauxite exporter — Alcoa and Rio Tinto are partners with the government. Compagnie des Bauxites de Kindia (CBK) is the Rusal outfit. We saw some issues [with CBK], and argued with Rusal. But we decided they were minor and open to differing interpretation. We did not want to appear as targetting Rusal, so we put them aside.” CBG, 51% owned by the foreign miners, 49% by the Guinean state, produced a record 13.8 million tonnes of bauxite in 2008. Rusal’s CBK produced 3.2 million tonnes in the same period.
The government’s problem with Rusal, Thiam told Minesite.com, has been triggered by the refusal of Oleg Deripaska, chief executive of Rusal in Moscow, to negotiate over problems found by government investigators with the Friguia alumina refinery concession agreement, executed in 2006. “There have been clear and flagrant violations with Friguia,” Thiam said. He added that the gap in valuation between what Rusal paid for its takeover of Friguia and what the asset was worth on an equitable basis was “staggering, and very difficult to justify. We have not seen any compensatory measure from Rusal.” According to Thiam, the negotiations for the Friguia agreement were conducted at the time by aides in the presidential palace, “who had no right to negotiate. Our internal procedures were violated; local law was violated.”
This past June, Prime Minister Kabiné Komara wrote a letter to Deripaska, inviting him to Conakry for negotiations over the results of the Friguia review. Deripaska replied to the Guinean letter, saying he was too busy, and suggested the Guinean officials come to Moscow. The terms of the reply were interpreted as insulting, and a refusal to negotiate. Guinean court action then followed in July.
What happened next, Thiam told Minesite.com, is unclear to the Guinean officials themselves. Thiam confirmed that Deripaska flew into the country unannounced, and requested a late-night meeting with Camara at the presidential palace. This apparently happened on August 6. Camara was told that if he relented on the court proceeding against Rusal for the Friguia violations, Deripaska would agree to the negotiations that had been previously proposed. Camara agreed, and ordered the presidential audit committee to delay the Friguia court process. However, Komara and Thiam, who had not been informed of the Deripaska visit, discussed what had happened with Camara. Thiam says the three now believe they may have been misled. Camara rescinded the slow-down request, and the government moved for the court ruling. This was issued on September 10, becoming international news because of the importance of Guinean raw materials for Rusal’s aluminium smelters, and Deripaska’s importance as Russia’s largest debtor.
Rusal has since issued statements claiming it had “purchased Friguia in full compliance with Guinean legislation and we consider the plant to be our legitimate property.” In Moscow, Rusal has claimed it will apply for an international arbitration tribunal in Paris to overturn the Guinean court. Rusal acquired the Friguia refinery for a privatization transfer price of less than $20 million. The refinery’s capacity is 640,000 tonnes of alumina per annum. Rusal claims it has invested $400 million in its mining and refining operations in Guinea.
Rusal acknowledges in a website announcement that Deripaska visited Guinea in early August. Vera Kurochkina, the Rusal spokesman, declines to say whether Deripaska or his representatives had been in contact with Camara, or had met him on August 6.
According to Thiam, forensic analysis of the Rusal-CBK production, accounting, and export declarations reveals over-charging of costs, so as to reduce Friguia’s profit line, and cut taxes. Government estimates have already identified tax and other revenues claimed by the government from Rusal to be between $600 million and $700 million.