As Alufer is granted Guinea’s latest Mining Convention, Critical Resource analyses prospects for foreign investment in the country’s resource sector, using our LicenseSecure™ methodology.
- In early February, Alufer signed a Mining Convention with the Guinean government for its Bel Air bauxite project. This is one of the first Conventions to be signed since the mining code was amended in 2013.
- The project is located in the Boffa region, around 15km from the coast. Alufer expects construction to start in Q2 2016, with production likely to commence in late 2017.
- The signing of Alufer’s Mining Convention is one of a number of causes for optimism around Guinea’s mining sector. Alufer joins a handful of companies which have been granted Conventions since the country transitioned to democracy in 2010, and is amongst the first under the amended mining code. In addition, President Alpha Conde has appointed a young and business-friendly new cabinet, and Guinea has finally been declared free of the Ebola epidemic which so badly affected the country in 2014-15. With Rio Tinto’s vast Simandou iron ore project facing an uncertain future, the recently-granted Conventions could indicate an increased government focus on progressing smaller-scale projects such as Bel Air.
- In 2015, President Conde was re-elected for a second five-year term after having won the country’s first free democratic elections in 2010. His recent win has galvanised support for his government and has allowed him to eschew party-political cabinet appointments, instead pushing through a relatively progressive and technocratic new cabinet which is encouraging to foreign investors. New appointees include the veteran former managing director of Guinea Alumina Corporation Mamady Youla as Prime Minister, and western-educated former businessman Abdoulaye Magassouba as Minister of Mines and Geology. Despite these positive signs, optimism should remain tempered by past legacies of state inefficiency, corruption and authoritarianism, as well as the country’s relatively short democratic experience.
- The amended mining code under which Alufer’s Convention sits has gone some way to addressing investor concerns and signals state efforts to attract investment in the sector, although there remains a degree of ambiguity around the legislation (for example concerning the conditions under which the state can claim up to a 35% equity stake in mining projects). Guinea’s admission to the Extractive Industries Transparency Initiative in 2014 similarly reflects the country’s apparent commitment to better governance and an improved business climate.
- Investor confidence has also been boosted by the World Health Organisation’s announcement in December 2015 that Guinea is now officially Ebola-free. The two-year epidemic killed over 2,500 Guineans and crippled the country’s economy. GDP growth shrank from 2.3% in 2013 to just 0.6% in 2014, and mining projects such as Simandou were put on hold as foreign companies withdrew staff from the country. Since the announcement in December, economic forecasts have improved dramatically: the African Economic Outlook predicts growth of 4.3% if the virus does not re-emerge, citing new mining projects as a key stimulus. However, a renewed outbreak remains a possibility and the government must be well-prepared for such an event. Companies operating in the country will need to ensure that they have in place ongoing country monitoring and strong internal policies on health and safety.
This article uses Critical Resource’s LicenseSecure™ model to assess the likely level of political and stakeholder risk. Our updates provide a rapid overview of new or updated ratings in our database, with a focus on projects in the news. Please note that these ratings updates are provisional, based in part on open source analysis and are not from client projects. Full LicenseSecure analyses are in-depth, involve extensive intelligence gathering and are confidential.
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