In an exclusive Critical Resource Q&A, Guinea’s Minister of Mines Abdoulaye Magassouba criticises reporting of the recent Simandou scandal, downplays claims of outsized Chinese influence and calls on industry to recognise the major strides the country has made as a destination for mining investment.
The Simandou headlines don’t reflect Guinea’s new reality
“Headlines about alleged corruption involving Rio Tinto at the Simandou project create a buzz for readers, but they miss the real story*. All we are talking about so far in relation to the Simandou affair is allegations and investigations. At the time of the alleged payment being made in 2011, the government was unaware of what was going on. Given that Rio Tinto paid the government $700m to keep the blocks, we can safely assume that the affair did not benefit the company in the final deal – it was the biggest single payment ever made by an investor to the government of Guinea.
Though the headlines might suggest otherwise, the fact is that Guinea in 2017 is not the country that it once was. Some continue to view us through the lens of the 1990s, but it is time they bought a new pair of glasses. I am not saying the mining sector is now perfect, but the dynamics are very positive. Today we have a far more transparent system than previously. We publish all mining contracts. When we conduct negotiations with investors, we use international law firms to plug any of our own capacity gaps. And when mining conventions are signed, they go before the national parliament for approval. To give you a sense of how far we have come, not a single vote was cast against any of the last three conventions sent to parliament.
Furthermore, the recent Simandou affair is itself partly a consequence of this new culture of transparency, because it was the government’s mining contract review process which revealed that some concessions had been granted on the basis of corruption. It is not as if the affair came out of nowhere; it was actually revealed during a process initiated by the government itself.”
The real story is billions of dollars of new investment
“Guinea is, if anything, a victim of the Simandou headlines which do not reflect the reality of the country’s mining sector today. The real Guinea-related story that investors should focus on is that the country has come through the worst of the commodity downturn in remarkably good shape. In 2016 alone, $2.5bn was committed for investment in Guinea’s mining sector, mainly in bauxite and gold. Leaving aside the Simandou project, this figure is unprecedented in our country’s history.
Two factors explain our recent success. First, we are blessed with a tremendous diversity of mineral resources – including iron ore, bauxite, gold and diamonds – which makes us resilient against downturns that hit some commodities harder than others. An important job for the government now is to diversify our commodity production further to strengthen ourselves against price fluctuations and external shocks. As it stands, bauxite and gold disproportionately dominate our commodity production.
Second, the government has undertaken deep reforms in recent years to make Guinea a more attractive destination for mining investment. In 2013, we adopted investor-friendly amendments to the 2011 mining code. We also established a one-stop shop for investors in mid-2016, and a new state-of-the-art mining cadastre system is due to come online very shortly. Nonetheless, it is clear that we, the government, could do a better job of communicating these achievements and dispelling common misperceptions about Guinea’s mining sector. Otherwise people of good faith will continue to labour under the impression that Guinea today is no different to how it was 10, 20 or 30 years ago.”
Don’t overestimate Chinese influence
“The idea that China now dominates Guinea is another example where reality does not match perception and where the government could do a better job of communicating the facts. The numbers speak for themselves – 80-90% of total mining investment in Guinea last year came from non-Chinese sources.
Of the approximately $2.5bn committed, $643m was made by CBG, a joint venture of Western companies. Over $1bn was committed by Emirates Global Aluminium, owned by Abu Dhabi’s Mubadala. Alufer, another significant investor, has US, UK and African investors on board, including the Africa Finance Corporation. Then there is also Russian investment. The list goes on. It shouldn’t be forgotten that it was Rio Tinto that brought Chinalco into Simandou, not the government of Guinea.
That said, we, the government of Guinea, are pro-investment. We welcome Chinese investment, just as we welcome investment from the US, Europe and elsewhere. What matters from our perspective is not where the investment comes from, but whether it comes from credible sources looking at viable projects that will bring win-win partnerships for both the country and the investor.”
Attracting investment is just the first step – next we need to deliver development gains
“Attracting international investment is just the first stage of ensuring that the mining sector has a positive development impact on the country. What matters next is ensuring good revenue management. The government is focused on improvements in this area. Last year, for the first time in its history, Guinea completed an Extended Credit Facility programme with the IMF. This is an important sign of the significant progress we have made in strengthening our management of public finances and mining revenues.
Looking ahead, we are working closely with mining companies and international donors to come up with innovative and mutually beneficial ways of giving local people a greater role in the development of mining projects. We want these programmes to be ambitious but at the same time realistic, accounting for the commercial constraints of mining projects. At the end of the day, if projects do not get developed, Guinea gets none of the potential benefits. However, with the right ideas, we can create genuinely win-win solutions for investors and local stakeholders. Local communities will enjoy benefits from inclusion in projects; and so too will mining investors, whose projects become more viable once they have local support.”
*In November 2016, Rio Tinto dismissed two of its top executives after internal company emails revealed a $10.5m payment made in 2011 to a consultant – a university friend of Guinea’s President Alpha Condé – who was hired to help secure the company’s rights to blocks 3 and 4 of the Simandou iron ore project. Law enforcement authorities in the US, UK and Australia are reportedly considering the case. All parties strongly deny any wrongdoing. Rio Tinto retained blocks 3 and 4 after reaching a $700m settlement with Condé’s government. Last year, the company sold its stake in Simandou to Chinese mining company Chinalco.