Extractive Inustries - Potential Oportunities

Penelope Chester writing for the UN Dispatch got this right...



Extracting Benefits From The Natural Resource Industry
UN Dispatch
Penelope Chester - May 24, 2010 - 9:25 am


Development


Mining giants haven't failed to take note of opportunities in West Africa. The Financial Times reports that six major mining groups are planning on spending billions of dollars in Liberia, Guinea and Sierra Leone in a bid to profit from the region's rich resources, particularly iron ore.

In Guinea, for example, Vale - a Brazilian company, the world's largest iron ore mining firm - bought a $2.5-billion majority stake in BSG Resources (Guinea). In addition to the cash value of the deal for the Guinean government, Vale's indispensable infrastructure investments to move minerals from mine to port will also be significant. Plans include the renovation of 410 miles of railway between the two countries, and the construction of a $1-billion port in Didia, a town in southeastern Liberia. Infrastructure investments will total between $5 billion to $8 billion by 2020.

The recent deal by Vale underscores the West African region's increasing appeal for mining companies, who - for better or worse - are well-equipped to work in politically and economically unstable countries. Recent trends in corporate social responsibility are slowly paving the way toward greater transparency and social accountability. This includes the creation of international regulations and standards for the natural resource industry, like the Extractive Industry Transparency Initiative, or theGlobal Reporting Initiative. For publicly-traded mining companies, whose shareholders are becoming increasingly more aware of the human and environmental costs, a real shift is beginning to occur in tems of how a company works with the communities in which they operate.

The natural resource industry can be as much of a bane as it is a boon in developing countries, and there is plenty of evidence showing just how corrupting of a force the industry can be in places with poor governance. That said, mining can also bring about significant economic gains – if the revenues generated are reinvested properly. Furthermore, mining companies often come into remote areas and communities where they generate employment and demand for services. Companies who are leading in social responsibility take it one step further, and partner with governments and development organizations to ensure that sustainable investments are made in infrastructure, health and educational facilities, helping to support local businesses.

In Tanzania, for example, Canadian gold mining giant Barrick is partnering with USAID and EngenderHealth, an international reproductive health organization, to fund and implement the Lake Zone Initiative, aiming to combat HIV/AIDS, malaria and tuberculosis and improve the availability and quality of health services for underserved populations in the Lake Zone region (home to nine million residents in Tanzania).
The key to having these new investments in West Africa truly benefit the local population is to ensure that the investments correspond to local development priorities. New infrastructure such as railways and ports should benefit the people of Liberia and Guinea as much as it facilitates a company's operations. Vale, for example, intends to reconstruct a railway line for passenger use in Guinea. If a company plans to spend significan amounts of money on infrastructure or health care (building hospitals, for example), they should be doing so in coordination and partnership with local authorities.

Countries like Liberia and Guinea can catalyze potential development opportunities by creating a regulatory environment that attracts foreign mining companies. They can also help secure positive outcomes for their populations. Liberia, for example, has launched the Liberian EITI, an initiative meant to ensure proper and transparent management of forestry revenues.

At a time when foreign aid and development assistance budgets are under tremendous pressure, there is a real opportunity for governments and local populations to leverage the additional revenues and ancillary investments that come from natural resource companies operating in their countries.

Image: Derelict iron mine facility in Bong County, Liberia (Penelope Chester)

UN Dispatch

link: http://www.undispatch.com/node/9906

ALERT - Possible Oil Exploration of Liberia's Mangroves

In the news:

Simba Energy Raises Additional Funds As Investors Warm To Its Liberian Exploration Project
Minesite
May 19, 2010

These may be uncertain times but it seems there is still a market appetite for wildcatting in new energy frontiers. Canada’s Simba Energy, which is hoping to find black gold in the untested mangrove swamps of Liberia in West Africa, recently announced a near doubling of a non-brokered private placement launched in April.

Originally the company, which is listed in Toronto and Frankfurt, planned to raise C$1 million through a private placement of up to 14,285,715 units - comprising one common share and one transferable share purchase warrant to buy another common share within two years at a price of C$0.15 per share - priced at C$0.07 per unit. Now the company has increased the private placement to 28 million units to raise C$1.96 million, with the proceeds used to fund general working capital. This...

© 2009 Minesite

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Liberia, Not so fast!

Mangroves are the wetland communities found in the intertidal zone of estuaries.
It is important that we look after these areas and protect them. Not only because they are vital to the continued health of many of our fish stocks but also because we have a moral and social responsibility to look after our environment and to leave it in a healthy condition for future generations.

Oil activity in mangroves causes a series of environmental impacts:

interruption of fresh water flow to the trees;
alteration in the flow of sea water both toward and within the forests, altering the drainage patterns and causing changes in vegetation and soils and a general instability in the area;
deforestation, caused by construction of infrastructure such as: drilling platforms, camps, wells, access roads, heliports, refineries, pipelines etc;
well drilling completely destroys the surrounding area, and alters the natural hydrology of the mangrove;
changes in the soils can provoke alterations in the pH of the soil and water, leading to a chronic deterioration in the quality of the mangroves;
discharging of solid wastes can destroy the mangrove forest by asphyxiation of the pneumatophors or by the formation of a barrier to the ebb and flow of water;
dumping of liquid wastes (formation water) produces negative impacts on the animal life of the mangrove.

The recovery of the mangroves after such impacts can take 10 to 20 years, even if no new spills occur.


Damage the Mangroves and say goodby to recreational and commercial fisheries.

Damage the Mangroves and say goodby to feeding and breeding areas for many species of fish and crustaceans that support an abundance and diversity of birdlife.

Damage the Mangroves and say goodby to important physical protection of the coast from erosion and storms (as if our problems are not big enough already).

Damage the Mangroves and say goodby to biologically productive natural systems contributing organic matter to estuaries.

Damage the Mangroves and say goodby to filter of sediments and other substances that may accumulate from land runoff.


There have been international calls for moratoriums on oil exploration in the mangroves, including the Oilwatch Declaration to the 7th Conference to the Parties (COP) to the Ramsar Convention (San José, Costa Rica, 10-18 May 1999)


The EarlyBird Foundation calls for:


The stoppage of any new oil exploration in mangrove zones.

The avoidance of mangrove zone in the planning of oil and gas pipeline routes.

The integration into the RAMSAR Convention of all mangrove zones which are at risk or under pressure from oil activity, with the objective of preserving their integrity.

An inventory under the Convention, of tropical mangrove zones which have already suffered some intervention, in order to begin their immediate restoration.

A socio-environmental impact study of all oil activities in mangrove zones to be carried out under the auspices of the Convention. The study should cost the impacts of oil activity and their restoration, and establish responsibilities. The results of this study to be made legally binding for RAMSAR member countries.

Efforts to be made by the Secretariat of the RAMSAR Convention to integrate those countries, which while not members are confronting problems with, or threats of, oil extraction activities in their mangrove zones.


Oil and Mangroves do not mix!
see: http://mangroveactionproject.org/issues/petroleum/oil-mangroves-do-not-mix

Four Legged Friends (Duiker Story)

Duikers, a good little briefing. At…
http://scienceblogs.com/tetrapodzoology/2008/08/duiker_rhymes_with_biker.php

Due Diligence Exposes Several Bidders For Forest Concession

Wow... this stuff is working! (story below) We are getting the front side of the deal right. All that remains is to follow through.....


Due Diligence Exposes Several Bidders For Forest Concession
The NEWS (Monrovia)

NEWS5 August 2008 Posted to the web 5 August 2008
By George BardueMonrovia

The Forest Management Contract (FMC) Due Diligence Committee has submitted its report to the Inter-Ministerial Concession Committee (IMCC) on the financial and technical capabilities of companies that submitted bids for logging operations in Liberia.

The bids, which were publicly opened for three Forest Management Contracts on April 21, 2008, brought 13 companies bidding for different categories.

Following the bidding process, the Concession Bid Evaluation Panel placed seven companies in the "A" category, three for the "B" category and another 3 in the "C" category with the Tropical Reserve Entrepreneurial Enterprises (TREE) scoring 95 percent.

However, when Due Diligence was conducted on the companies, the Committee discovered that TREE did not provide substantive financial and technical evidence although the Bid Committee declared TREE as provisional winner in the "A" category.

The prequalification standards for a medium FMC require US$15 million in capital including cash and equipment.

The Due Diligence committee's report indicated that TREE claimed to have vehicles and equipment valued at US$1.9 million, adding "it presented bank statement showing funds totaling US$0.3 million. This leaves a net financing requirement of US$14 million. "

In addition to financing its own operations, the Due Diligence Committee noted that TREE has committed itself to finance the operation of five timber sales contracts, three by B&V Timber Company and two by Tarpeh Timber.

The committee said they found out that over the first six months of operations, these companies together will require about US$1.2 million in investment funds.

However, TREE was asked by the Forestry Development Authority (FDA) to provide evidence of additional funds to support five timber sales contracts but it failed to do so, the Due Diligence Committee noted in its report.

The Due Diligence Committee's report also indicated that TREE offered no evidence of financial capability.

"TREE had entered into an agreement with firm named Tropical Africa Business wherein the latter committed to provide US$1.0 million in equipment and spare parts. TREE has also entered into an agreement with a firm named Ningbo Jujin Investment Company Ltd. of the People's Republic of China wherein the latter committed to provide US$2.5 million in equipment and funds," the Committee pointed out.

But it said that these agreements provide an amount far short of the US$14 million required.
The Due Diligence Committee also observed that the agreement with Tropical Africa Business, along with the commitment of US$1 million seems to be flawed.

The Liberia Tree and Trading Company, a declared winner of category "C" of the Forest
Management Contracts with 85 percent also underwent due diligence and participated in the bidding process.

According the Due Diligence Report, the Liberia Tree and Trading Company owed government US$165,000 in back taxes for which the Ministry of Finance advised FDA not to enter into a contract with the company until the matter was cleared.

On the issue of technical capability, the Committee reported that the Liberia Tree and Trading Company holds no equipment, either owned or leased.

"In its business plan, the company indicated that it would lease all of its logging equipment from Logs & Lumber, a Ghanaian company and a parent of Eco Timbers. In discussion with the FDA team in May 2008, the firm indicated that the equipment would be leased directly from Eco Timbers," the report disclosed.

Additionally, the Due Diligence report noted that FDA requested for a copy of the lease agreement or other evidence of Eco Timbers' commitment to provide equipment along with evidence of Eco Timbers' control over the equipment that it proposes to lease.
Touching on the financial capability of the company, the committee found out that the company has a cash bank balance of US$0.1 million as of June 16, 2008, adding "unaudited financial statements shows net assets of US$0.3 million as of December 31, 2007."

"The business plan projected an investment of US$6 million, including equipment, to be made in the first five years of operation. This is to come from three sources: bank loan US$3 million; suppliers US$2.4 million and shareholders US$2.4 million," The Due Diligence Team said.
The FDA's Due Diligence Team in a discussion with the company on May 30, 2008, said it was informed that the capitalization plan was had changed and that a new investor in the firm, Ecotimbers, would lend the company US$6 million.

Of this amount, US$4 million would come from a loan from the Bank of Beirut to Ecotimbers, the Due Diligence Committee indicated in its report.

The winners of the Forest Management Contracts are yet to be announced by the Inter-Ministerial Concession Committee (IMCC).

When authorities at the Forestry Development Authority (FDA) were contacted, Public Relations Manager Anthony Varwen said all of the companies that participated in the bidding process demonstrated financial and technical capabilities.

Mr. Varwen told this paper that no company that did not provide evidence of their financial capabilities was given contract.

He said the Due Diligence Report is in the office of the FDA Managing Director John Woods and cannot be accessed.

Varwen disclosed three companies won the PFC bid but added that the FMC bidding process is still going on.

He noted that the due diligence report would be made public went the Inter-Ministerial Concession Committee (IMCC) approves it. He did not say when it would be approved.
Copyright © 2008 The NEWS.

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EarlyBird

Bit by Bit it Will Fit - ArcelorMittal / Rio Tinto

The other proverbial Shoe has dropped (See the Article that follows) and it is natural fit! They may be talking eastern Canada, but we are hearing eastern Guinea. The Canada program to expand mining and processing facilities in Labrador West and transportation capacity on the railway linking the mine with the port of Sept- Iles, Quebec will be a great trial run for Guinea-Liberia operations.

When (if) the Simandou project merges with the Liberia Operation across the border it will mean only one thing.... You will no longer have to travel to Guinea. It will come to you piece by piece, by rail through your back yard.

We may observe the full dress rehearsal in Canada but how about a little transparency now?

{article}

ArcelorMittal Says Rio Tinto's IOC Unit Would Be `Natural Fit'
By Dale Crofts
July 2 (Bloomberg) -- ArcelorMittal, the world's largest steelmaker, said it would be interested in acquiring Rio Tinto Group's Iron Ore Co. of Canada unit because the business fits with its operations in eastern Canada.


``If that kind of opportunity arose, I'm sure we'd take a look at it,'' Lou Schorsch, head of Luxembourg-based ArcelorMittal's flat-rolled business in the Americas, said yesterday in an interview in Chicago. ``That would kind of be a natural fit. We share a lot of infrastructure.''
ArcelorMittal is buying iron-ore plants in Canada and Liberia to counter the market power of BHP Billiton Ltd., Rio Tinto and Cia. Vale do Rio Doce. The three companies control about 80 percent of the world's seaborne iron ore and are raising prices to records. London-based Rio Tinto has said it plans to sell as much as $10 billion of assets this year.


Iron Ore Co. of Canada, also known as IOC, is ``a good operation and not on our short list of possible disposals,'' Rio spokesman Nick Cobban said today.


ArcelorMittal said in September it would buy the more than two-thirds of the Wabush Mines iron-ore venture in Canada that it doesn't already own from U.S. Steel Corp. and Cleveland-Cliffs Inc. for about $67 million. U.S. Steel and Cleveland-Cliffs ended talks to sell the stake in March, and ArcelorMittal has asked the Ontario Superior Court to force the transaction. ArcelorMittal is

``very confident'' it will complete the purchase, Schorsch said.


Wabush produces iron-ore concentrate in Newfoundland and Labrador and has port facilities on the St. Lawrence River's north shore, close to the operations of ArcelorMittal's QCM unit.
``Part of why we are interested in Wabush is because QCM is more or less right down the road,'' Schorsch said. ``Also right down the road is IOC that Rio Tinto owns.''


Rio holds a 59 percent stake in Iron Ore Co. and operates the business. Rio is spending about $475 million to expand mining and processing facilities in Labrador West and transportation capacity on the railway linking the mine with the port of Sept- Iles, Quebec.


To contact the reporter on this story: Dale Crofts in Chicago at dcrofts@bloomberg.net.
Last Updated: July 2, 2008 09:54 EDT


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Anthropogenicagent

Are We Ready to Move a Mountain?

Iron-ore activity in Liberia is taking off and we are at a jog and gathering pace. ArcelorMittal’s stated ambition is for an iron-ore output beginning in 2009 of 500,000t/y and increasing to as much as 25Mt/y by 2011. At the end of May, Russia’s Severstal reached agreement to purchase up to a 61.5% stake in African Iron Ore Group Ltd (AIOG), which owns, through subsidiaries, the exploration rights for an iron-ore deposit in Liberia’s Putu Range area. In addition, Severstal will acquire a 6.29% stake in Mano River Resources, which currently controls AIOG.

Just across the boarder in Guinea, Rio Tinto reported 2,259Mt of JORC-compliant iron-ore resources at its Simandou project on May 29. These resources are located within the Pic de Fon and Oueleba deposits which form part of the Simandou range in southeastern Guinea. The company is planning the development of the first production phase of 70Mt/y, potentially rising to 170Mt/y, subject to agreement with the government.

Mano River, Putu Range and even old "Poor Bone" (Bong Range) are largely unknown quantities. So let's focus on the Nimba Area. The largest operation in the late 1960's through the 1980's was the Liberian-American-Swedish Minerals Company (LAMCO), a joint venture that accounted for about half of Liberia's annual iron ore output at that time. LAMCO began shipping ore in 1963, when the port of Buchanan, which the company had constructed, opened for traffic. The mine's capacity was about 12Mt/y of ore at the start-up of operations. In the late 1970s output dropped to about 9Mt/y.

Again, at its zenith, the highest capacity handling through the LAMCO facilities completed in the early 1960's was 12Mt/y of ore per year. The big question as we move forward, is production going to out run the capacity to handle the material? 25Mt/y by 2011 is double the old capacity. Do they really expect to add another 70Mt/y to that? Nearly 100 Million tons per year is not going to move west across Liberian territory without someone taking notice. The Simandou project may be exporting an unacceptable environmental impact. Are we ready?

Is green our fame or is it the red dust on the green leaves?
Anthropogenicagent

750km of Liberian Territory v. Stranded Investment in Guinea

More tantalizing hints

“The deposits are located in the south east of the country very close to the border with Liberia and 750km away from the sea.”

Story follows; but when will Rio-Tinto reveal their relationship with Acelor-Mittal. Is it too soon for transparency? Could it be that the Liberian People have been cut out of the deal already. We are still waiting for the answers. We will not forget the mysterious circumstances during the bidding on the old LAMCO mine…. Rio-Tinto backed out leaving the deal on the table for Mittal. It is a matter of record. But, why? Hint: 750km of Liberian territory and a stranded investment in Guinea.

STORY

Rio Tinto eyes Chinese investors to partner it in Guinea iron ore projectRio Tinto has already spent US$300 million on its Simandou iron ore project but the company still eyes investors from China to partner it as it moves to develop the 170 million tonne per annum mine.

Author: Frank Jomo
Posted: Friday , 16 May 2008

BLANTYRE -
The world's second largest producer of iron ore - Rio Tinto - says it will be courting Chinese steel and construction companies to partner it in developing the US$6 billion Simandou iron ore mine in the West African state of Guinea.

Rio Tinto, itself being the subject of a hostile takeover by rival, BHP Billiton, would make a final decision whether to go ahead with the mine in 2009.

But head of Rio's iron ore division Sam Walsh told the Financial Times that he was optimistic of bringing Chinese investors into the project later this year and that the company's preference would be to have a steel company that is allied to a construction company. He said the Chinese steelmaker would agree to buy a portion of Simandou's output on a long-term off-take contract while a Chinese construction group would be valuable in making sure the mine is built on schedule and on budget, at a time of rising costs.

The Simandou deposit is touted to be one of Africa's largest iron ore deposits estimated at between eight and 11 billion tonnes and made up of high grade haematite, which has a 65 percent iron content.

However to tap these huge deposit, Rio Tinto will have to part with a fortune. The deposits are located in the south east of the country very close to the border with Liberia and 750km away from the sea. In addition poor infrastructure in the country might prove a spanner in Rio's works to develop the mine into one of the world's great iron mines.

For now though, the miner seems set to roll on the project having spent US$300 million on it. The company announced recently that its pre-feasibility study into the development of a 70 million tonne per annum mine at Simandou is well advanced. Rio says the development of the mine would make it one of the largest iron ore mines in the world and that there are future plans to make it even larger, to 170 million tonnes per annum.

© Mineweb Holdings Limited, 1997 - 2007

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Anthropogenicagent

FUZZY MATH

We just got word late last week that Arcelor SA and Mittal Steel Co.NV, signed agreements worth $2.2 billion with the government of Senegal to mine iron ore in the West African nation. The total estimated ironore reserves are around 750 million metric tons at four locations in the Faleme region of southeast Senegal.

Let us review the equation:For Senegal, $2.2 billion for 750 million metric tons.

The Liberia deal was $900 million for 1 billion metric tons.

Of course, this is a gross over-simplification. The project in Senegalinvolves developing the mine, building a new port near Dakar and laying467 miles of railway to link the mine and the port. This leads to further speculation. A new hypothesis.

Liberia is already partly developed. Rehabilitation is cheaper thanbuilding from scratch. More profits for Mittal Steel... to take withthem to Senegal for their future project, due to start in 2011? Nowonder they were in such a hurry to get things going in Liberia. They are a big company, why should we begrudge them any part of theirprofit or their global ambitions?

anthropogenicagent

Liberia Debt Relief, who's relieved?

If you think the NGO Staffers are saints, then you risk being offended by reading on. Stop now. On the other hand if you want to wade through the misconceptions and mass media manipulation, read-on.

The United States government's announcement last week to forgive Liberia's $391 million debt will free up more funds for reconstruction and development. This is good news. As we read about debt relief, let us not forget how difficult it was to spend nearly 400 million in the first place. Remember the NGO Chief of Logistics, Operations, Station, Regional Director, Whatever, Bossman. Remember the drop of sweat that rolled down his face as he realized the extent of his own naiveté. How through mismanagement and corruption the materials needed for the operation had vanished as quickly as the OAU carpet from the Unity Conference Center. The more money that came into the programs, the more things unraveled.

No problem, because by evening he was at his old jojo bar with a growna girl on each arm. Don't forget the dreamy days spent at the beach. Like a benevolent sovereign, snapping his fingers for a fresh round of Club Beers for his expatriate friends. Oh, and the trips to the Lebanese grocery to stock-up on European delights before a lounging leisurely by the U.S. Embassy pool.

As these NGO Staffers caroused with one another in their insular Monrovia enclaves, Liberians hung on for dear life. The audacity as they wrote home about all their good deeds, when by their mismanagement and lack of control the very people they had come to save were victimized.

During those terrible years there was an alphabet soup of NGO's who ate money at a prodigious rate with their primary funding coming from donor governments. Debt Relief! Who is relieved? Perhaps it is the NGO Staffers who squandered their budgets through mismanagement for years. Instead, we smugly say that we forgive the Liberians.

Moral conviction is relative when all you believe in is your own "goodness". When after a time in Liberia your mind is twisted, and your worldview paradigm has shifted. When you realize that "Third World," is just a convenient phrase when the real problem stems from the fast that there is just one world with many impoverished folks paying the way for the comforts of a relative few.

No doubt the NGO's had a difficult and complicated job. Becoming an expert of rationalization is a job hazard for the NGO Staffer. Even that is a rationalization. No, even the NGO Wonk is not relieved. He has no need for absolution. It was always someone else's money anyway. Their nightmares of mismanagement are as easily forgotten as they were disguised in the first place.

Is debt relief just the premise to another round of NGO mismanagement and corruption?

J. Carl Dealy