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Posts Tagged ‘Bellzone’

Guinea to review mining licenses

March 7, 2011 Comments off

“Guinea is planning a comprehensive review of its mining licences that could disrupt a $1.35bn iron ore agreement between China’s Chinalco and Rio Tinto, a $2.5bn iron ore acquisition by Brazil’s Vale, and a slew of smaller mining deals in the mineral-rich west African state.

All mining companies in Guinea will have to submit to higher standards of transparency in order to invest, as will the countries from which they originate, according to a joint statement from Alpha Conde, Guinea’s new president, and George Soros, the billionaire philanthropist who advised him.

‘All contracts will be reviewed and reworked by the beginning of the second half of this year,’ said a senior official from Guinea’s ministry of mines at a conference in Paris on Thursday. ‘The government will become a minority shareholder in all mining contracts.'”

Source: Financial Times, March 7 2011

Observations:

  • According to the new licensing structure all foreign investors and their host countries will need to subscribe to the WorldBank’s EITI (Extractive Industries Transparency Initiative). Furthermore the government will request minority ownership of all projects.
  • The most important mining project in the country is the iron ore complex around Simandou and Kalia. Rio Tinto and Chinalco, Vale, and Bellzone and CIF hold licenses to various blocks of the complex, from which production should start within 2 years.

Implications:

  • China and Chinese companies, as brought in by Bellzone and Bellzone, don’t subscribe to the EITI yet. This could lead to significant development delays and/or break-up of consortia. It is unlikely that the government will push the large foreign investors out of the projects, as they need the foreign money to get the projects going.
  • In the Economist’s country operational risk benchmark, Guinea ranks 149th out of 149 countries, tied with Iraq. The 10 risk categories included in the benchmark are: security; political stability; government effectiveness; legal and regulatory; macroeconomic; foreign trade and payments; financial; tax policy; labour market; and infrastructure. Next to the changing regulatory environment the infrastructure risk is important for Simandou’s projects, as Guinea and Liberia are fighting over the port to be used for shipping the ore and the way the ore should be transported to the port.

©2011 | Wilfred Visser | thebusinessofmining.com

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Bellzone Mining confirms MOU with China International Fund (CIF)

May 26, 2010 Comments off

“Shares in Bellzone Mining surged 60 percent yesterday morning on London’s AIM market, following the announcement of a 50/50 joint venture with CIF for the 2.4 billion ton JORC magnetite Kalia Iron Project in Guinea, West Africa.

CIF will fund the entire infrastructure required for the project, which will include the rail system, bulk storage facilities, port, port loading facilities, port services and power development required to produce and transport a minimum of 50 million tons per annum of iron ore.

Nik Zuks, Managing Director of Bellzone Mining, commented: ‘I am delighted to announce this binding MOU with China International Fund Limited. Under the terms of the Binding MOU, CIF will fund and construct the 286km rail and port facilities for our Kalia Iron Project in return for the right to purchase 100 percent of the off take from Kalia.'”

Source: African Business Review, May 25 2010
Related Financial Times article: CIF to fund Guinea iron ore venture

Observations:

  • CIF earlier designed the oil-for-infrastructure deal in Angola. Promising the poor governments of resource-rich countries proves to be an effective way of securing access to the resources.
  • Production from the Kalia deposit is expected to start in 2014, setting a clear deadline for the execution of the infrastructure projects.
  • Kalia is the only project Bellzone is running, share price has therefore increased sharply after the announcement of the agreement with CIF.

Implications:

  • As Vale and Rio Tinto and Chinalco will start producing in the Simandou area, close to Kalia, these companies will be interested in exploring cooperative agreements with CIF. Huge synergies could be achieved by avoiding competing infrastructure projects to be run to bring the ore to the coast.
  • Transportation of ore via Liberia, as Vale is planning to do, is certainly not in the best interest of the Guinean government. Vale will therefore have to find ways to please the government in order to secure fruitful cooperation.

Mining groups target West Africa / A richer seam

May 22, 2010 1 comment

The Financial Times published two articles this week on the increasing impact of international mining companies in Africa. The combination of articles provides a good insight into the political sensitivity and the importance for the development of the region:

Mining groups target west Africa (Financial Times, May 18 2010)

Six of the world’s biggest mining and steel companies have converged on an unprecedented scale on a mineral-rich corner of west Africa beset until recently by civil war. The companies plan to spend billions of dollars in Guinea, Liberia and Sierra Leone, where some of the world’s richest deposits of iron ore, the raw ingredient of steel, are found.
The groups are Vale, the Brazilian iron ore miner, Rio Tinto and BHP Billiton, the Anglo-Australian mining houses, ArcelorMittal, the UK steel company, Russia’s Severstal, and Chinalco, the state-owned Chinese mining company.”

Strategic resources: A richer seam (Financial Times, May 21 2010)
“China has vied with western groups in Africa for oil and minerals for the best part of a decade. But it also has ambitious nuclear power targets and its quest for uranium – repositories of which are few and far between – has thrown the rivalry into sharper focus. …

In the past three years, as China embarked on its new thrust into Africa, relations between Niamey and Paris plunged. The award of uranium concessions to China’s Sino-U and other prospectors broke the de facto 40-year monopoly of Areva, France’s state-controlled nuclear group.
The competition has seen work start on Niger’s first refinery and a $700m hydroelectric barrage, not to mention hundreds of millions of dollars in “signature bonuses”, courtesy of Beijing. It helped the country wring tougher terms from France before granting permission for Areva’s vast new mine, which will make the country the world’s second-biggest uranium producer after Kazakhstan.”

Observations:

  • This month’s acquisitions of Vale and Vedanta and earlier investments by Bellzone in Guinea count up to over $5 bln of investments. Over 50% over these investments will be in infrastructure, helping not only the resonsible mining company, but as well contributing to development of the country.
  • Total development aid to Africa in 2008 was $26 bln. Foreign Direct Investment in infrastructure related to mining is quickly bypassing this figure. Total FDI in Africa was $88 bln in 2008 (UNCTAD WIR), of which a very significant part is related to mining & metals.

Implications:

  • Although the Chinese approach of buying resource access by offering infrastructure development and more symbolic gifts is still regarded to be unethical by many westerners, western companies are working hard to catch up with the Chinese, trying to secure access to the good resources in central and west Africa.
  • Infrastructure developments are arguably the most important capital investments required for economic development of a country (J. Sachs).
  • Key problem for African leaders is the vicious circle of the resources trap they are in. Africa needs the infrastructure investment to develop the economy, but needs the resources that are shipped abroad in exchange for the infrastructure development in order to create an industry of value adding services.

Guinea set to seal fresh iron ore deal

May 11, 2010 Comments off

“Guinea expects in the coming weeks to announce another significant iron ore deal to follow Vale’s $2.5bn acquisition in the west African country, with Chinese investors considered the frontrunners.
Mahmoud Thiam, mining minister, told the Financial Times that he hoped a new joint venture involving Bellzone, an Aim-listed junior miner that says it has a ‘non-binding memorandum of understanding … with a Chinese enterprise’ to exploit its prized Guinean concession, will be announced within a month.

Iron ore has become the hottest of commodities amid voracious Chinese demand and following radical changes in March to the way big miners sell to steelmakers that allowed prices to soar. West Africa – home to some of the largest untapped stocks but also renowned for its volatility – is attracting feverish attention.
‘The [Vale] mine would turn us into the third-largest iron ore exporter in a five to six-year period,’ Mr Thiam said. ‘If the Bellzone mine comes online it will turn us into the largest iron ore exporter if both mines are going full throttle within 10 years.’

Source: Financial Times, May 10 2010

Observations:

  • The (Australian) company will try to set up the mine with $0.9 bln own funds, investing in infrastructure with $2.6 bln Chinese money.
  • The upcoming deal with a Chinese company fits in a continuing trend of Chinese investments in Africa to secure long term natural resource supply.

Implications:

  • The mining market landscape is changing: more and more companies are competing for resources in remote areas that are not in the traditional heartlands of mining, like Guinea. The geographical production base in 20 years time will be significantly different from the current situation.
  • Chinese mining & production companies will grow stronger and stronger in the mining business, as they hold a competitive advantage in securing the funds required to invest in projects like in Guinea.