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Posts Tagged ‘Kalia’

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

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.