THE mining town of Yekepa in Liberia’s Nimba County has all the hallmarks of a boom: an Olympic-sized swimming pool, world-class tennis courts, a cinema and a golf course. But the boom took place two decades ago, when Yekepa was known to Liberians as Little New York, a town where many prospered until the civil war that broke out in 1989 tore their country apart and spread its poison across the region. Now there is new hope, albeit mixed with cynicism, that its wealth will trickle down to the people as the mine is exploited again. The Nimba mountains, straddling the borders of Liberia, Guinea and Ivory Coast, hold one of the world’s richest deposits of iron ore.
The Yekepa mine, opened in the 1950s by a Liberian-American-Swedish company, was the country’s first large-scale one. But it remained dormant throughout the civil war. In 2006, to much fanfare, it was restarted by a multinational steel company, ArcelorMittal, which has been exporting iron ore for the past two years. Other companies, such as BHP Billiton and China Union, are now active too. China Union says it expects to start shipping ore soon. Aureus Mining, a Canadian company, hopes to start producing gold in 2015. Sable Mining Africa, a British company, is the first to have secured permission from Guinea’s government to transport iron ore direct to the Liberian port at Buchanan, which is closer to Nimba than Conakry, Guinea’s capital. The company expects to begin production and start transporting iron ore in 2015.
Gold has long been west Africa’s dominant mineral, but iron ore is exciting more interest, says Rolake Akinola of Ecobank, a pan-African firm founded in Nigeria. The region is undeveloped and mining firms are busy exploring and discovering potential sites even as they develop new mines, he says. Yet foreign companies will not find it easy. Infrastructure is poor, geological information scanty, land ownership often murky and institutions weak, especially in countries like Liberia and Sierra Leone that have been ravaged by civil war and dictatorship. Commodity prices have wobbled and some big companies will be wary of investing until the legal framework is more robust.
The Revenue Watch Institute, a New York-based lobby promoting better management of natural resources in the poor world, has helped Guinea’s government to draw up a new mining code, which requires the government to hold at least 15% of the equity in new mines. The code also sets a new tax regime and a higher threshold for foreign investors. This, says the institute’s Patrick Heller, could offer a model for other countries in the region.
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Guinea’s government is reviewing all existing concessions, as is Sierra Leone’s. Mali’s new government is expected to follow suit, and may renegotiate some contracts. Liberia is also drafting a new mining code. Ghana’s government has raised taxes on gold-mining companies, which say their operating costs will rise sharply.
Michael Keating of the University of Massachusetts, Boston, says that these reviews of mining codes and contracts have been instigated by Western donors who do not want local people or their governments to be ripped off. But investors may be deterred. “It’s one thing to conduct an inventory and another to go back to concessionaires and attempt to renegotiate signed contracts,” he says. “Nothing will scare investors away faster than the notion that legally signed deals can be nullified at the whim of a government agency.”
Most west African governments have signed—or pledged to sign—the Extractive Industries Transparency Initiative (EITI). The EITI tries to ensure that contracts and accounts of taxes and revenue generated by concessions are open to public scrutiny. But that is easier said than done. Last year Liberia’s government asked a British accounting firm, Moore Stephens, to carry out an audit of Liberian mining contracts signed between the middle of 2009 and the end of 2011. The audit, published last May, found that 62 of the 68 concessions ratified by Liberia’s parliament had not complied with laws and regulations. The government has yet to take action after a string of recommendations emerged from an EITI retreat in July.
Regional governments also fret over a practice known as “concession flipping”, whereby foreign mining companies that do not have the capacity to exploit sites sell their concessions to larger companies for windfall profits. “Every flip is essentially a heist on the government exchequer, with anonymous offshore firms as the getaway car,” says Leigh Baldwin of Global Witness, a London-based lobby that fights for fairer deals for local people and their governments from mining and other resources. Concession flipping, he adds, is widespread in Africa. The Africa Progress Panel, headed by Kofi Annan, a Ghanaian who once led the UN, has put out a report called “Equity in Extractives”. This, too, stresses a need for more openness in mining contracts. As people in the region demand more democracy, better deals from mining are a new priority.