Ivanhoe Liberia, the company acting on behalf of High Power Exploration (HPX) in Liberia to ship iron ore from the Nimba Mountain in Guinea via rail through the port of Buchanan, says ArcelorMittal Liberia (AML) should not feel concerned by its presence in Liberia, as HPX is more than willing to work along with AML to improve the mining sector in the subregion.
HPX acquired the rights to the Nimba project concession in late 2018 early 2019 at a time when iron prices were around $65 compared to today’s $94. The company says it acquired these rights through a competitive process with several competing bidders run by the consortium of BHP, Newmont and Areva which owned these rights. At that time the Government of Guinea had already made it clear for quite a while that Nimba ore could be exported through Liberia as long as certain conditions were met.
“We are in no way competitors as Arcelormittal is not so much a mining company but it is a steel company, HPX believes that having 2 major new investments being developed in parallel, involving Arcelor’s $800 million and HPX/SMFG’s $600 million in Liberia alone, is of course much better for Liberia but it is also better for AML. Indeed, the railroad transport costs will be lower for them if spread over a much larger tonnage than if they were the only user. So I am confident that AML will ultimately welcome our project and will want to work constructively with us,” says Guy de Selliers, Chairman of Ivanhoe Liberia Ltd, & Société des Mines de Fer de Guinée (SMFG).
In response to an article published in another one of Liberia’s daily newspapers, he further stressed, “Of course AML should not be threatened by our project. To the contrary, HPX welcomes the AML project because AML’s project is essential for the economic development of Liberia and for the social stability in the whole Nimba region, which is good for everybody.
In an exclusive interview via zoom with the Daily Observer’s Managing Director Bai Sama G. Best, the Chairman of Ivanhoe Liberia Ltd, & SMFG, Guy de Selliers, shares additional details about the vision for its ambitious mining project and its implications for Liberia.
(Below is the full transcript, with questions in bold.)
Mr. de Selliers, thank you for taking the time to do this interview. Tell us about the projected lifetime of your company’s operations in Liberia. Are we looking at 25 years or more?
We look at a very long time. First, there are lots of iron ore in the north of Liberia as you know, northeast of Liberia on the Nimba range, and in the southeast of Guinea. The first project we are doing, of course, is the mining of this very high grade low impurity ore … which we call the caviar of iron ore and that is the project for which we had a pre-feasibility study and which is well advanced and which we want to start as soon as we get all of the permits. So we will start in 2023 and the production will start two to three years after that, maybe three, three and a half years.
But the problem with this project is that it has a relatively short mine life. And about twenty years. US$2.7 billion for 20 years is a lot of money. Therefore we are very keen on going beyond that, and on looking at developing other iron ore deposits in that part of West Africa, so that it becomes a 20, 30, 40 year project. Mining infrastructure could live for a long time, so it is a shame to just do it for 20 years and forget about it. It has to go beyond. And that’s certainly our plan. As I said in the press release, we really would like to be very active in developing what could be a new so-called iron ore province in the world, an area where there's quite a lot of iron ore and there’s a lot of potential. But we have to start somewhere. And we started with this one project which is maybe short life -- only 20 years. But the great mining companies keep on finding more and developing more, and that’s our plan.
That project in Guinea has been hailed as one of the most valuable in the subregion, if not on the continent and probably one of the most valuable in the world. And to say that it is a short-life mine, can you unpack that idea, please?
Because it’s such a high quality ore, we want to go as quickly as we can to 30 million tons. And of course, we’ll start at 10 to 15 (million) and then we’ll ramp it up and we want to go as quickly as possible to 30 million tons. But we’ve got a mining plan which takes us through about 20 years. So it means that we know exactly, year-by-year, month-by-month, where we get to take the ore and we have a detailed mining plan for 20 years. But of course, [in] Nimba north, there’s 1.5 billion tons of ore of a lower grade. But then you could do something else. You can upgrade it and turn it into a pillage feed or something like that.
Once we get the infrastructure in place, it could be used to work with and for a number of different mining companies. It could be us, it could be others, but the key mining infrastructure -- the core transport infrastructure is what you need to be able to open up the whole region. And that’s what we’re trying to do.
And US$600 million of that investment comes to Liberia for rail and port infrastructure?
Absolutely. The port is an expensive part because we have to build a new berth. Our plan is to build a new berth in Buchanan, which will not disturb ArcelorMittal’s operations in any way, shape or form. Just will not. They said they want to keep the berth on the land side. We said fine, we’ll build a berth on the jetty side, on the leeway of the breakwater. But that’s an expensive process and of course you have all the stockpiling and bulk material handling and storage. And that’s several hundred million dollars right there. And then, of course, we’ll be responsible for all the costs relating to the expansion of the railroad from 15 million to 45 million (tons) because we want to have that capacity. Once that capacity is there, it’s there forever as long as it’s maintained. When I say US$600 million, there are some very significant costs, such as the value of the contracts and of the equipment, and for the whole project [including] owner’s cost, interest in construction, contingencies, taxes, engineering, EPCM, and a lot of things. So US$600 million is really what is going to be the equipment and contracting work, and there will be a lot of contracting work in Liberia per se.
How long do you think it will take to get that rail extension and the port facility up and ready to go for your project?
We want it to be ready at least by 2026 and 2027 at the very latest. But that’s our frustration, that we want to work more closely with ArcelorMittal. And we have found it difficult to engage with them. And this is the point I’m trying to make and am happy to be quoted on, which is that, it is so much better for Liberia to have not just one project (ArcelorMittal), but two projects. It is so much better for Liberia to maximize the use of that remarkable infrastructure, which they have had for a long time, which is a great infrastructure. It’s better for Liberia that, at the Port of Buchanan, there’s 45 million tons of ore being shipped per year than just 15 (million). So, it’s better for Liberia, there’s no doubt about it. I think it’s better for us, to be honest with you, because you’ve got economies of scale if you ship 45 million as opposed to 15 million on the railroad. You spread the cost over a much larger tonnage. So there clearly are economies of scale.
So I’m just quite optimistic that it makes sense for everybody to work together and I can’t imagine that anybody would want to say ‘no, no no, we only want to rely on ArcelorMittal’. It would be very bizarre. And I can’t even imagine ArcelorMittal wouldn’t understand that it would be pretty obvious that there would be economies of scale. It would benefit them. And so, why would they not be supportive? That’s my question.
I have not seen the ArcelorMittal agreement, so I will not comment on that. But I think it is what you have done, as a group of newspapers to insist on having complete transparency about this agreement. I think that’s absolutely right.
I totally agree. I’m personally amazed by the impact that the FOI request has achieved because now there is another mineral development agreement that has sped through the Senate. But when it reached the House of Representatives, it was halted because we also raised the exact same concerns [about that one] as we raised concerning the ArcelorMittal agreement.
That’s exactly right. You’ve got the EITI and Liberia is part of it. How could you be part of the EITI and not have total transparency about these agreements?
Let’s look at jobs. From your company’s press release, we are looking at about 500 jobs for Liberians. What kinds of jobs are we talking about -- engineering, managerial?
These are permanent jobs. I don’t have the breakdown exactly in mind. But I do think that training of the domestic labor force is always a key part of any mining project and again, we should work with ArcelorMittal, so that we have one big training center, and for anything which has to do with railroad transport and material handling. Or we could have ours separate, I don’t mind. But there is a real benefit by not having a monopoly by one company over an infrastructure. One of the benefits is that, if two people are using that infrastructure, they have to define the rules of the game very precisely, up-front. Any kind of [adverse] behavior by one could affect the operation of the other. So they would monitor each other. And you’d get much higher standards on a multi-user infrastructure than on one which is monopolistic in nature. If we have to share a railroad, we would both be making sure that, whatever they have to do, whatever we have to do, we do it to the highest standards because otherwise, if it doesn’t operate at the highest standards, we’re both penalized.
You alluded to the possibility of contributing to or sharing ArcelorMittal’s training center. Could you share more about what you have in mind concerning that?
We would like to work closely with ArcelorMittal for the benefit of Liberia. The better we work together, the better it’s going to be for everybody -- for the companies and for Liberia.
I’ve been in this business for 40 years. I started my career with the World Bank. Half of my career has been in development institutions -- World Bank, and later on the European Bank for Development and Reconstruction. So my DNA is to worry about countries where we operate. And I am always convinced that, especially now, a mining company has to earn its right to operate. It’s called the social license to operate. You have to earn it everyday. You earn it by training local people; you earn it by having really good health and safety practices; you earn it by contributing to the local community. We insist that we should be running a passenger and light freight service on that line. I don’t know if Arcelor is planning for that, but we plan for it. Why? Because we know that people have to feel that this railroad is not there just to help the mining companies, but it’s here to help the community. And there are examples in other countries, like the Nacala railroad in Mozambique and Malawi.
From a point of view of agricultural goods, it’s a mining railroad, but it has a major impact. Vale in Brazil -- a major impact. So we want that. We want to operate that. And we think it’s our duty to have good health facilities for the employees, but also for other people. Like they had with LAMCO, they had really good health facilities. That’s all part of the license to operate. It’s not just charity for the sake of charity. If the community around you is happy about the way you behave, there won’t be strikes, there won’t be people blocking the railroad.
To have two big projects is better than just one. To have another 500 jobs is good. To have another source of revenue because of transit fees, it’s good for the country.
You talked about having a passenger rail as part of the rail arrangement. Does that directly serve your company’s purposes in any way at all, or is it something that you just think, because it is possible, why don’t we throw that in?
It’s the latter. Companies could afford to have charter planes and so on. But it is important that the local people feel that the railroad is also their railroad. And it’s important for passengers, but it’s even more important for light freight. We’ve already done a study on possible agro-industry projects along the line, in the corridor. You cannot have an agro-industrial project of any kind of significance if you don’t have a transportation infrastructure.
Mining companies don’t like that, but you have to push them to do it, because it’s more complicated. They want to simplify their lives. Their trains are nothing else but their trains. But I know that while it’s a little more complicated, it is a really good investment in good will and in support of the local population. I am sensitive to the fact that, for the inconvenience of having more mineral trains, there is a convenience -- it’s compensated by the convenience to know that, not every hour, but maybe every once or twice a week, there would be a freight train that they can use for their goods. I mean, they would say, ‘okay, I’m happy to have that train. That rail line is not just the rich mining company’s rail line, it’s also mine.’
You mine this iron ore and you take it to the world market. Do you sell it to other companies or does your company have a steel production facility?
We are a pure mining company. Arcelor is much more a steel company than a mining company, which explains why they sometimes decide to be active in iron ore mining and sometimes they stop. For many years, around 2015 to 2017, when iron ore prices were low, Arcelor was rumored to be not investing more in the iron ore business. We are pure mining companies, like Rio Tinto, like BHP. Rio Tinto mines its iron ore and then sells it to the steel industry. And we do the same. So our life depends on developing mines and exploiting new mines, as we have done in the Congo. We are mine builders and operators.
Quite a few concessionaires have come to Liberia and established their subsidiaries here to extract the raw materials, only to transfer them back to their respective parent companies. So there’s no real competitive sales on the world market, such that Liberia might even consider getting some form of equity in the project or some additional benefit, in case the price of iron ore should increase. By being a purely mining company, you’re selling your product at competitive prices on the world market. Is that fair to say?
At the highest market price we can get. There is no risk of so-called transfer pricing, where a mining company would sell to its parent at pretty good terms. I’m not suggesting that Arcelor does that. But what you can be sure of is that when you are a mining company, you sell at the best price you can, because that’s how you make your money. You don’t make your money on the downstream, you make your money on the upstream. And the upstream is the mine.
So does that mean that the better prices are for iron ore, the better revenues we can expect in Liberia in terms of royalties?
It’s certainly true in Guinea, because it's the Guinean natural resource which we are exploiting. So there, we’re paying royalties based on the price. But we will be paying transit fees to Liberia. But we haven’t even started the discussion with the [Liberian] government on exactly what would the transit fees be, and so on. We’re doing a detailed economic analysis to figure out what is normal international practice, what is justified. But there is no doubt that there will be a stream of significant revenues for the year-in, year-out, for the Liberian government from transit fees that we would be paying.