Liberia: Inside HPX’s Big Bet on Boakai’s Administration

Since 2019, when Liberia and Guinea entered into a ratified bilateral agreement to export iron ore from Guinea through Liberia, using the existing rail infrastructure between Yekepa and Buchanan, nothing has happened to fulfill that agreement between the two Mano River Union countries six years later.  This has been primarily because of the level of intense objections on the part of ArcelorMittal to control the decision that allows other companies, most notably the High Power Exploration (HPX) access to the existing rail infrastructure. 

The rail, which was built during the days of the LAMCO iron ore company, was given to ArcelorMittal under its Mineral Development Agreement with the Government of Liberia to refurbish and use. AML has said repeatedly that it has no problem with multi-user access sought by HPX and others because the AML agreement with the Government of Liberia allows for multi-user access to the rail. However, that same agreement grants AML full control as operators and ultimately leaves that decision not up to the sovereign Government of Liberia as to when and how others can use the railway, but to ArcelorMittal. 

The MDA further states that there can be no “unreasonable interference” by third parties when it comes to AML operations and the authority to determine what constitutes “unreasonable interference” is ultimately for AML to decide. This, essentially by some industry observers, locks everyone else out, as no company will willingly grant access to competitors unless the Government intervenes.    

As a result of this caveat in the AML MDA, for three years, it created a stalemate as HPX and others maneuvered the policy and legislative landscape of Liberia in quest of a final ratified concession agreement for rail access. Meanwhile, HPX provided US$37 million in payments directly to the Weah Administration in what HPX termed “a gesture of good faith” as rail and port access negotiations with that previous administration were actively underway. This payment would later result in some controversy around its intended purpose, but HPX however publicly insists that the payment, made directly into Government coffers at the Central Bank via the New York Federal Reserve Bank was completely legal and transparent, and done so only at the request of the Government during fiscal challenges, and while the Company was negotiating with Liberia. The terms of those upfront payments against potential future fees render them re-payable should the Government of Liberia fail to meet the obligations it agreed to during the negotiations with HPX.

Fast forward to the Boakai Administration, HPX, an American company owned by several major US institutional and private investors, including Robert Friedland, a well-known mining sector mogul and the Executive Co-Chairman of Ivanhoe Mines which operates major mining concessions around the world; has now taken a different course of action. HPX owns the mineral-rich Nimba iron ore project in Guinea and now, instead of insisting on access to the existing rail controlled by AML, which has proven elusive thus far, HPX in partnership with the Guma Group of South Africa announced early this month that it will aim to develop, finance, and operate a new railway, dubbed the Liberty Corridor, to stretch alongside the existing rail between its Nimba project in Guinea down to a new deepwater port in Grand Bassa County, about 50 miles from the current Buchanan Port. One industry observer called it a “game changer.” 

By all accounts, this is to be a massive undertaking that HPX has estimated will cost between three to five billion dollars. HPX affiliate, Ivanhoe Mines, which operates the Kamoa-Kakula Copper mines in the Democratic Republic of the Congo (DRC) and several other mines around the world is familiar with projects of this magnitude according to persons familiar with the ongoing talks with the Government, so there is no concern of HPX ability to attract investors and financing for such an undertaking.  

In fact, Ivanhoe Mines recently signed an agreement to use the Lobito Corridor which runs between Angola, DRC, and Zambia to move its copper to global markets through the port of Lobito. The Lobito Corridor, which is being financed by the United States government and the European Union along with other investors, is proving to be a major force for regional economic growth in the Southern Africa region. 

Something similar that HPX is now promising to develop in Liberia with its latest announcement of the Liberty Corridor. Unlike the existing rail under the control of AML for the last 18 years to export its ore, HPX’s plans include utilizing its newly constructed corridor not only for iron ore but also for passenger, freight, agriculture, and other services in need of such a corridor, including running fiber optic and communications lines. 

This investment will be transformational on several levels, given its scope and scale. It is estimated by some analysts monitoring the deal that some 2,000 jobs are possible during the construction phase of the rail and port and could lead to over 900 permanent jobs, not to mention several downstream contracts for goods and services in such a corridor that would benefit local Liberian businesses in multiple sectors of the economy. 

The existence of more than one functioning railroad in the country could potentially lead to the establishment of a Rail Transport Authority. Also, given that other mining investors in Guinea are attempting a massive iron ore, rail, and port project from near Simandou to the Port of Conakry, Liberia is well positioned to host a training facility for rail and locomotive operators and engineers — making Liberia a rail transport hub, serving the Mano River subregion and beyond. 

The willingness of the new government, which is already being confronted with budgetary and financial challenges, to get into early bed with HPX for such a venture should come as no surprise. It would be an early win for the Boakai Administration to kick this off in attracting foreign direct investment. 

The excitement by the government is not without a note of caution, as expressed by Gbarpolu County Senator Amara Konneh on his Facebook page recently, that he will ensure that any deal reaching the Legislature is heavily scrutinized. According to one insider, it is a good note of caution expressed by any sitting legislator but is not something that should worry HPX, because the company and its affiliates are well-versed and experienced in developing projects that meet the highest international standards of transparency. In addition, as a U.S. company, both HPX and members of foreign governments are subjected to U.S. laws and compliance regulations that must be adhered to in all of the company’s global business operations.

HPX Executives indicated during the press conference with President Boakai that multiple streams of funding will be poured into the project, including possibly from the U.S. Government, which has already shown an interest in such a high-impact and economic growth project. On the African continent, the African Development Bank has launched multiple new initiatives in direct support of transformations and integrated infrastructure projects that link regional economies, such as what the Liberty Corridor is intended to accomplish. 

In the short term, as announced in the press release, the parties have agreed to enter into a firm agreement within 30 to 60 days of the announcement granting to HPX and Guma certain rights to develop the project and commence with its feasibility studies, economic and social impact assessments, as well as any environmental impact of such a major undertaking, and that agreement is expected to be presented to the Legislature for its ratification.