Liberia's Govt Signs U.S.$2.6 Billion Mineral Agreement

The Sirleaf Administration believes Liberia’s economic salvation – and perhaps the reconciliation of its people – lies in the attraction of foreign investment in order to reduce poverty. The administration has therefore signed yet another mineral management agreement with the “winner” of a recent bid. Economist and veteran civil rights advocate, Dr. Togbah-Nah Tipoteh, agrees; he also agrees that the administration’s declaration of “zero tolerance” for corruption is a good starter. However, he says attracting foreign investment by violating the investment code is tantamount to attracting no investment at all. He is therefore raising legal and technical questions. 

The government of Liberia says it has signed a US $2.6 billion mineral development agreement the Western Cluster Ltd, which reportedly comprises the controversial Elinelto and two holding companies – Sesa Goa and Bloom Fountain Limited – to mine iron ore in western Liberia.

Benefits of the agreement

The Chairman of the National Investment Commission (NIC), Natty O. B. Davis, told the media yesterday that when the Senate ratified the agreement, it would provide over 2,500 jobs for Liberians, in addition to several other social contracts that the agreement embodies.

According the NIC chairman, Elinetto and the Sesa Goa Comines would jointly operate the iron ore clusters, with the latter group holding majority shares.

There has been controversy over Elinetto’s financial capacity and mining experience, but Mr. Davis said government was convinced that the companies in the venture have the required finances and experience to operate the cluster. He said government’s confidence was essential in helping to alleviate public fears in managing the Western Cluster.

“A Mineral Development Agreement (MDA) valued at over US $2.6 billion has been signed by the Government of Liberia (GOL) and the Western Cluster Limited”, the NIC boss reemphasized.

He noted further, “The agreement will allow the concessionaire to make significant investment in the development of the Western Cluster Region, and a railway from Monrovia to Bomi. This infrastructure development will not only facilitate mineral exploration but also serve the development need of the region.”

According to the agreement, the company will pay US $42 million in up-front fees, the largest payout to the government of Liberia for mineral development agreement.

Additionally, Mr. Davis said, the mineral deal would contribute to the Geology Department of the University of Liberia, including the building of a long-lane asphalt paved all-weather road from Tubmanburg to Mino River for use by the public.

“Furthermore, in seeking the interest of its citizens, the government ensured that the Mineral Development Agreement, among other things, gives priority to qualified Liberians in terms of employment.

“[It] will also help to improve access to education and healthcare in Bomi, Cape Mount, and Gbarpolu counties, as well as give preference to Liberian supplies in terms of procurement, including straight adherence to the environmental laws of Liberia,” Mr. Davis said.

Those who signed the agreement were Western Cluster Limited’s CEO, Jacob Angel; Sesa Goa’s CEO, Prasum Kumar Mukherjee; Lands, Mines, and Energy Minister, Roosevelt Jayjay; and NEC Chairman O. Natty B. Davis, II.

Others who signed the agreement as members of the Inter Ministerial Concession Committee (IMCC) were Deputy Minister of Finance Francis Karpeh and Justice Minister Cristiana Tah.

Observers say the value of the Sirleaf Administration’s investment attraction is likely to rise to US $20 billion if the senate ratifies the Western Cluster agreement.

Sesa Goa, which is reportedly India’s largest producer and exporter of Iron ore, has a market capital of US $2.6 billion.

According to the new mineral deal, Sesa Goa will be responsible for all operations of the project.

Its parent company, Vedanta, is listed in the London Stock Exchange (LSE) and diversified Future Exchange (FTSE), 100%, and is India’s largest and mining company. Vedanta’s net asset is also valued at over US $11.5 billion.

Meanwhile Mr. Davis said the Western Cluster Agreement, when it comes into full swing, would help contribute to the social economic development of the Western Cluster Region.

He said government expected exploratory mining to begin later this year.

Unfortunately, however, not many Liberians share Mr. Davis’ euphoria about the job creation possibility of the new mining deal.

For some Liberian, including Dr. Tipoteh, the new agreement is indication that the Sirleaf Administration was prepared to flout the laws of the country for peanuts amidst huge investment uncertainty.

Tipoteh cries “wolf!”

In the view of longtime opposition leader, Dr. Togbah-Nah Tipoteh, the new deal has not only ignored prevailing evidence regarding the inability and lack of expertise of the key bid winner to operate the iron ore cluster, but that it has also exposed the government’s failure to uphold the investment code of the country.

The criticism of the economist and opposition leader was contained in the August 11, 2011 “Open Letter” he addressed to President Ellen Johnson-Sirleaf in reaction to news that the government has signed mineral development agreement with the Western Cluster Limited.

He told the president that by releasing the “open letter”, therefore, he intended to raise public awareness in order to compel her to take concrete actions in keeping with her “zero tolerance for corruption” vow.

Dr. Tipoteh recalled complaining about the Delta Mining Company’s shortcomings and President Sirleaf’s response by reordering the bidding process, and hoped that the she would take similar steps in the current case.

“After I presented the truth about irregularities in the decision-making about Delta Mining Company, you proceeded to doing the right thing by initiating a fresh bidding process on the Western Cluster iron ore mining. I remain hopeful that you can again make the right decision after the following presentation of the truth about the Elenilto case,” Dr. Tipoteh said.

“Firstly, Elenilto has been declared by your government to have won the bid to do iron ore mining in the Western Cluster when in fact Elenilto did not meet the basic requirement, as specified by the government, which states that Elenilto or any other bidder should have at least 5 years experience in iron ore mining.

“The fact of the matter is that Elenilto does not have one day’s experience in iron ore mining anywhere in the world. Secondly, Elenilto has proceeded to selling 51 percent of western cluster assets of assets in Liberia, which it does not own, to Sesa Goa for a reported USD 90 million,” the economist and opposition leader said.

Dr. Tipoteh quoted media reports as saying that President Sirleaf told the cabinet that she did not sign the mineral agreement because the case of Elenilto was pending before the Liberia Anti-Corruption Commission (LACC) for evaluation and recommendation.

He then wondered who else would have signed such a crucial concessionaire agreement on behalf of the government of Liberia.

“If such representation were made by you to the Cabinet, then who signed the Mineral Development Agreement?” he wondered.

Dr. Tipoteh insisted that President Sirleaf must take seriously media contentions that ‘the travesty in all of these financial machinations is that Elenilto Minerals and Mining Limited has no unique skills, but just friends in powerful places, within the Liberian government’.

He said it was necessary that the president took act on the observation because signing a vital concessionaire agreement with Elenilto, which he said has no “provenance in the iron ore industry” and allowing it to sell off assets it does not yet own was a violation of the investment code of Liberia.

“Madam President, I would be most grateful were you to make a public reply to my public observation and request for clarification of issues in the Elenilto case to enable the people of Liberia to make informed decisions,” Dr. Tipoteh said in closing.