Officials from the China Development Bank (CDB) are offering to finance a substantial part of the Conakry government’s US$8.6 billion overhaul of mining and industrial infratructure, according to a source close to negotiations.
Chinese mining companies are looking at Guinea’s world-class reserves of iron ore and bauxite, and many of the proposed road, rail and electric power projects would be financed through countertrade for mineral exports. Since President Alpha Condé came to power in November 2010, his government has made little progress in unscrambling the many opaque mining and infrastructure contracts set up by successive military governments. There are fears that more countertrade agreements with Beijing could further complicate Conakry’s obligations.
The government passed its new mining code in September 2011 and is pressing ahead with its review of all major mining contracts, but there is still great uncertainty among the big foreign mining companies in Guinea – Anglo-Australian Rio Tinto, Brazil’s Vale and Russia’s Rusal – about the shape of the iron-ore and bauxite projects.
Committee for cooperation
Condé created the Comité de Coopération Sino-Guinéenne in July 2011 to negotiate a framework deal with the CDB. The committee has authority to manage all cooperation issues: it comprises representatives from the ministries of Economy and Finance, Mines and Geology, and International Cooperation, the Agence Chargée des Grands Projets, the Banque Centrale de la République de Guinée, as well as Guinea’s Ambassador to China and China’s Ambassador to Guinea. On 2 March, Condé appointed his minister in charge of strategic questions, Ousmane Kaba, to head the committee.
Prime Minister Mohamed Said Fofana and China’s new Ambassador to Conakry, Zhao Lixing, opened the 50,000-seat Stade Omnisport in Nongo on 19 January, a symbol of the burgeoning bilateral relationship. Built on 239,000 square metres at a cost of 440 mn. yuan ($50 mn.), the Nongo stadium, according to Zhao, is ‘the biggest project of its kind’.
There are only two other big Chinese buildings in Conakry: the Palais du Peuple, the seat of parliament which was constructed during the rule of dictator Sékou Touré (1958-1984), and the headquarters of Radio Télévision Guinéenne (RTG-Conakry), completed under President Lansana Conté (1984-2008). Beijing is helping the state broadcaster switch from analogue to digital broadcasting. The Hôpital Spécialisé de Kipé, located in a Conakry suburb, cost $50 million and was opened in April 2011 by Condé but isn’t functioning for lack of equipment and trained staff.
Even before the new CDB financing for the five-year plan is finalised, there is a raft of new projects under way::
• In March, Guinea selected China Geo-Engineering Corporation to build a 385-kilometre road from Sériba to Médina Gounass to link Guinea and Senegal. The $16 mn. project is financed by the Arab Bank for Economic Development in Africa.
• On 16 February, China Airport Construction Corporation announced it would build an new international airport at Maférinya, about 75 km from Conakry. Financed by China Export-Import Bank, the new airport will be about 12 km long and 5 km wide, said CACC Vice-President Liu Ying after meeting Condé in February.
• On 1 February, Shanghai Construction Group started building a $65 mn. 5-star, 18-storey hotel, a few metres from the presidential palace in Kaloum.
• China Hyway Group – which submitted a multibillion-dollar mines-for-infrastructure deal to the military junta – is still looking for mining permits. There are no guarantees that they will get them (AAC Vol 3 No 12, More contracts as the vote looms & China Hyway Group’s mines-for-roads deal).
• Chinalco (in joint venture with Rio Tinto to develop Blocks 3 and 4 of the giant Simandou iron ore project) has not seen any further upheaval since finally accepting the government’s cancellation to Blocks 1 and 2. Rio Tinto and Chinalco say they are committed to building the Trans-Guinéen Railway that will link the southeast of the country to the west coast over some 1,000 km and at a cost of more than $3 bn. (AAC Vol 2 No 12, Blood and money in the streets).
• China Power Investment Corporation hopes to conclude negotiations in the coming months and get to work on $5.8 bn. in investments for a 4 mn. tonne-per-year alumina refinery at Boffa, a deepwater port at Bel Air and a 340-megawatt power plant.l China International Water and Electric Corporation began construction in March on the 240-MW hydroelectric dam at Kaleta. On 4 April, the government will start work on the $446 mn. dam, of which 75% will be financed by China.
Controversy at Forécariah
The China Power Investment project at Forécariah (AAC Vol 4 No 11, Betting on Boffa) is the best-established in the country but also the most controversial. It is run by the Guinea Development Corporation (GDC), a joint venture between the China International Fund (CIF) and the Guinean government. Part of the problem may be political: former Mines Minister Mahmoud Thiam, who launched several controversial mining deals under successive military regimes, has left Guinea for his base in the United States, where he works as a director of China Sonangol, a CIF affiliate (AAC Vol 4 No 7, Shine on you crazy diamond). Thiam played a key role in negotiating deals for China Sonangol and CIF in Madagascar and Angola.
The GDC was created under the military junta of Captain Moussa Dadis Camara (December 2008-December 2009) and General Sékouba Konaté (December 2009-November 2010). In theory, GDC Mining Corporation would have controlled the operations of other GDC companies in transport and infrastructure relating to the joint venture with the state. However, President Condé wanted to change the terms of GDC projects, such as the right of refusal for all unclaimed mining permits.
‘One does not know if it is truly GDC Mining that is controlling this business,’ said another official in the Mines and Geology Ministry. Another source said the Chinese companies held only a simple mining permit but they seemed certain to take over the project.Under’s Guinea new mining code, a mining permit does not allow a company to extract ore. For that, a company must obtain an exploitation permit for investments less than $1 billion or a mining concession for investments larger than $1 bn.
‘At Forécariah, this rule has not been respected and we cannot allow the export of minerals due to the risk of setting a legal precedent,’ says an advisor to Mines Minister Mohamed Lamine Fofana. He conceded that the government had been slow to act but added that putting the project in a ‘legal framework’ was a top priority.
The Forécariah mine holds about 45 mn. tn. of iron ore, which would guarantee the GDC a lifespan of some nine years at a rate of 5 mn. tn. per year, as projected by CIF. Production at Forécariah began on 23 March and will generate revenues to finance the construction of the mine at Kalia, as well as a railway and deepwater port, explains our source. Kalia has about 4 bn. tn. of high-grade iron ore, according to Bellzone Mining, a Jersey-registered company that operates the Forécariah mine in a joint venture with CIF. A source close to Bellzone says that it plans to work with CIF and GDC at Kalia.
Source: All Africa.Com – 29 March 2012