Monday, May 26, 2008

Sierra Rutile Tops Gov’t Mining Review

By Ibrahim Seibure and Kevin Hill

The government has focused its mining review on getting a better deal from Sierra Rutile, according to the Deputy Minister of Mineral Resources.

Deputy Minister Abdul Ignosi Koroma said that many mining deals were negotiated during a time of political instability, which undermined the government’s bargaining position.

“It is the job of the Ministry of Mineral Resources to see that the profit of mining goes for the people of the country. This is the major reason we are doing this review. The agreement was made during war time, we were impoverished, bad deals were done,” he said.

Mining is “the engine of our economic growth for the development of the country”
Past government policies were “not geared towards this, not for the development of the country. Mineral resources are Sierra Leone’s link to infrastructure development.”

The Minister of Mineral Resources, Abubakaar Jalloh, has just returned from a trip to Liberia to learn from that country’s recently completed review of mining contracts. This knowledge is expected to help Sierra Leone to better renegotiate.

Sierra Leone is known around the world for its diamonds. The country is infamous for the blood diamonds which helped fuel a decade long civil war. The country also has one of the world’s largest deposits of rutile, or titanium dioxide.

Rutile is a mineral often used as a brilliant white pigment in paints, plastics, papers, foods and as a reflector of the sun’s UV rays in sunscreen.

Rutile in Sierra Leone

Rutile mining in Sierra Leone started in the 1970s but was disrupted during the civil conflict in 1995. Sierra Rutile shut down for 10 years, restarting full operations in 2004.

Rutile is found in the topsoil of Moyamba and Bonthe districts in the southern region of Sierra Leone. It is mined by a process of flooding, dredging and separating the soil from the valuable mineral content. This leaves large man-made lakes behind and destroys the topsoil in the process.

The Sierra Rutile concession area is 580 square kilometres, for which they pay surface rent of $10US per acre to the landowners. Plans are to disturb 10% of the land during the life of the mine. This means that 58 square kilometres of the land area in the community will be destroyed.

Sierra Rutile is in the process of expanding its operations with use of a second and third dredge to extract the rutile. Mining is expected to last for the next twenty years in the area.

According to an April 2007 Reuters report of April 2007, “Sierra Rutile's parent company Titanium Resources Group (TRG), reported 2006 sales of $51.3 million from its rutile and bauxite operations in Sierra Leone, helping the company trim full-year pretax loss to $1.47 million, from losses of $17.5 million the previous year”.

Pa Osman Kamara, the town chief of Mogbamoh, where the mining is taking place, says that the mine is a mixed blessing for his community. It provides some economic opportunity that would exist otherwise, but is environmentally destructive and does not live up to its corporate social responsibilities.

“We are happy the mine is here, but we don’t feel a part of the mine”, he said.

The chief complains that infrastructure in the area is lacking, including poor housing for workers and bad water quality for the community. The power grid passes by the community and roads remain unpaved. Streams that used to serve the people have been dammed.

According to the chief, residents in the area face discrimination when the company hires new employees. People are brought in from the outside, like Freetown or Ghana, and locals cannot find work.

“We are the people here and we need to be part of the employment” said Chief Kamara.

“We’re not happy with the expansion…(we) won’t benefit from the mine if the community is surrounded by water. Continued expansion would mean that people would have to use boats to access parts of the community”, said Kamara.

A local resident who was able to find skilled work with the mine, who requested anonymity in order to protect his job, reiterated that having a job is good, but that the conditions of work need to be improved.

“We’re happy because we’re working, it’s not good to be idle”, except that “the salary is very low: Le275,000 per month.”

Impact of the mine

Director of Corporate Affairs for Sierra Rutile, Mr. John Bonoh Sisay, insists that Sierra Rutile is acting in good faith and is committed to bringing development to the communities it operates in.

As an indication of the impact the mine has on the area, Mr. Sisay said that at the time of the restart of the mine in 2001 there were only 10,000 people living in the area. The population has now swollen to 140,000.

According to Sisay, Sierra Rutile is “creating an economy in a part of the country where there is no economy”. Further, the company currently employs 2000 people and an estimated 20,000 people benefit from the mine either directly through family benefits and salary or as secondary businesses and contractors.

Sierra Rutile maintains nearly all the feeder roads from Mile 91 to Rutile, but can’t afford to tar the roads. This provides access to the mine and neighbouring villages for the area.

The mine has created the Rutile Foundation, an organization that aims to be an engine of community development, rather than assistance. It has produced a structural development plan in consultation with landowners, chiefs and the EU.

The foundation has raised $300,000US, but has yet to spend the money.

Plans are in place to build a vocational school, in order to build capacity in the community. The school will train plumbers, electricians, and welders. It is expected to be completed in the next 2 to 3 months, but construction has yet to begin.

“The more employment you have, the less tension the company feels,” Sisay added.

Sisay said that employees are given, on top of their salary, an additional Le200,000 per month in non-taxable benefits, including a Le70,000 bag of rice, Le30,000 transportation, a kerosene allowance and access to medical facilities.

When asked about the environmental impact of the mining operation, Mr. Sisay said,
“Of course there is environmental impact. The challenge is how do we minimize that impact.”

Sierra Rutile commissioned American-based Knight/Piezold to author an environmental impact report, which has been approved by all stakeholders including the government of Sierra Leone.

The mine is also subject to a quarterly review of their operations by the European Union and the government of Sierra Leone.

Chief Environmental Officer of the Ministry of Lands, Country Planning and the Environment, Cyril Jusu, said the national environment board has not been fully functional since its inception.

The Ministry of Lands, Country Planning and Environment is responsible for issues pertaining to environmental concerns in the country.

He said the Environmental Impact Assessment (EIA) should be followed to the letter now that the government is going to review all mining agreement in the country.

“The EIA planning should incorporate the participation of the local communities and all stakeholders during the preparation and implementation process,” he said.

Legal Issues

Abu Brima, Director of the Network Movement for Justice and Development, claims that the current agreement between the government and Sierra Rutile is contrary to the constitution of the country, and that the economic and social rights of Sierra Leoneans are violated by the terms.

“It is not a normal contract, but rather a parliamentary act. The Sierra Rutile and Koidu Holdings agreements are above the mines and minerals act,” said Director Abu Brima.

He claims that Sierra Rutile benefits from a “tax holiday”, paying only 1.5% on goods imported and just 0.25% for good exported, or rather just an export inspection fee.

“Price of rutile has increased, but it is not reflected in the agreement”, he said. “It’s a rip off.”

Brima also claims that all minerals mined by Sierra Rutile are to be exported, which means there is no provision for adding value to the mineral in Sierra Leone, potentially costing the country hundreds of jobs and valuable income.

“We are finding ways to bring this to court. It’s quite expensive, but it’s an opportunity to expose the bad. Economic recovery depends on how Sierra Leone deals with its minerals,” he said.

No time frame has been given for the legal challenge by NMJD, who are seeking lawyers to try the case. “Just invoke the constitution and all will be nullified… the deal was done in very bad faith” he said.

Mr. Nabieu Vandy, Director of Legal Affairs at the National Commission for Human Rights, agrees that the Sierra Rutile Agreement Ratification Act requires a review.

The agreement “fails to accommodate human rights concerns, and allows environmental degradation as a sole economic motive, built into the agreement”, he said.

The local agreement signed between Sierra Rutile and the community itself is “too weak, is lame. (There is) no enforcement mechanism. If obligations are not fulfilled there is no option for the community to sue”.

Mr. Vandy said “It doesn’t look like a negotiated contract, rather it looks like a standard contract – a sign or don’t fly type of deal.”

“This agreement is not in the interest of the community, nor is there any provision for the benefit of the community”, he said.
“We were at war”

Capital Has Risk

John Sisay believes that the Sierra Rutile Mineral Act was negotiated fairly according to the situation at the time.

“At the time the act was negotiated, we were at war”, he said.

“You were still at war, capital has risk. There is an economic cost of moving money from here to there. Unless you want to be reliant on donor aid forever you have to cut into real world economics, including tax concessions,” Mr. Sisay said.

Sesay also claimed that resource development in the country has stalled as the government carries out its mining review process.

“The mineral sector is stagnating while waiting for reviews. No new investment is being made in prospecting for minerals,” he said.

Sierra Rutile is funded by private equity and a 25 million Euro start up grant given to the government of Sierra Leone by the EU, and loaned to Sierra Rutile at 8% interest per annum. The company is expected to begin repayments on the loan at the end of June of this year, according to Deputy Minister of Mineral Resources, Abdul Ignosi Koroma.

The Sierra Rutile deal was negotiated with the assistance of international bodies including the World Bank, according to Deputy Mineral Resources Minister Koroma.

“It was the best they could do at the time. The deal was their best deal, but now is clearly unfair for Sierra Leone,” the deal was “the best decision at the time. We were just recovered (from the war)”, Koroma said.

The deal was done primarily to promote productivity and improve the image of Sierra Leone. The world believed that Sierra Leone was still at war. Attracting business at the time was extremely difficult.

“In this business, you win some and you lose some. We now hope that we can win more”, Koroma said.

Mr. Abu Brima, of NMJD believes that Sierra Rutile “took advantage of the lack of good policies and laws in the country and the vulnerability of the country. Corporate entities take undue advantage of that. They use leverage to twist the arms of weak governments”, he said.

Balance the Deal

Previous to the Mines and Minerals Act, passed in 1994, Sierra Leone relied on a chapter of the former colonial laws for guidance on mining issues. Concessions were often granted without consultation or planning.

Since the Mines and Minerals act has come in to place there are now provisions for technical advice on decision making and checks and balances on the power to award concessions. An executive committee, including the president, now investigates potential investors and provides direction to the Ministry.

According to Mohamed Mansaray, Director of Geological Survey, these checks and balances allow Sierra Leone to “balance the deal”. Investors make money, but must then start to do something for the community. “If you don’t do this we take away your concession”.

“Government is not a good business man. Encourage the business man to come in and do business and we (government) should regulate it properly”, Mansaray said.

Deputy Minister Koroma said the reason the government is reviewing mining deals, including the Sierra Rutile Act, is so that it can negotiate better agreements that will bring more benefits to the people of Sierra Leone. He could not say when the review process would end.

1 comment:

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