282020Oct
Guinea’s mines: digging up good news

Guinea’s mines: digging up good news

The Republic of Guinea is an unfolding example of how Africa’s vast resource potential can start to be realised.

It has been described as “a geological scandal” thanks to its rich mineral deposits, yet the Republic of Guinea has been “a notorious case-study in governance and economic failure for more than half a century”, according to Baba Hady Thiam, senior partner at legal firm Thiam & Associés.

The country – sometimes known as Guinea-Conakry – is still one of the poorest in Africa, but 2019 reports from such respected bodies as the World Bank, the African Development Bank (ADB) and the US Commerce Department paint a fairly upbeat picture of economic prospects.

The engine of improvement has been mining, with the ADB declaring: “Guinea has exceptional mining potential. Including two-thirds of the world’s known bauxite reserves, as well as gold, iron and diamonds.”

The state of play in Guinea’s mining sector was sketched out by Baba Hady Thiam during a recent West African mining webinar held under the African Influence Exchange banner.

“Since 2010, unprecedented reforms have made the Republic of Guinea one of the best destinations for mining investments in Africa,” Baba Hady Thiam told the online delegates.

Since 2010, there have been– unlocking international engagement in the former French colony.

And foreign interest there surely was. Guinea has:

* more than a third of the world’s bauxite reserves, i.e. nearly 40 billion tons with a grade of more than 40%. (Bauxite is the principal ore used in making aluminium);

• The largest unexploited iron deposits in the world, at 20 billion tons, with a quality grade above 60%;
• A significant gold deposit of more than 10,000 tons that has drawn the likes of South Africa’s AngloGold and Russia’s SMD to start mining;
• Large, but undetermined, diamond deposits of at least 25 to 30 million carats; and
• Rich sprinklings of various other valuable minerals.

The US Geological Survey shows Guinea has moved up to be the world’s third largest producer of bauxite, with 57 million tons annually – behind Australia (86 million) and China (79 million) and ahead of Brazil (29 million).

The huge increase in production in just a few years is mainly due to the rapid expansion in operations by Société Minière de Boké (SMB), a consortium of Chinese, Singaporean and local interests.

Guinea is targeting second place in the bauxite world, according to recent statements by the Minstry of Mines.

Achievements have been possible because of the aforementioned reforms, which include:
• A new mining code in 2011 with incentives for investment, guarantees of state revenue, environmental protection and anti-corruption measures;
• A “shared use of mine-related infrastructure policy” – with a master plan for mining ancillary infrastructure;
• A One-Stop Shop to speed up admin for permits and other authorisations;
• Modernisation of the Mining Cadastre;
• Compliance with the Extractive Industries Transparency Initiative
• A 2017 Corporate Social Responsibility and Local Content Policy; and
• Online publication of all mining contracts.

New mining projects include the extension of capacity at the Sangaredi bauxite deposit in Boké by the Compagnie des Bauxites de Guinée (CBG), a consortium of global giants Rio Tinto, Alcoa and Dadco. Current production of 16 million tons will rise to 28 million by 2027 – with $1 billion spent on the factory and the port of Kamsar.

Another new project involves the Nimba iron ore deposit – owned by BHP, Newmont and Orano – by High Power Exploration (HPX), a US-based company with an operating office in Canada.

Baba Hady Thiam told webinar delegates the mining sector accounted for about 83% of Guinea’s export earnings and about 20% of gross domestic product (GDP).
“In 2020, the resulting local mining income amounted to about US$44 million”, which was transferred to local development funds.

He added that the Mining Sector Development Plan is one of the key tools of the government’s national economic and social development strategy.

“Execution of the plan makes it possible to manage the financial and social benefits expected from an efficient, sustainable and responsible exploitation of the mining potential and to lead to a structural transformation of the Guinean economy,” said Baba Hady Thiam.

A 2019 decree setting “a legal and institutional framework for local content” aims to promote the use of local skills, locally produced services and materials, local sub-contractors and corporate training of local people. It sets a minimum local quota of 10% for management staff, 25% for supervisory, 50% for skilled workers and 100% for unskilled.

Nothing is ever plain sailing. Among “considerations and obstacles” mentioned by Baba Hady Thiam were: governance problems, political risks, a chronic deficit in transport and energy infrastructure and a lack of transparency in the fiscal mechanism.

And, of course, the full consequences of the Covid-19 pandemic are yet to be fully seen.

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