NewsWest AfricaIron ore drives Liberia's extraction boom

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Posted on Friday, 31 August 2012 11:12

Iron ore drives Liberia's extraction boom

By Tamasin Ford in Monrovia

Two decades of civil war and rust were swept away when ArcelorMittal reactivated Liberia’s iron ore mines; 1m tn have now been exported/Photo©Getty ImagesAs ships full of iron ore leave Liberia for the first time since the end of the civil war, oil exploration offshore is attracting interest from big investors.

 

The attraction of Liberia to foreign investors is self-explanatory – rich natural deposits of gold, iron ore, diamonds and an abundance of rubber, palm oil and timber. The continuation of peace and stability under President Ellen Johnson Sirleaf has enticed a flood of foreign investors to develop projects in the small West African nation. In 2009, the Harvard-trained economist helped Liberia to become the first African country to be compliant with the Extractive Industries Transparency Initiative.

Since 2006, the government has signed $19bn worth of concession agreements covering the mining, agriculture and forestry sectors. In September 2011, ArcelorMittal became the first company to ship iron ore out of Liberia since the end of the civil conflict in 2003, hitting 1m tn in March of this year. Exports are expected to rise to 4m tn by the end of 2012.

More companies are following suit. Russian steel firm Severstal bought out its minority partner Afferro Mining in April and then announced it would invest $66m in the Putu iron ore project in south-east Liberia.

China Union signed a $2.7bn deal to redevelop Liberia's Bong mines in January 2009. BHP Billiton has an exploration permit, but the Australian miner declined to comment on its expansion plans. If iron ore development keeps going at this pace, the International Monetary Fund (IMF) predicts, the value of iron exports will overtake rubber by 2013 (see graph).

The legal framework falls far short of international best practice, agencies responsible for the oil sector lack capacity and there is evidence of mismanagement

Questions remain over the decision-making behind concession sales, most recently related to the January 2010 award of the Western Cluster reserves to little-known Indian company Elenilto, which then sold on its stake in 2011 to Sesa Goa, a subsidiary of India's Vedanta Resources. In May, Sesa Goa said it expected its first shipment of iron ore by March 2014. Critics also question the award of the Bong mines concession to China Union, saying the company does not not have the expertise or the funds to develop the mine.

Offshore promise

There is also the promise of oil. Recent discoveries in Sierra Leone and Ghana have fuelled a scramble to explore Liberia's 17 offshore blocks. In Febru- ary, Africa Petroleum Corporation (APC) discovered "significant" amounts of oil in Narina 1-well on the LB-09 Block. Colourful Australian-Romanian businessman Frank Timis, whose companies dominate the resource industry in neighbouring Sierra Leone, runs APC.

US firm Anadarko has also begun exploratory drilling in offshore block LB-10, 10% of which was bought by Japan's Mitsubishi Corporation in October 2011. Exploration at the Montserrado-1 offshore well, which Anadarko operated in partnership with Irish firm Tullow Oil and Spain's Repsol, was abandoned in November after a non-commercial oil discovery. Chevron also began drilling in April.

But amid claims by civil society groups that the National Oil Company of Liberia (NOCAL) paid lawmakers inappropriate 'lobbying fees,' there are continued calls for reform of the oil sector.

In a September 2011 report, the non-governmental organisation Global Witness said: "The legal framework falls far short of international best practice, agencies responsible for the oil sector lack capacity and there is evidence of mismanagement by NOCAL." If Liberia develops and enforces its existing laws, Global Witness says, oil revenue could "be critical to the development of what is one of the poorest countries in the world".

Foreign ownership of resource extraction projects has historically meant cheap labour for the concessionaires and very little for the average Liberian. "There is not much concessions can do to stimulate growth other than providing money for government coffers. The only way to translate it to Liberians is to take that money and pump it back into the economy," says Yuri Sobolev, the resident representative of the IMF.

The National Investment Commission estimates 90,000 jobs will be created by the concession agreements in the next decade, but Sobolev points out that 50,000 new people enter the job market each year, meaning the concessions will absorb very few of the unemployed●

 This article was first published in the July, 2012 edition of The Africa Report, on sale at newsstands, via our print subscription or our digital edition.



Last Updated on Friday, 31 August 2012 11:31

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