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Guinea’s Simandou iron ore tender transparency called into question

By David Whitehouse
Posted on Thursday, 1 August 2019 18:51

The Simandou mountains in Beyla, Guinea. REUTERS/Saliou Sam

Guinea’s tender for part of the Simandou iron ore assets, given up by Israeli tycoon Beny Steinmetz earlier this year, is rekindling suspicions that the dice are loaded.

The government, on 13 July, issued a tender for a smaller share of the Simandou iron ore resource, comprising blocks 1 and 2. Steinmetz relinquished control of the assets in February after reaching an out-of-court settlement following a lengthy dispute with the government. Guinean Minister for Mining and Geology Abdoulaye Magassouba says that the reissued tender will be “open, competitive and transparent”.

The tender timetable is tight. Prospective bidders must express interest by 2 August and offers must be finalised within 30 days. Candidates will have to pay $300,000 to access tender specification documents.

“Such pay-to-play terms undermine the Minister’s claims of transparency,” says Eric Humphery-Smith, an analyst at Verisk Maplecroft in London.

Staking claims

The stakes are high. Rio Tinto, which holds a 45% stake in Simandou’s blocks 3 and 4, which it has also been trying to sell, describes the resource as one of the world’s biggest undeveloped high-grade iron ore deposits. High-grade iron ore is attractive to buyers, such as China, because there is less pollution from the processing than with lower grades. But development has been hampered by the remote, mountainous location and poor infrastructure – and by Guinea’s insistence that the ore is shipped from the country’s ports.

Australian iron ore group Fortescue Metals, seen as the frontrunner in the tender for blocks 1 and 2, has denied that a memorandum of understanding has been signed. But Humphery-Smith suspects the outcome may be pre-determined.

If Fortescue secures the blocks, it would provide “compelling evidence that Guinean mining tenders are transparent in name only”, he argues.

Recurrent pattern

The US State Department in July said that Guinea has the potential to be an “economic leader in the extractives industry”, yet “persistent corruption and fiscal mismanagement” remain obstacles. The history of opaque tenders is long and persistent.

According to Humphery-Smith, investors would be “hard-pressed to find an example of a Guinean mining tender in which the government disclosed the full list of bidders, never mind the relative value of their offers, against the tender’s scoring criteria”.

Verisk Maplecroft’s corruption index, of which contract publication is a key component, scores Guinea at 1.96 out of 10, and the firm calculates a 71.9% probability of Guinea remaining in the “extreme risk” category in 2021.

That verdict is underscored by Transparency International’s 2019 Global Corruption Barometer. The index shows Guinea as the seventh-worst country in Africa in terms of public perception of whether or not the government is doing a good job in tackling corruption, with 76% of people surveyed saying the government is doing badly.

The Transparency International survey showed that 62% of people thought corruption in Guinea had got worse over the last 12 months.

The bottom line: Transparent tenders open to all are essential in helping realise the potential at Simandou.

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