By Conor Godfrey
The feasibility studies are complete.
The ore deposit in Simandou, Southern Guinea, is 66% iron (high quality), and is likely the largest undeveloped iron ore deposit in the world (110 km).
One stockbroker interested in the project was quoted as saying– “It’s a world-class monster.”
Over the next several years, mining giant Rio Tinto, in conjunction with state backed Chinese mining conglomerate Chinalco, will spend an initial 6 billion dollars developing the necessary infrastructure to extract Simandou’s ore.
According to Rio Tinto executives, this infrastructure will include a trans-Guinean rail line from Simandou to the coast, a new deep water port South of the Capital Conakry, and of course, the infrastructure surrounding the mines themselves.
As Guinean officials were cleaning the drool off their desks, Rio Tinto announced that the Guinean government stood to reap 200 million dollars in tax revenue from the first few years of operation with a proportionally higher rake as mine output increases.
This is more money than all the other concessions in Guinea generate combined.
I hope and fear in equal measure.
A trans-Guinean railway would increase Guinean commercial capacity by leaps and bounds.
The announcement also refocuses attention on the transition authorities promise to hold democratic elections this June.
How serendipitous would it be for the newly elected government to have 200 million extra USD to jump start social programs and convince the population that a civilian government will indeed make their welfare a priority?
(See “The Coup d’Etat is Back” for the other possibilities.)
Watch this Rio-Tinto video for a grandfatherly manager’s take on the benefits of Rio Tinto’s giant mine.
While I acknowledge the vast potential for social improvement this deposit offers, my sense of déjà vu is disconcerting.
The presence of mining giants in Guinea dates back to the mid-1980s (1996 for Rio Tinto). How much has Guinea’s overall social welfare improved since then?
Negligible, if at all.
Ideally, the Guinean government would be a relatively clean, efficient organization capable of speaking with one voice, striking hard bargains with the mining companies, and implementing effective monitoring and legal safeguards to ensure that the money flows into government rather than personal coffers.
I expect the Ghanaian government to perform in this fashion when they start producing oil at the end of this year.
Alas Guinea is not Ghana. Instead, Guinea occupies the 168th slot out of 180 on Transparency International’s Corruption Perceptions Index, the government is riddled with internal divisions, and mining revenue historically has financed homes in France rather than roads and electric grids in Guinea.
Do not mistake my apprehension as opposition to private sector development or resource exploitation.
I believe in the private sectors’ power to transform developing economies. I also believe that mineral resources, in consultation with local authorities and relevant environmental groups, should be exploited in a mutually beneficial way.
Yet, the current dynamics inside Guinea make this almost impossible. Rio Tinto’s mission is to satisfy shareholders—not to transform the culture of corruption in Guinea.
Currently, Rio Tinto’s PR and social responsibility departments are making all the right noises.
I have no doubt they will build a few schools and health clinics, offer several thousand local jobs, and hopefully make good on their promised trans-Guinean rail line.
Yet, I fear that generations from now when Guinea gets up off her knees and stands ready to use her natural bounty for the benefit of all Guineans, the wells will be dry, the mines stripped, and the foreigners gone in search of more low hanging fruit.
To avoid this, civil society, NGO’s, commercial partners, and donor countries should begin a full court press on Conakry to make government finances more transparent and ministers more accountable before the revenue from Simandou begins pouring in.
I will even make the naïve suggestion that civil society should force the government to draw up transparent development priorities, and then in conjunction with Rio Tinto, hire a credible outside auditor to report on how mining revenue is being collected and spent.
This would make far more difference to Guinea than a handful of schools or rural health centers.