Guinea and its iron ore: Let the people benefit, for oncePosted: June 5, 2014
Guinea’s government may at last be dealing sensibly with its mineral riches
BURIED beneath the mist-capped mountains of south-eastern Guinea is one of the world’s biggest deposits of iron ore. Estimated at around 2.2 billion tonnes, the Simandou concession contains almost as much as the entire global iron-ore industry produced in 2013. Thanks to its size and unusually high quality, some experts say that whoever controls Simandou may dominate the world’s iron-ore sector for a generation.
After a decade of wrangling, Guinea has now struck a deal worth $20 billion with Rio Tinto, a British-Australian metals and mining giant, to exploit the southern half of the deposit. This should enable the company to mine 95m tonnes of ore from the jungle-matted mountains every year, creating 45,000 jobs and doubling the west African state’s GDP. Rio Tinto has also agreed to build a deepwater port and a railway line to take the ore 650km (400 miles) to the sea. Guinea’s government hopes it will create a “growth corridor” stretching the length of the country.
Until recently it had looked as though Guinea would gain little from its abundant natural resources, which also include diamonds, bauxite and gold. The dirt-poor country has been a classic case of the “resource curse”: blessed with natural riches but still languishing at the bottom of almost every development index, thanks to corrupt, warmongering rulers.
Days before he died in 2008, Guinea’s then dictator, Lansana Conté, signed over the rights to mine the northern half of Simandou, which Rio Tinto then owned, to an Israeli businessman, Benny Steinmetz, for $160m. Mr Steinmetz soon sold a 51% share on to a big Brazilian mining company, Vale, for $2.5 billion, prompting Mo Ibrahim, a Sudanese-born British telecoms billionaire and philanthropist, to remark, “Are the Guineans who did that deal idiots, or criminals, or both?”
In April the democratically elected government of President Alpha Condé stripped Mr Steinmetz and Vale of their concession. Mr Steinmetz has begun arbitration proceedings against the government of Guinea; Rio Tinto is suing both Steinmetz and Vale, accusing them of conspiring to steal its rights. The Guinean government has said that Vale may not have known about the various allegations of dishonesty against Mr Steinmetz and is therefore free to bid in the future for the rights to blocks in the Simandou area that have yet to be allocated.
The new Rio Tinto deal may come to be seen as the moment when Guinea finally began to take advantage of its fabulous mineral wealth. “With massive infrastructure investment, this project is of critical importance,” says Mr Condé. “It’s a nationwide priority that goes beyond the mines and far beyond our generation.”