Guinea’s Erratic Politics Unsettle Miners

Guinea’s new military chief is keeping mining companies in the West African nation on pins and needles after yet another televised threat against a foreign mining firm there.

Captain Moussa Dadis Camara, who took power after the death of President Lansana Conte in December, warned Global Alumina (GLA. U-T, GBAMF-O) that he would rip up its contract with the state if the company did not provide a schedule of its activities, Reuters news agency reported on March 27.

“You must give us a timetable of your activities so Guineans can ultimately benefit from Guinea’s riches,” Reuters quoted Camara as saying on national television. “Just as the government reclaimed that zone from (resources firm) CBG to grant it to you, the state can reclaim the contract from you.”

Global Alumina and its joint-venture partners BHP Billiton (BHP-N, BLT-L), United Arab Emirates state-owned aluminum smelter Dubal Aluminium, and Mubadala Development Co., an Abu Dhabi government investment fund, are building an alumina refinery in the country.

(Dubai Aluminium owns one of the largest single-site aluminum smelters in the world, while Mubadala invests in strategic sectors such as energy, utilities, health, real estate, public-private partnerships, basic industries and services.)

When asked for comment, Renee Kearney, a spokesperson for the joint venture, declined to confirm or deny the Reuters report. Instead, she said in an email that the joint venture would “continue to work closely with the government of Guinea on all aspects of the project. However, we do not comment on the content of these discussions.”

Ruban Yogarajah, a spokesman for BHP Billiton, refused to discuss the matter. “We can’t confirm it and we’re not commenting,” he said.

The latest threats against Global Alumina follow Camara’s detention of former mining ministers and an order to shut down Anglo-Gold Ashanti’s (AU-N, AGD-L), Siguiri mine after one of the gold major’s directors missed a meeting at a mining forum the military chief had convened.

Camara later relented and allowed AngloGold to reopen the mine four days later, on March 24.

Since coming to power, the 45- year-old former army captain has promised to fight corruption and improve living conditions in Guinea.

NGOs call the mineral-rich country — steeped in bauxite, alumina, gold and diamonds — one of the poorest and most corrupt nations in the world.

Guinea borders Sierra Leone, Liberia, Guinea-Bissau, Senegal and the Ivory Coast.

Camara has said that national elections will be held before December 2010.

Global Alumina says the estimated US$3-billion refinery would represent the largest single private investment in sub-Saharan Africa.

It says the refinery, to be built in northwestern Guinea and expected to produce about 3.6 million tonnes per year, will create more than 10,000 construction jobs and 1,500 permanent mining and refinery operations jobs.

With a projected three to five indirect jobs for each direct job created, the project’s employment impact on the economy is estimated to be more than $300 million over the construction period and $30 million per year for the life of the refinery, the company says on its website.

Other benefits to the economy include direct local procurement of more than $100 million during the construction period.

Under the basic agreement, the joint venture will pay the government annual bauxite royalties of roughly US$9 million. It will also make fixed annual payments in lieu of income taxes for the first 15 years of operation of US$5 million for the first five years, US$8 million for the next five and US$12.5 million for the last five years and then revert to the statutory income tax rate, which is currently 35%. In addition, the joint venture has agreed to pay local community development taxes of US$500,000 per year for the first 15 years and US$1 million thereafter.

At presstime, Global Alumina shares traded at about 45¢ apiece in a 52-week trading range of 35¢- $1.84. The company has 195.6 million shares outstanding.