23 December 2008
Meanwhile, IFC mining investments in Guinea face uncertainty after the government revoked half of the IFC-backed Simandou concession, and over the future of the massive Guinea Alumina Project as Guinea's president dies.
In an interview with Reuters, Lars Thunell, head of the International Finance Corporation (IFC – the World Bank’s private sector division) committed to stepping up equity investments in the mining sector to support projects whose viability might be affected by low global demand. However, at a time when virtually all sectors of the global economy are experiencing declining investment, some question whether the use of scarce public funds to expand mining operations best serves the institution’s poverty reduction mandate.
Meanwhile, by all indications, the IFC is moving ahead with plans to invest $500 million in the Guinea Alumina Project, a massive joint venture led by BHP Billiton in western Guinea that would include a bauxite mine, alumina refinery, power plant, and port facilities. The investment, which includes $200 million from the IFC’s own account and $300 million leveraged from other investors, would represent the IFC’s largest mining investment ever. With an estimated $4.7 billion price tag, the project would also become one of the largest capital investments in sub-Saharan Africa. The project is expected to be submitted to the board of the IFC for approval on January 30, 2009.
Earlier this month, the African Development Bank (AfDB) announced that it had approved $450 million through various financial instruments for the project. That announcement came just days before Metal Bulletin revealed that the estimated production date would be delayed by two years to 2013. The article also suggested that the European Investment Bank and a number of export credit agencies are considering their own investments in the project.
While project promoters are touting the transformative benefits for Guinea’s languishing economy – it would boost Guinea’s processing capacity to turn bauxite into aluminum – the project has also raised eyebrows about the substantial governance risks involved. Guinea has long been one of Africa’s most corrupt countries, and the death of President Lansana Conté on December 22 after 24 years in power adds a new element of uncertainty to a situation that has deteriorated in recent years. Guinean unions staged a nationwide strike in early 2007, which was met with brutal repression that resulted in over 150 people killed. Protests continued as recently as October 2008 in the mining town of Boké – the site of the proposed Guinea Alumina refinery - where citizens blocked trains that transport bauxite to the coast while they lack access to basic services such as safe water and electricity.
While IFC prepares to present the Guinea Alumina Project to its board, Rio Tinto has announced that it is shelving its $6 billion Simandou iron ore project in Guinea, in which IFC has a 5 percent share. The project has endured a protracted legal dispute, in which earlier this month the Guinean government revoked half of the Simandou concession citing insufficient progress in exploration and sold it to one of Rio’s competitors.
Resources
- IFC looks to increase mining equity stakes-CEO by Wendell Roelf, Reuters, December 4, 2008
- AfDB extends up to $450 mln for Guinea aluminia venture, Reuters, December 11, 2008
- Global Alumina's Guinea alumina jv delayed; ADB provides funding, Metal Bulletin (subscription required), December 12, 2008
- Mining communities will not let up “despite repression,” IRIN, November 4, 2008
- Rio Ordered to Give Half of Guinea Concession to BSG by Jean Chua and Brett Foley, Bloomberg, December 11, 2008
- IFC considers record mining investment in Guinea as its Simandou concession comes under dispute, Bank Information Center, August 11, 2008