The Guinean government has singled out United Co Rusal’s Friguia aluminium complex, and the joint venture by Vale and Beny Steinmetz Group (BSG) as the first contracts to be examined in its mining contracts review, well-placed sources said.
All mining contracts in the country will be under the spotlight
, but Guinea, which has just assembled a technical team to review and renegotiate the contracts, will initially set its sights on the most controversial mining deals in the country, sources said.
“They will start with the most contentious contracts, for example the BSG-Vale joint venture or potentially Rusal’s Friguia
, which has had lots of problems with the government,” one source said.
A very senior member of the technical committee told Metal Bulletin that it will meet soon to set out the agenda and timetable of the review process.
“All the companies’ contracts will be looked into; it’s not only Vale and Rusal,” the official said.
“I am not singling out any individual names. All I can say at this moment is that discussions will be had between us and these companies, and everything – everything – will be looked at,” he added.
Guinea alleges that the Israel-based BSG group did not follow correct procedures when it sold a 51% stake in iron ore blocks 1 and 2 of Simandou North for $2.5 billion in 2010.
BSG has defended the sale, which it said was “ratified and publicly welcomed by the Guinean authorities at the time” and that mines minister Lamine Fofana inked the deal.
Vale has threatened to pull out of Guinea
and will announce its final decision at the end of this year, it said.
The uncertainty caused by the contracts review process is “slowing down operations in Guinea”, Africa Practice analyst Tom Wilson told Metal Bulletin.
“Guinea would be better starting with the most forward-looking contracts as opposed to complex ones. They could make some [progress] with forward-looking contracts rather than getting bogged down in complex negotiations,” Wilson said.
Rusal’s relations with Guinea have suffered amid scrutiny over the terms of its acquisition of the 630,000-tpy Friguia aluminium complex
Guinea officials said Rusal’s contract for the 2006 privatisation of Friguia is being scrutinised because it was granted directly by former president Lansana Conté and did not pass through parliament as required by the country’s law.
“[In both cases] the outlook for the revisitation process hinges on the technical capacity of the negotiating team. There is an imbalance in the legal and technical knowledge of the government and private partners,” Wilson told Metal Bulletin.
“As a result, negotiations are likely to take much longer than anticipated and delay the development of the sector, which could pose political problems for [current president Alpha] Condé,” Wilson said.