Sierra Leone Restarts Iron Ore Exports from Marampa After Dispute with US Mining Firm Cools Down
Gerald Group has recently resumed iron ore shipments from Sierra Leone through its newly-formed local subsidiary Marampa Mines. This comes nearly two years after the Sierra Leonean government revoked the US firm’s licenses and tried to evict it from the country over a tax dispute.
That dispute was resolved in May this year when both parties agreed to halt all arbitration and form Marampa Mines in place of SL Mining. While Gerald fully owned SL Mining, it has ceded a 10% stake in Marampa Mines to the government and agreed to pay USD20 million as a one-off settlement. However, there is still substantial uncertainty given volatile iron ore prices and the fragile framework in which recent deals have been reached.
Significance – Easing friction
Sierra Leone was already at high risk of debt distress before Covid. Public debt stood at 66.9% in 2019 largely due to a rise in domestic debt, and the IMF and World Bank projected that debt servicing would absorb close to 50% of government revenue by 2022.[1]The government’s ability to manage this situation improves with the resumption of iron ore exports this year, not only from Gerald’s Marampa mine in Port Loko but also from Kingho Mining’s in Tonkolili. Iron ore previously accounted for around 20% of the country’s export revenue.
Now, increased iron ore prices have been a strong incentive for Gerald and President Maada Bio to accelerate dispute resolution. The president was personally involved in the negotiations, and his appointment of current Mining Minister Timothy Kabbah in August 2020 also helped to ease friction – by removing Kabbah’s predecessor Foday Yokie who initiated the adverse regulatory action in 2019.
The Marampa and Tonkolili mines are situated in the north where the opposition All People’s Congress (APC) draws most of its political support, and so the disruptions in mining operations there have contributed to social unrest as the local economy deteriorated. Police arrested five expatriate employees of Gerald’s defunct SL Mining after host community riots in April 2020. At the time the employees were accused of ‘inciting hatred’. But now, the prospect of restored mining operations has raised spirits among host community constituents.
Meanwhile, the Bio government’s engagement with iron ore mining firms has not progressed through an inclusive process. Members of parliament, some of whom we have engaged with, say that deals have not been properly passed through parliament. Indeed, parliament has not yet ratified a new agreement for Marampa Mines, and Kingho Mining was already operating the Tonkolili mine when MPs, especially from the opposition APC, said they had been excluded from the approval process.
Those gaps are significant given the origin of Gerald’s dispute with the Bio government. The disputed mining lease agreement for SL Mining was first ratified in December 2017, when APC controlled the parliament and Bio’s Sierra Leone People’s Party (SLPP) was in the opposition. The deal was hurriedly ratified on the same day that it was tabled in parliament, and on the legislators’ last day in office before general elections would be held three months later. Then APC lost the presidency and parliamentary majority to SLPP, and this marked the onset of Gerald’s regulatory trouble in the country.
Outlook – regulatory risk
The revived iron ore mining activity raises the outlook for debt sustainability, but there is still substantial uncertainty given volatile iron ore prices and the fragile framework in which recent deals have been reached. Weaker pricing and/or a change in the political dynamic (upcoming general polls in 2023) may again affect the stability of the regulatory environment. However, the pursuit of delayed industry reforms – for instance, in a proposed mining law – through an inclusive process would further brighten that outlook.
*Photo credit: Dominik Vanyi
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[1]https://documents1.worldbank.org/curated/en/131511593700755950/pdf/Sierra-Leone-Economic-Update-2020-The-Power-of-Investing-in-Girls.pdf