By Tanu Jalloh
When the diamond mines surfaced in the 1930s the country glittered. The economy boomed. But when they almost diminished after eight decades, they left behind misery, hatred, greed and war. The hopes they had raised were razed. However, resources generated by the mines, then, were the major forces behind the country’s glosses. With the mines, there were hopes, but also was money.
The war was here, and people partly blamed it on the diamond mines. Some observers say output of the country’s diamond export was likely to have peaked in recent times; thus even at its best it accounted for just 34% of total export earnings in 2010. Yet the country was the world’s 10th ranked producer of diamond, by volume, in 2010 and the world’s third ranked producer of Rutile (Gambogi, 2011; Kimberley Process Rough Diamond Statistics, 2011).
The war is gone, and then comes iron ore. In the words of Dr. Samura Kamara, Sierra Leone’s finance minister, the commencement of iron ore production would boost economic activity this year and beyond.
When the country would have attained full implementation of the two new iron ore mining projects (African Minerals Limited and London Mining Limited), a substantial expansion of domestic output is assured – exports and tax revenues in the coming years would be a testament to the mines, hopes and money.
So hopeful that Dr. Kamara, when reading the Government Budget and Statement of Economic and Financial Policies for the Financial Year 2012 noted thus: “Real GDP is projected to expand by at least 50 percent in 2012, putting Sierra Leone among the fastest growing economies in the world.”
In fact the International Monetary Fund believes Sierra Leone’s economy may grow by 51% y/y in 2012 as a result of iron-ore production. Even the most recent critical assessment by Standard Chartered Bank (SCB) global research titled: ‘Sierra Leone – New Opportunities, Old challenges’ (10 January 2012, UK) was optimistic. The report stated that based on their analysis of other post-conflict economies, starting from a low-base, with substantial export growth nonetheless, they expect GDP growth of around 30% in 2012, which would still put Sierra Leone among the fastest-growing African countries.
Sierra Leone’s export profile is set to be transformed this year, as production from the Tonkolili iron-ore mine could lead to a quadrupling of total exports. Iron-ore production ceased in Sierra Leone in the 1970s because of unfavourable iron-ore prices and government mismanagement. When operations and supply resumed in full scale late last year, with production was expected to reach 20 million tonnes in 2012. Expansion projects could increase production to 50 million tonnes in the medium term, according to SCB.
Informed by those estimates, the country’s economy could grow further by 10 percent in 2013 and 2014, hoping that exports increase by fourfold in 2012. In fact hopes are so high that even if you take away iron ore production from the general monetary outlook of Sierra Leone, the economy enjoys a huge chance to grow by 6 percent on average per annum in real terms in the next three years. This fact has been corroborated by findings of the latest African Economic Outlook report. It pointed out that having recorded 4.5% in 2010, growth was projected to rise to 5.1% in 2011 and to gradually recover to 6.0% in 2012.
“Consistent with this high growth performance, Sierra Leone has been identified by the International Monetary Fund (IMF) as one of the countries that will contribute to Sub-Saharan Africa’s strong growth performance in 2012, largely on account of developments taking place in the mining sector,” he stated.
He, however, added that the two-speed economy could pose serious management challenges. In that regard, Sierra Leone could learn from the experiences of other Sub-Saharan African countries, and in doing so, create a dynamic, long-term vision whereby the Dutch Disease, the resource curse and excessive environmental degradation, could be avoided.
And then there was news of oil as if to lubricate the cog on the wheels of fortune for Sierra Leone’s economy.
Oil, first discovered in 2009, could be a game-changer, so says the SCB report. Meanwhile, currently three companies are conducting exploratory operations and the ministry of finance expects oil in commercial quantities to be verified in 2012. If so, this could lead to significant investment in the country, which would necessitate a reassessment of Sierra Leone’s likely long-term growth trajectory. Apart from mines, this is hope. This is money.
Like all laws subject to constant necessary reforms, the Mines and Minerals Act may be inconclusive and vulnerable but the initiative was certainly a critical move towards contemporary reforms. Legal regimes change not necessarily because they are weak or bad, but also because things move fast such that people take decisions that are likely to be overridden the next day by positive change. It is dynamism, and probably the only constant thing in human history.
So, there was an Act of Parliament to consolidate and amend the law on mines and minerals; to promote local and foreign investment in the mining sector by introducing new and improved provisions for exploration, mine development and marketing of minerals and mineral secondary processing for the benefit of the people of Sierra Leone; to ensure that management of the mineral sector is transparent and accountable in accordance with international best practice…( The Mines and Minerals Act, 2009; No 12 of 2009), eighteen years more recent than the one that had existed. This legal reform was in itself a hope for money from the mines.
On Friday 20 August 2010 the Government granted, and Parliament ratified, the mining lease for the Tonkolili project and related infrastructure which included two mining licenses for a period of 25 years. In December, SRK Consulting completed a preliminary mineral resource estimate that totaled 12.8 billion metric tons of measured, indicated, and inferred resources for the Kasafoni, the Marampon, the Numbara, and the Simbili deposits combined in the Tonkolili District.
Cape Lambert, which planned to begin production in late 2012 with an expected mine life of 20 years based on preliminary mineral resource estimates and AML have signed an agreement that gave the former right of access to the Marampa railway and Pepel Port. It would have an initial minimum transport capacity of 2 Mt/yr and would hold 33% interest in the Marampa infrastructure. AML and the Government hold the remaining 57% and 10% interests respectively (Cape Lambert Resources Ltd., 2011).
Sierra Rutile Ltd. (SRL) of the British Virgin Islands owned and operated the Sierra Rutile Mine which is located in southwestern Sierra Leone, some 135 km from Freetown, is expected to increase ilmenite and rutile production this year (Sierra Rutile Ltd., 2011).
The Government and Koidu Holdings S.A signed a new agreement for the Koidu kimberlite project mining lease area…which contained provisions for the mining and commercial exploitation of the Koidu kimberlite and development of the surrounding community.
New York-based Dolat Ventures Inc. acquired a 75% stake in Millennium Mining LLC of Sierra Leone which operated alluvial diamond mining in Sewa River, Tinkonko Chiefdom in Bo District. It has announced the installation of the new wash plant to increase its processing capacity to 90 metric tons per hour of gravel (Dolat Ventures, Inc., 2010).
Guernsey-Paragon Diamonds Ltd. through its subsidiary Sierra Leone Hard Rock Ltd. held 100% ownership in the Konoma alluvial diamond project in Kono District and produced 5,400 carats of diamond in 2011(Obtala Resources plc, 2010; Paragon Diamonds Ltd., 2011).
Stellar Diamonds plc, through its subsidiary Sierra Leone Ltd., held 100% ownership in the Tongo kimberlite dyke project initiated a bulk sampling program to collect 1,000 to 2,000 carats for grade and value estimation of the diamond (Stellar Diamonds plc, 2010).
Let’s say money from all these mines could not be appropriately estimated to represent the aggregate of hopes for the country’s economy, mining revenues in the form of royalties and licenses could still increase substantially in the years coming. For instance, revenues from this sector are expected to rise to Le242.3 billion when compared to the estimated collections of Le185.5 billion in 2011 on account of the projected increase in iron ore exports in 2012. Royalty on iron ore alone is projected at Le178.8 billion in 2012.