By John Helmer, Moscow
Now it’s official – the French, British, Americans, Chinese and Indians are all behind Guinean President Alpa Conde’s decision to revoke the Russian concession for the world’s largest unmined bauxite mining deposit, Dian-Dian, and hit the current concession holder, United Company Rusal, with back-tax and fraud claims, plus interest and penalties, for about $1 billion.
A small item in a Paris-based newsletter, African Mining Intelligence (AFI) , out this week, reports the problems Rusal is facing in Conakry. These aren’t news – Conde ordered Oleg Deripaska, Rusal’s chief executive, out of his office in April. Since then Conde has held discussions with his advisors in Conakry and abroad, along with George Soros’s legal aid team in Guinea. The Guinean president has decided that after concluding his sensitive negotiations with Rio Tinto over iron-ore mining rights at Simandou, he will start new negotiations with the Russians. “Conde feels he has finished with Rio [Tinto],” said one of the presidential advisors. But there is still no cash [from Rio Tinto’s promised $700 million down payment] in the treasury. The government is strapped for cash, and will go after all the [mine concession] violations it can. His next target is Rusal. After Rusal, the target will be Crew Gold [owned by Alexei Mordashov’s Nord Gold company].”
AMI is owned by a Frenchman of Moroccan origin, Maurice Botbol, who publishes other newsletters on Africa and the intelligence community. Botbol will sell you this story for €4, although the information is dated, not altogether original, and not quite accurate:
|The Russian concern UC RusAl is in a tizzy in Guinea following the announcement that a Chinese group plans to build an aluminum complex at Fria near RusAl’s refinery. A former natural resources minister, Fassine Fofane, now the boss of a consultancy named Kakande, accompanied a delegation of Chinese investors from the firm Jiuquan Iron & Steel (Group) Co. Ltd (JISCO) in Guinea in early June. Fofana’s delegation proposed building an alumina refinery and an aluminum smelter in the Fria region, close to the Friguia aluminum refinery managed by UC RusAl.
The Chinese program was presented to prime minister Mohamed Said Fofana and to mines minister Mohamed Lamine Fofana. The delegation visited the mine operated by Compagnie des Bauxites de Guinee (CBG) at Sangaredi before travelling to Fria to examine the Friguia facilities. Rusal was sufficiently alarmed by the visit that it asked its representative in the country to examine how much influence Fassine Fofana had over the present government. RusAl is especially worried that the Chinese shepherded by the former minister might persuade the government to allow JISCO to use the railway to the port of Friguia to ship out its production or even, if it builds an aluminum smelter, that the government could order the Russian group to sell its alumina production at Kindia to the smelter in question.
On April 6, president Alpha Conde gave a report by Alex Stewart International to the Russian envoy to Guinea, Alexander Bregadze. The report calls on RusAl to pay USD 1 billion in compensation for loss of earnings linked to the privatisation of Friguia in 2006. The same day a meeting between Conde and a Russian delegation led by natural resources minister Yury Trutnev turned rather frigid because the president declined to receive Oleg Deripaska, boss of RusAl.
The Alex Stewart International (ASI) report was first ordered and compiled by former Guinean mining minister, Mahmoud Thiam, at the start of January 2010. This is an excerpt from the report. Thiam discussed it in detail with the Rusal executive in charge of Guinea, Victor Boyarkin, at several meetings during last year. Boyarkin, a former intelligence officer, reports directly to Deripaska. The head of Rusal’s international relations department, Sergei Chestnoy, a former member of the Russian Ministry of Foreign Affairs, has been sidelined as he is under investigation by the US Government.
The Paris publication this week is a signal that there are now French and other international interests engaged in the lobbying for Conde to revoke Rusal’s operating and mining rights in Guinea, and put them up for new awards.
A source close to Conde reports, following a conversation with him a few days ago, that “Minister Fofana is a promoter of a refinery project at Friguia. And at least three other refineries at various stages of planning. They pose no threat to Rusal.”
“On the other hand,” he added, “the President has made it clear that Rusal is next on his list of issues to fix.”
Another Guinean source claims the business issues have become personal for Conde and Deripaska after the April door-closing incident, and after Deripaska sought support from Conde’s wife, Djene Kaba Condé.
|Thiam, who retired from his ministerial post in January and returned to his home in the US, continues to be a presidential advisor. He confirms that the January 2010 ASI report is the basis for one of the two claims which have been tabled with Rusal. As the report excerpt shows, the ASI claim, for an estimated minimum of $960 million, deals only with Rusal’s Friguia (Fria on map right) bauxite mining and alumina refining and export operations.|
Before the ASI report was issued, Thiam and the Guinean government had gone to court in Conakry to annul Rusal’s Friguia purchase agreement. Rusal issued statements in response that it had “purchased Friguia in full compliance with Guinean legislation and we consider the plant to be our legitimate property.” Rusal also said it would apply to an international arbitration tribunal in Paris to overturn the Guinean court’s ruling against Rusal. According to Thiam, Rusal bought the Friguia refinery for a privatization transfer price of less than $20 million.
The second of Conde’s targets is Rusal’s concession to mine Dian-Dian. According to Rusal’s website, this deposit “is located 350 km north of Conakry in the Boke province [see Boke on map], and is a unique deposit containing around 1 billion tonnes of bauxite ore with a high aluminium content and insignificant amounts of hazardous impurities.” According to Rusal’s share sale prospectus in Hong Kong of January 2010, Dian-Dian represents roughly one tonne in five of Rusal’s entire global bauxite reserves.
According to Thiam, President Conde intends to repeat to Rusal the ultimatum it received from Thiam before he left his ministerial office — either start investing and building the mine, as required by the concession agreements, or lose one or all of the Dian-Dian mining permits. “Dian-Dian has three large permits with reserves to accommodate a large player each,” Thiam said this week. “Once they realise [Dian-Dian] is in play, all the big players will show up.” Asked what bauxite mining internationals he knows to be interested, Thiam referred to Chinese companies, Alcoa of the US, Rio Tinto of the UK, and Middle Eastern companies. He added: “no deadline has been set yet [for retrocession of permits]. The process is just starting. But Dian-Dian is at great risk.”
Rusal refuses to respond to this correspondent’s questions. The latest reference Rusal has made to its negotiations on the Guinean financial claims was this announcement of May 26: “UC RUSAL (SEHK: 486, EuroNext: RUSAL/RUAL, MICEX: RUALR, RTS: RUAL), the world’s largest aluminium producer, is pleased to announce the launch of a unique education programme the “RUSAL Scholarship-2011”. The RUSAL Scholarship will provide 100 talented young Guineans aged between 18 and 25 the opportunity to be educated in Russia’s best universities. All accommodation, transportation costs and tuition fees will be covered by UC RUSAL.”
The company said it anticipates spending $5.5 million over five years on this project. The cost of developing the Dian-Dian mine and associated infrastructure has been estimated at more than $600 million.
The alliance of Alcoa and Rio Tinto already holds a bauxite mining concession at Guinea’s biggest-capacity mine at Boke. According to Alcoa’s website presentation, “Alcoa is present in Guinea as a 45% shareholder of Halco Mining, a partnership which owns 51% of Compagnie des Bauxites de Guinee (CBG). CBG, a partnership with the Government of Guinea, has exclusive rights to mine bauxite in Guinea’s Sangaredi Plateau. In addition to mining in Sangaredi, CBG operates a port in Kamsar [see map] for drying and shipping bauxite to refineries worldwide. Alcoa also supports the local Guinea community through healthcare and library programs funded by the Alcoa Foundation.”
Omitted from this version is that Alcoa’s equal 45% shareholding partner in Halco was Alcan of Canada, and since the latter’s acquisition in 2007, Rio Tinto. The CBG operations are larger than Rusal’s in Guinea, and the largest in the bauxite world.
For many years, Rusal blamed Alcoa, and its former chief executive Paul O’Neill, US Secretary of the Treasury in 2001-2002, for being behind all of Rusal’s troubles in the US, including court fights and the banning of Oleg Deripaska from entry to the US. Then in 2004-2005 Alcoa, headed by an O’Neill successor, bought two of Rusal’s aluminium rolling-mills in samara and Rostov regions. That deal was facilitated by the purported advisor to the Russian government, Dmitry Afanasyev, who has since served as a Rusal board director and lawyer to Deripaska. Alcoa sources concede that they have been careful not to appear to be challenging Rusal’s interests abroad in case Deripaska makes trouble for Alcoa’s interests in Russia.
The involvement of US financier George Soros as an informal advisor to President Conde, and the despatch of Soros-funded US lawyers to Conakry to review mining permits and resource privatization records, has reawakened Rusal suspicion that the Americans, including Alcoa and the White House, are again aiming at Deripaska.
An American aluminium industry source says that President Conde’s negative attitude towards Rusal goes back many years, during the rule of Lansana Conte, the 25-year Guinean dictator who died in December of 2008. “Rusal was so arrogant and insulting to the Ministers and to the President’s assistants that it was clear that something was going to happen with Rusal’s virtual monopoly. Now it is coming home to roost.”
But Rusal wasn’t the first of the Russian groups to try to hold on to Dian-Dian without digging a hole. In the last years of the Soviet period and early 1990s, the controlling shareholders of the Bratsk Aluminium Plant (BrAZ) — Boris Gromov, Yury Schlaifstein, plus David and Simon Reuben of London – also claimed the Dian-Dian concession, and planned to mine it to feed their smelter. “Funny how life repeats itself,” the US source says.