By Our Staff Writer
NEW YORK/MONROVIA: Ivanhoe Liberia and Société des Mines de Fer de Guinée (“SMFG”), the Liberian and Guinean subsidiary companies of High Power Exploration Incorporated (“HPX”), last week announced that they have signed an amended and restated Framework Agreement with the Government of Liberia, reaffirming the principles for HPX’s non-discriminatory access to critical Liberian rail and port infrastructure, and identifying HPX’s requirements for the future evacuation of ore from the Guinean Nimba Iron Ore Project.
Multiple international media reports including MINING.COM say, following an assessment studies conducted by HPX Group in August 2021 on the possibility to transport iron ores from neighboring Guinea to the Port of Buchanan for shipment abroad, steel giant, Arcelor Mittal-Liberia, hurriedly crafted an Amended portion of its Mineral Development Agreement (MDA), valued US$800 million mainly targeting the country’s leading railroad and Buchanan infrastructure.
But, the Arcelor Mittal-Liberia new deal has been facing series of challenges from several quarters including the National Legislature and citizens of the affected counties where the company is operating.
However, HPX Framework Agreement with the Liberian Government, which is immediately effective, also sets out a timetable for detailed negotiations and the implementation of a definitive Concession and Access Agreement for HPX’s infrastructure requirements.
According to the acclaimed MINING.COM reports, HPX currently envisages that these infrastructure rights will include an extension of the existing rail line from Yekepa to the Guinea-Liberia border and access (with associated development and expansion rights) to the existing Yekepa-Buchanan rail corridor and to port infrastructure at or in the vicinity of Buchanan (the “Infrastructure Corridor”; and, where such infrastructure may be shared with other users, the “Shared Infrastructure”).
The Framework Agreement is another step forward in the realization of the benefits of the Guinean Nimba Iron Ore Project which will provide significant social and economic benefits to both Guinea and Liberia once in production.
The Framework Agreement builds on previous important steps, including the 2019 Implementation Agreement between Liberia and Guinea, securing the use by Guinean mining operators of Liberian infrastructure and transport services, and the Right of Access to existing transport infrastructure and services within the Yekepa-Buchanan port and rail corridor that was granted to HPX by the Government of Liberia in August 2021.
MINING.COM also reported that Guinean Nimba Iron Ore Project is a world-class undeveloped iron ore deposit. HPX completed a preliminary feasibility study on the project in 2021 (“2021 PFS”) that showed a robust rate of return on a forecasted long-term benchmark iron ore price of US$76 per tonne (US$/tonne), which compares with the current spot price which is in excess of US$145/tonne. This spot price does not take into account the current premium pay for the high-quality iron ore product that Nimba will produce.
The 2021 PFS also estimated total project development costs at US$2.77 billion (including direct capital costs, plus all engineering, owners cost, contingencies and taxes). Direct capital costs for rail and port development in Liberia are estimated at more than US$600 million. Project operating costs are estimated at below US$18/tonne. The 2021 PFS assumes construction starts in 2023.
The report added that the development of the Nimba Iron Project is estimated to create 2,000 direct permanent jobs, of which approximately 1,500 would be in Guinea and 500 in Liberia, and will help support indirect secondary employment in both countries.
HPX representative in Guinea and Liberia, Guy de Selliers, Chairman of Ivanhoe Liberia commented: “This Framework Agreement for access to critical Liberian port and rail infrastructure is an important step forward in making the Guinean Nimba Iron Ore Project a reality. It is clear that our project will deliver significant benefits in the form of investment, employment and recurring income for both Guinea and Liberia.
Through this Framework Agreement and the upcoming definitive Concession and Access Agreement, HPX is committed to ensuring that Liberia and the Liberian people reap their fair share of the benefits of the Guinean Nimba Iron Ore Project.
In addition, we want to develop our own mining activities in Liberia and have committed to start immediately identifying potential projects and exploration targets.
Now it’s time for all of us who care about mining and infrastructure in the region to become true partners and work together. Together with the Government, I really look forward to working co-operatively alongside ArcelorMittal to accelerate the development of both our Guinean Nimba Iron Ore Project and the planned expansion of their Liberian operations for the benefit of the Guinean and Liberian people, including as users of a passenger and freight rail service.”
The new deal states that “HPX and the Government of Liberia will enter into negotiations for a definitive Concession and Access Agreement for access rights (including associated development and expansion activities) in the Infrastructure Corridor to support HPX’s required capacity to export 30 million tonnes per annum (mtpa) of iron ore by 2027; The Government of Liberia will grant HPX usage of the Infrastructure Corridor in accordance with its rights and obligations under its current Mineral Development Agreement with ArcelorMittal, and will seek to resolve with ArcelorMittal the technical and commercial terms for HPX’s usage of the Shared Infrastructure in accordance with that Mineral Development Agreement; HPX and the Government of Liberia agree a passenger and freight traffic service will be an integral part of the railroad from the commencement of expanded operations; HPX commits to conduct its activities within the infrastructure corridor in accordance with industry best practice and world class technical, safety, social and environmental standards for a large-scale heavy haul railroad; HPX confirms that all environmental and social impact assessments on any infrastructure accessed by HPX will be carried out in accordance with the World Bank Group standards.
The Government will provide HPX with continuous unimpeded access to the Infrastructure Corridor to allow HPX to complete its environmental and social impact assessment and technical studies in respect of the Infrastructure and HPX will provide two upfront prospective access payments with the first one due immediately and the second one upon the Concession and Access Agreement becoming fully effective.
Further multiple reports averred that the Government and HPX will negotiate recurring access fees and fiscal regime structure, as well as HPX’s social and community development spending obligations, as part of the Concession and Access Agreement negotiations.
The level of the recurring access fee payments will be established in line with recognized international practice through detailed negotiations with the Liberian Government, the reports asserted.
At the same time, the Liberian Government and HPX have agreed to collaborate to identify and assess viable mineral prospects in Liberia.
The definitive Concession and Access Agreement embodying the above agreed principles is expected to be entered into and fully effective before the end of March, 2023.
HPX is a privately-owned, U.S.-domiciled mineral exploration and development company. Ivanhoe Liberia Limited is a Liberian Domestic Corporation and wholly-owed independent subsidiary of HPX while SMFG is a Guinean incorporated mining company and an 85% owned subsidiary of HPX, owned in partnership with the Government of Guinea.
Interestingly, Arcelor Mittal’s US$800 million 25-year expansion Agreement was rejected by the House of Representatives and sent back to the Executive Branch for renegotiation. The Plenaries of both Houses prior to their December break, tabled the Mittal-Liberia MDA.
Some members of the National Legislature cited the monopolistic portion that has to do with Arcelor Mittal controlling the railroad and wanting users to pay fees to it. Arcelor Mittal has vowed not to take the Agreement rejection lightly, in the face of signing of HPX deal to co-use or develop the railroad for both companies-HPX and Arcelor Mittal.
Last November, HPX and the Sumitomo Mitsui Financial Group (SMFG) announced that its pre-feasibility study for the Nimba Iron Ore Project was positive and encouraging.
The Nimba Iron Ore project, is the brainchild of U.S.-Canadian investor Robert Friedland who acquired HPX in 2019. The company expects eventual production of up to 30 million tons a year with construction forecast set to begin in 2023.