By Seltue R. Karweaye |
The National Investment Commission (NIC) has announced the Liberian government and the Hummingbird Resources Inc. have signed a Gold-Mineral Development concession worth over US$ 250 Million. The Gold-Mineral Development agreement between the government of Liberia, and the Hummingbird Resources Inc. was negotiated and signed, but very little was known about the contents of these negotiations, and actual terms of the agreements, due to opaque processes, and reasons of confidentiality often invoked in relation to the contracts.
There is no doubt why it, like almost all agreements of this kind of, was kept secret from the Liberian people. The Hummingbird Resources Inc. agreement awarded exploration licenses for all minerals, covering over 7,000 square kilometers located within a significant proportion of eastern Liberia (Sinoe, Grand Kru, River Gee, and Maryland counties). Further according to reports, the company is expected to mine about 14 trillion ounces of gold over the 25-yr life span of the project. The World Bank affiliate, International Finance Corporation (IFC), is said to have invested US$8m in the project.
It is remarkably disadvantageous to the country of Liberia and its people. Liberian negotiators failed to understand that mineral development is a long term investment, and contracts must establish how rents will be divided between governments and companies as well as how costs and risks will be shared.
Hummingbird will pay a signature fee of US$3 million to the Government of Liberia, with US$1.5 million to be paid within 15 days of the effective date and thereafter, US$1.5 million to obtain the license. A Royalty of 3% is given to the Government of Liberia on gold revenues. Additionally, the agreement allows 10% percent shares for Liberians. How could Liberians negotiators give away so much to the Hummingbird Resources Inc.? Why the National legislature failed to critically analyze the Hummingbird Mineral Development Agreement, but recommended the ratification of the mineral agreement?
The Environmental Protection Agency (EPA), despite the agency role in the formulation of the mining sector policy, was left out of the negotiation process of Hummingbird Resources Inc., why? Why critical issue such as environmental management was not discussed and that certain environmental experts were not allowed to speak on the issue of extraction, processing, and transporting of minerals and it impacts on the environment, as well as on the potential health and safety of those working in the industry during the process leading to signing of the Hummingbird Mineral Development Agreement? Didn’t President Weah veto the Act to ratify the Mineral Development Agreement (MDA) between the Government of Liberia and Hummingbird Resources (Liberia) Incorporated for several reasons?
According to the President, the Special Presidential Concessions Review Committee overall conclusion was the agreement didn’t meet a fair business arrangement, and few critical aspects needed reconsideration in order to bring a protracted benefit with mutual balance for each of the comparing parties. Did the Liberian negotiators know the combined income statement of Hummingbird Resources Inc. did not show any revenue but reported losses?
Did our negotiators know that in Mali three people were killed and many others injured in May of 2018 at the Komana West deposit owned by Hummingbird? Also, did our negotiators know Hummingbird decided to provide a $2 million convertible loan to the U.S. zinc mining company Bunker Hill (OTC: BHLL), and many investors of Hummingbird Resources Inc. didn’t like the Brunker Hill deal as the company was turning away from gold or mineral exploration?
Did our negotiator know that the company managed to secure additional funding from its lenders due to loses? Did we award gold minefield covering 7,000 square kilometers to a company that has zero revenue, and has accumulated over the $24M net operating loss from 2008 through 2016 because of the World Bank which invested US$8m into the company and is also Liberia’s lender and economic adviser?
Hummingbird Resources Inc. is not NAÏVE and it knows for sure that they will find good quantities of high-quality minerals in Sinoe, Grand Kru, River Gee, and Maryland counties. They are going to reap so much and give Liberia so little. Considering the 10% royalties stipulated in this agreement, Liberia stands to get ten cents for every dollar earned, $10 for every $100 earned, and so forth. A Royalty of 3% may sound a lot but I am afraid it is peanut for a post-conflict country that is so desperately needed for roads, schools, hospitals, etc.
Another concern of mine pertaining to estimated US$250million agreement is there is a known fact that deposits of iron ore, gold and diamonds are in Liberia, however, and there is considerable potential for additional discoveries. A wide range of other mineral resources are present and minerals with known potentially economic targets in Liberia.
These include barite, bauxite, manganese, heavy mineral sands, kyanite, phosphate, kaolin-rich clay, silica sand, copper, lead, nickel, tin, tungsten, zinc, and range of technology metals, such as niobium, tantalum zirconium, and rare earth elements. What happens when Hummingbird Resources Inc. discover other mineral resources? She would reap the amount of the increase which would equal almost millions or billions of dollars per year when mining resume in Liberia. These types of contracts normally have a windfall tax to cover this eventuality. Unfortunately, those that negotiated the agreement were unaware of this possibility due to the lack of in-depth inquisition or should I say greed.
The present regime under President Weah leadership like its predecessor (Madam Sirleaf) failed to recognize that if we do not reinvest in Liberia resources wealth into productive investments above ground, Liberia is actually becoming poorer. Our leader including the member of the national legislature continues to use their access to financial resources from extractive industries to advance their own personal agendas, instead of using them in the best interest of the nation as a whole. Natural resources are a public resource and the negotiations between Liberia and foreign companies should be transparent, accessible and easily understandable by citizens, unfortunately, this is not the case in Liberia. Communities are not given the opportunity to review contracts and find out how much revenue has been generated and what development projects the revenues have been spent on. Sadly, the new pro-poor government had re-introduced the failed policies of plantation economy which afford investors to loot Liberia’s resources while the political elites ripped the benefits at the expense of ordinary Liberians.
It is time that President Weah insists on the imposition of a windfall-profit tax on these long term concession agreements. All over the world, countries have been renegotiating or imposing a windfall-profit tax if renegotiation is impossible. According to Former World Bank Chief Economist and a Nobel laureate in economics; and University Professor at Columbia University, Joseph E. Stiglitz, “natural-resource foreign companies will push back, emphasizing the sanctity of contracts, and threaten to leave. But the outcome is typically otherwise. A fair renegotiation can be the basis of a better long-term relationship.”
I tend to agree with Professor Stiglitz argument and Botswana is a prime example. Botswana’s renegotiations of such contracts laid the foundations of its remarkable growth for the last four decades which led to an immense reduction of poverty. Moreover, it is not only developing countries, such as Ghana.
Botswana, Bolivia, and Venezuela, that renegotiate bad contracts; developed countries such as Israel and Australia have done so as well. Even the United States has imposed a windfall-profits tax. South Africa, home to the greatest mineral wealth in the world, estimated to be worth $2.5 trillion, is considering imposing a swinging 50% windfall tax on mining “super profits” and a 50% capital-gains tax on the sale of prospecting rights.
Those are among the proposals put forward by an independent panel of experts, set up by the ruling African National Congress (ANC) to study the possibility of greater state intervention in the mining sector. Ghana, Africa’s second-biggest gold producer, recently announced a review and possible renegotiation of all mining contracts to ensure that mining profits are “maximized… [For] the good of the country”. It plans to raise taxes on mining companies, from 25% to 35%, and a windfall tax of 10% on “super profits” in addition to existing royalties on output metal, to 6%. Guinea, home to the world’s largest bauxite reserves as well as one of the world’s biggest iron-ore deposits, is helping itself to a 15% stake in all mining projects and an option to buy a further 20%. In Guinea, mining companies are legally obliged to pay a tax to the owners of the land on which they mine. They are also required to support local development projects.
Namibia has decided to transfer all new mining and exploration to a state-owned company. Algeria has become the latest African country to consider slapping windfall profit taxes on foreign oil companies. According to report, Algerian government says the tax will be applied in months when the price of Brent crude averages above $30 a barrel and will vary from 5% to 50%, depending on the company’s total production. As we speak Brent Crude Oil is averaging $107 per barrel.
The same can be said of Ivory Coast’s government which recently adopted a 19% tax on gold profits, seeking to capitalize on current high gold prices to help fund reconstruction following a decade-long political crisis. The new 19% windfall tax would yield some 40 billion CFA francs ($79.1 million) in additional income to the state annually. Zambia, for example, had hoped to impose windfall profit taxes on copper mining to finance an infrastructure fund.
Poor management of our natural resources results to No Economic Growth and No Growth, No Pro-Poor Agenda. It is that Simple! Mineral exploration is exhaustible, unless we use it prudently now when commodity prices are good, we’ll regret later. And so, while the going is promising, we must make sufficient revenue from it and we can diversify to other areas in our economy.
Liberians are sitting on huge natural resources and we ought to find a way of rewarding ourselves something from that ownership. It is up to Liberians to know what it is entitled to and claim it accordingly. If they don’t, they will have nobody to blame.
Information and economic methodologies exist which Liberia can use for bargaining. If Ghana, Ivory Coast, Guinea, Algeria, and other African countries can do it, I am sure Liberia can do it as well. It’s time we get the right remittances from our natural resources. Therefore, it is no longer wise to allow investors to invade Liberia, and let them exploit its resources at will. We must do something about the exploitation of our natural resources by the selected few at the expense of the majority.
Poverty in Liberia cannot possibly be eliminated unless the poor themselves say we insist on justice with regard to the equal distribution of wealth, not CHARITY. One example of that justice is to end privatization of natural resources or obtain the right remittances from our natural resources. Shine your eyes, my people!!
Source: Perspective Online