Liberia: HPX Use of Railway to Export Iron Ore from Guinea Possibly the Reason Behind Rejection of ArcelorMittal Third MDA Agreement

MONROVIA – The US$800 million 25-year ArcelorMittal expansion deal has been rejected by the House and sent back to the Executive for renegotiation. The House has raised a couple of issues that they believe ought to be addressed in the agreement, however, FrontPageAfrica has gathered that the move is also intended to pave way for the coming in of High Power Exploration (HPX), an exploration company opting to carry out iron ore development in Nimba Guinea Mountains.

ArcelorMittal, on the other hand, FrontPageAfrica has gathered, isn’t taking the rejection lightly, especially with the coming in HPX which seeks to co-use the railway along with ArcelorMittal Liberia.

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.

HPX is a privately-owned, U.S.-domiciled mineral exploration and development company while SMFG is a Guinean incorporated mining company. SMFG is an 85% owned subsidiary of High Power Exploration (HPX).

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.

The project is located in the Guinean Nimba Mountains, in south-eastern Guinea, adjacent to the Liberian and Ivoirian borders. It is a Tier 1 deposit containing extremely high grade, low impurity, direct shipping ore and is considered one of the best undeveloped iron ore resources in the world. The use of such high-grade ore is an essential component of the fight to reduce energy consumption and global warming emissions during the steel making process.

However, the project will depend hugely on Liberia’s Port of Buchanan for export.

The pre-feasibility study estimated total project development costs at $2.77 billion and direct capital costs for rail and port development in Liberia at more than $600 million.

According to the feasibility study, the operating cost estimate assumes, among other things, that access fees will be paid to the Government of Liberia, as the owner of the existing rail line (which is currently operated by ArcelorMittal Liberia), in line with established international principles.

According to HPX, it has received authorization from the Liberian government to use the rail facility to move the iron ore from Guinea to the Port of Buchanan for export.

However, the company has concerns over the third amendment of the ArcelorMittal Mineral Development Agreement which they believe grants exclusive access to the railway to ArcelorMittal, a competitor in the business.

“We are concerned about the detailed conditions because what’s important is not just theoretical access,” Guy de Selliers, the chairman of HPX’s subsidiary in Guinea

told Reuters in an interview last November.

“You can’t invest $2.5 billion in a project in Guinea if you think you’re constantly going to be hostage to the goodwill of someone else,” he said, adding the company was in discussions with the Liberian government.

ArcelorMittal owns an iron ore project on the Liberian side of the border with Guinea and operates the railroad. 

This has been a major point of contention for which the Legislature has held back its approval of the new MDA with ArcelorMittal.

The Senate, during their deliberation of the MDA, called for third parties to have unhindered access to the rail and port. It called on the Executive Branch to ensure that AML will cooperate with, give access to and will receive no transit or any other fees from the government and Government-designated third parties who may want to construct a rail or build other infrastructures.

The company has reportedly promised to give the Liberian government US$30 million for the project.

“HPX is an exploration company that does not have clear plan for 30 metric tons, has no funding, needs to secure an investment. AML’s deal has already packaged a hefty U$30m (thirty million US dollars) signing fee instead of a pie in the sky promise of U$30 from an exploration company. AML’s has already invested $200m in the rail, and has begun upgrading the infrastructure,” a source familiar with the development told FrontPageAfrica.

ArcelorMittal has consistently said that their use of the railway and port is for the benefit of Liberians.

The company argues that the new amendment would increase government’s revenue through royalties, taxes, duties, among others. The increment is expected to be from around US$30-40 million annually to approximately US$75 million annually when Phase 2 is ramped up.

The new agreement would also make Liberia a major iron ore producer and by that there will be an expansion the port and rail facilities, new processing facilities, making it one of the largest mining projects in West Africa. This is because the new agreement would pave the way for the company to step up from the current 5 metric tons per annum of DSO to 15 metric tons of high value concentrate.

ArcelorMittal also maintained that the new MDA clearly spells out the multi-user rail and port infrastructure wherein the Government of Liberia continues to be the owner of the rail and port infrastructure and reserves the right as to who can utilize the corridor.

The new agreement strengthens the government’s demand for other users including Guinean miners to utilize the Liberia infrastructure for their export.  The other users will need to, however, invest to increase the capacity of the rail and port for their own use.

Meanwhile, the Guinean government has signed an arrangement the development of the Simandou deposits blocks one through four with Rio Tinto Simfer and Winning Consortium for 35 years. These two consortiums will build the railway from Beyla to Forécariah (670 km) and the deep-water port at Moribayah (Forécariah) at a cost of US$15 billion. 

With the signed arrangement, the two consortiums will own 85% whilst the Guinean government will own 15%. A national agency to manage the railway and port structure will be established. The railway will be multi-purpose for the transport of ore, for passengers, agricultural products, and general freight.

The Guinean government has also insisted that any other mining company that sets up in this corridor, in the south-eastern part of Guinea, will have access to this railway in accordance with the capacity of the railway infrastructure.

According to HE Minister of Mines, Moussa Magassouba, the 670 km railway and deep water port must be completed by December 2024 with commercial shipments of ore to begin by 31 March 2025. The tunnel contractors working near Kindia were caught up in the instructions from the government to stop work at the projects of Simandou.

This could mean that there will be a shift in HPX interest in Liberia’s rail and port and could be a blow for Liberia.

Transporting tons of raw materials to port from mining sites in remote parts of Guinea has been a major hurdle for prospective developers of the country’s vast mineral wealth for years and both nations are hoping that the agreement, which builds on an initial memorandum of understanding signed nine years ago, is a victory for U.S.-Canadian investor Robert Friedland’s HPX, acquired Nimba, a high-grade deposit in southeast Guinea.