Liberia: Govt ‘Secretly’ Signs Rail Usage Framework Agreement with HPX While ArcelorMittal MDA Still Dangles
MONROVIA – The usage and management of the railway running from Yekepa, Nimba County, to the Port of Buchanan remains the major unresolved factor stalling the passage of the third ArcelorMittal Mineral Development Agreement, however, in the midst of the rigmarole, the Liberian government has sealed a Framework Agreement with High Power Explorations (HPX) for the usage of the rail to export of iron ore from Guinea through the Port of Buchanan.
By Lennart Dodoo, [email protected]
The signed amended and restated Framework Agreement with the HPX confirms the Liberian government’s principles for HPX’s non-discriminatory access to Liberian rail and port infrastructure and identifying HPX’s requirements for the future evacuation of ore from the Guinean Nimba Iron Ore Project.
The Framework Agreement, 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.
As per the Agreement, HPX looks forward to having the right to extend the railway facility from Yekepa to the Guinea-Liberia border and have access to the Yekepa-Port of Buchanan rail.
HPX group companies Ivanhoe Liberia announced over the weekend that “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.
Shrouded in Secrecy
Cloaked in apparent secrecy, the government made no prior announcement of an impending signing while the Legislature was still actively debating the ArcelorMittal 3rd Amendment. The 5-G speed with which the agreement was signed and announced, has many wondering whether there were other factors and backdoor dealings that birthed the HPX deal.
Our high-level source who has been reviewing signed copies of the framework document points out that the document appears to have been signed between Saturday, March 26 and Monday, March 28, 2022. While the title page carries a date of March 30, our source is certain that the HPX Framework document was signed much earlier than that.
The Framework Document, a copy of which FrontPageAfrica has obtained revealed that the Liberian government had been receiving payments from HPX Ivanhoe Liberia and the government failed to make public pronouncements on the payment. The Liberian government on December 23, 2019 received the first payment of US$7 million for the railway deal, according to the Framework Agreement.
The Framework Agreement referred to this upfront payment as “deposit”.
“It is recorded that Ivanhoe Liberia has paid to the Government a payment of US$7 million on 23 December 2019, which is referred to as the Deposit in clause 7.1 of the 2019 Framework Agreement and hereafter referred to as the “Up Front Payment 1”; the Framework Agreement states.
It continues: “the Up Front Payment 1 is no longer currently due for reimbursement and upon an event of default, the Government shall repay the Up Front Payment 1 in accordance with Clause 3.2 below; and
“nothing in this Agreement shall affect or prejudice any claim or demand whatsoever which any Party has against the other Party under clause 7 (Deposit Payment) of the 2019 Framework Agreement as amended and restated in this Clause 2.3(b); and
Billed as “Up Front Payment 2”, HPX is to pay the government US$30 million.
The payment line of the framework document specifically and categorically states that payment will be made “…with evidence of SWIFT transfers made within 4 business days on or before 3/31/22”
The Framework Agreement states: “a payment of US$30 million (the “Up Front Payment 2”) within 4 Business Days of execution of this Agreement, with evidence of SWIFT transfers made on or before March 31, 2022; and
“a payment of US$25 million upon the date falling 10 Business Days after the date on which the Concession and Access Agreement is fully effective and legally binding and the HPX Group (and/or its nominees) has unimpeded legal and physical access to all of the Infrastructure Corridor as is required to implement the HPX Project, to the satisfaction of the HPX Group (the “Up Front Payment 3”).”
The signing of the HPX Framework Agreement comes in the wake of the rejection of ArcelorMittal’s third MDA amendment which the House of Representatives has sent back to the Executive for renegotiation.
ArcelorMittal Given the Run
It can be recalled that after the House of Representatives had initially passed the MDA and forwarded to the Senate for concurrence, the Senate made some significant changes to the MDA and called on the House for the setting up of a conference committee that will sort out the issues identified by both Houses for final passage.
The Senate refused to concur with the House in ratifying the draft MDA on grounds that it did not address most of the concerns raised by residents of the affected communities. The Senate accused the government’s negotiators during the crafting of the draft agreement of making several waivers at the detriment of the state. The Senate then drew up several recommendations to be addressed before the ratification of the agreement. It then proposed the setting up of a conference committee with the House to resolve their differences.
Some of the Senate’s recommendations bordered around disputed area and exploration, Rehabilitation of Infrastructures, third party’s access to rail and port infrastructures, additional revenue consideration and compliance.
The House Conference Committee was to join members of the Senate Conference team to review and advise both Houses on the possible ratification of the amendment which has US$800 million direct benefit to Liberians.
Those appointed on the eight-member Committee included Rep. Rosanna Schaach, Co-Chair, Reps. Johnson Gwaikolo, Vincent S. T. Willie, Cllr. Kanie Wesso, Matthew Zayzay, Acarous Gray, and Joseph Somewobi as members.
The committee wasted no time getting to work. It concluded its first informal meeting on the evening of March 24, with several key members present to brainstorm their modus operandi. The youthful House side Chairman, Hon. Massaquoi took notes and was tasked with presenting a draft for discussion at the next meeting scheduled for the following Tuesday in Monrovia.
Surprisingly, the House held an emergency session on Tuesday, March 29 after which it announced the sending of the ArcelorMittal Liberia Third MDA back to the Executive for renegotiation.
Shortly after the House’s, action, ArcelorMittal issued a carefully worded statement pointing out what it said were fundamental flaws in the House of Representatives’ action. Said the March 30 statement: “ArcelorMittal Liberia has learned through unconfirmed media reports that the House of Representatives has made appointments to the conference committee and some other decisions over the past few days regarding the company’s Third Amendment to the Mineral Development Agreement (MDA), which is awaiting ratification by the Legislature.”
AML’s statement concluded by saying it believes that the Amendment to the MDA is in the best interest of Liberia and its people, as signed on September 10, 2021, after more than 12 months of negotiations with the Government of Liberia.
HPX and the Nimba Ore Project
The 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$76 per ton (US$/ton), which compares with the current spot price which is in excess of US$145/ton. This spot price does not consider the current premium paid 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/ton. The 2021 PFS assumes construction starts in 2023.
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.
At the signing of the Agreement, 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.”
Key Terms of the Framework Agreement
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 tons 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.
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, 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.
HPX and the Government have agreed to collaborate to identify and assess viable mineral prospects in Liberia.
ArcelorMittal’s Investments in Liberia
AML’s investment represents a guaranteed U$1 billion of new money coming in. It creates nearly 3,000 new jobs and ensures sustainable economic growth. Simply put, the jobs are here in Liberia, for Liberians, their families. The concession company to date remains the largest investment in Liberia.
ArcelorMittal’s deal has already packaged a hefty US$30 million signing unlike HPX’s whose payment 2 is conditioned.
ArcelorMittal Liberia has already invested US$200m in the rail, and has begun upgrading the infrastructure.
Liberia will become a major iron ore producer with the third amendment when passed. This will pave the way for the expansion of the Port of Buchanan, the rail and new processing facilities. It is expected to create 3,000 jobs.