Deciphering The Western Cluster MoU With The Government Of Liberia


The Fight for Bomi is on! Just as the riddle of the Enron-Dynegy transaction in the US, where Enron nearly concluded the purchase of Dynegy, but only wanted to use Dynegy’s own money to buy Dynegy, so it appears with the Western Cluster Liberia (WCL)/Elenito deal from the very onset. In that deal, Enron had no money and wanted Dynegy to surrender its bank accounts so that Enron could buy Dynegy!

Francis K. Zazay, [email protected], Contributing Writer, Finance, Accounting and Tax Practitioner

The difference here is that Elenito/Western Cluster succeeded in selling shares to raise capital, after it won the concession agreement with the Government of Liberia. It is, therefore, not an irony for the WCL concession to be as unequivocal in purpose, while the current MOU with the Government of Liberia, that is seeking to ratify the actions of the concession agreement is Not!

On June 4, 2022, it was announced that the Government of Liberia and WCL had signed a Memorandum of Understanding (MOU) for the commencement of the iron ore project, pursuant to the concession agreement between Liberia and WCL. The MOU consequently give rise to a groundbreaking ceremony on June 8, for Western Cluster to start operation. The MOU specifically states that its provisions ‘supersede all provisions of the Agreement which are contrary or in conflict hereto…….it goes further to state that this MOU forms the entire agreement between the parties for the resumption of the Company’s operations.

With no intent to question the integrity of the Government Agencies who negotiated the deal, and Honorable Snowe, in particular, who made the announcement, the matter for consideration is whether the actions of few members of the House of Legislature and some Executives of Government, or a committee thereof, is sufficient to override an instrument emanating through legislative process and the Inter-Ministerial Committee on Concessions (IMCC).

Awarding of Concessions in Liberia: Concession interest in Liberia is granted based on prescriptions of the Public Procurement and Concessions Act (PPCA). The procedure involves a bidding process, legislative reviews and action, prior to signing into law by the President of Liberia. This is when the right to operate is granted to a ‘qualified holder of a concession’. The qualified holder of a concession is one who has won a bid to invest as a concessionaire and negotiate a contract that is an act of the Legislature.

Concession contracts signed in Liberia during the previous administration had investment potential in excess of $17 Billion United States dollars, that covers the mining, oil exploration and agriculture activities.

The PPCA requires that they are granted to corporations with a capital capacity not less than $10M United States Dollars. The public policy further requires that the awarding of concessions in be managed and guided by deliberations of the Interministerial Committee on Concessions. Strangely, the MOU with the WCL, which appears to effectively amend the concession agreement, is a shocking departure.

The suspicion for its departure from the norm is founded on the fact that aside from the announcement and various town hall meetings held by Hon. Snowe, the MoU itself has not been made public to inform the interest of all parties, nor are other documents available to determine whether other legislative considerations were sought to give rise to the signing of the MOU. For example, many county officials of Bomi who were asked to provide copies of the MoU did not have it.

This includes officials of the Ministry of Lands, Mines and Energy, the National Bureau of Concessions, etc. This makes the entire process to appear hidden and shrouded in secrecy, and in a manner that suggests that the MOU was not constructed based on objective and transparent interest. It is required in Liberia that prior to the commencement of every concession, a development plan or feasibility studies report should be provided.

The MOU does not state if this was done! There is always a noisy trail in the case of the WCL Concession. The company continues to tread on troubling paths since its inception. For example, immediately after ratifying the agreement, but prior to the commencement of any operations, Elenilto sold 51% of its share to Sesa Goa, a Vedanta PLC subsidiary, earning US$90 Million. This practice led to concerns as to whether the WCL has the desired capital capacity to meet the concession needs. Efficaciously though, WCL appears to meet all legal and operational requirements, except when it comes to its dealings in Liberia. WCL is a conglomerate of the Delaware registered USA, Elenilto Minerals & Mining with 49% interest, and Bloom Fountain, with 51% interest, a Mauritius company that is a wholly owned subsidiary of Sesa Goa.

Sesa Goa is a publicly listed company incorporated under the laws of India. Furthermore, the WCL is registered to operate a 25-year Mineral Development Agreement (MDA) signed in 2011. It will operate in the three iron ore regional deposits located in the former Liberian Mining Company’s operations in Bomi County, the former Liberian National Iron Ore Company (NIOC) in Mano River, and the Bea Mountains in Grand Cape Mount County. The company has an effective operational date of August 22, 2011, and an estimated required investment size of US$2.3 Billion. Despite demonstrating that it meets all of these apparent legal requirements, most operational dealings of the WCL continues to raise eyebrows.

Current Operational Status: The issue of the current operational status of WCL prior to signing the MOU is not referenced anywhere in the MOU. For example, the status of MDA’s requirement that WCL pays US$2.8M annually in Social Development Funds to the affected counties of Bomi, Cape Mount, and Gbarpolu, in addition to government taxes and royalties, is not stated. As shown in the below table of a 2012 Report of the National Bureau of Concessions, outlining the annual obligations of the WCL, the MOU has not given a status of these critical responsibilities. Unlike the case of the Enron-Dynegy transaction, the obvious has been the successful transfer of interest by WCL to raise capital since the inception of the MDA; when to the contrary, the MDA requires capital capacity as a prerequisite for an agreement.

Table 14 – Schedule of Payments to Government Ministries and Agencies-2012 Operations Report of the NBC 1 1 Up-front Payment $25,000,000.00 2 Community Development $2,000,000.00 3 General Education Fund $200,000.00 4 Scientific Education Fund $100,000.00 5 Mineral Development Fund $50,000.00 6 Exploration Permit Fees $7,500.00 7 Fees for Aerial Survey $7,155.20 8 Withholding Tax for Employees $88,645.00 9 Withholding Tax Interest $5,122.04 10 Visas etc. $22,490.00

Total $27,480,912.24 Critical Departures From the MDA: Section 6.1 of the agreement calls for the incurrence of capital by WCL to commence the construction of desired operational facilities. Section 6.2 of the Concession Agreement calls for the WCL to demonstrate its capacity to operate the terms of the concession and to submit a development/feasibility plan to that effect. Section 6.7, relative to Railroad and Port Construction, Operation and Ore Transportation, the WCL is ‘sopoto’ build train tracks/railroad from the mine to the port of export for the transportation of its iron ore, without causing problem for road transportation.

In lieu of these infrastructure acquisition and construction requirements, such as railroad construction, the WCL now transports ore using the regular transport road, in the millions of ore tons under the current MOU arrangement. This is a departure from the legal framework established between the Government of Liberia and the WCL.

These activities run contrary to Section 6.7 (b) of the MDA and a fundamental violation of our freedom to travel at will. This section requires Western Cluster to build and rehabilitate all roads and bridges to support its operation, and not to use existing structures, as the MOU has granted to the WCL. Additionally, the MOU does not appear to require the WCL to meet its feasibility report obligation, as required by Section 5.2 of Concession Agreement which was due at least 18 months after the MDA was signed.

By this flagrant abrogation of the concession agreement, commuters on the Bomi to Monrovia Road are required to allow the night hours to be used by the WCL to truck the ore to the port of Monrovia; that now involves many very, very big and gigantic machine-like trucks. Authorities have reported that exposure to iron ore increases health risk to the lungs when inhale that can lead metal fume fever; ‘a flu-like illness with symptoms of metallic taste, fever, chills, aches, chest tightness, and cough, etc.

As the WCL particularly sought to begin operations in 2022, after closing for several years, it again entered an MOU with the GOL that appears to contradict both the concessions agreement and the laws of the Republic of Liberia. Not only is the new WCL project driven in seclusion, but it appears to defy all operational norms, to the extent that it appears to aggrandize interest other than the National Interest.

Similarly, it was reported in a Moore Stevens concession audit that 52, out of 60 concession contracts signed in the previous administration were problematic. The signing of this MOU is therefore, a bleak reminder of that publication. Aside from the environmental and social impact issues, the MOU now gives the WCL all that it needs, when in fact, it should be in the capacity to provide such, as outlined below: 1.

Three iron ore mining deposits given for free 2. Relieving WCL of all financial obligations, except $10M out of perhaps, $23M 3. Payment of financial obligations only after the ore mined by the LMC has been shipped 4. Rehabilitate the Bomi Road but rebuild the street from the St. Paul Bridge to the Freeport to the disadvantage of Bomi 5.

Allow WCL to expose our bridges to huge and catastrophic structural risk, including the St. Paul, Maher and Po River bridges, by the time the heavy tons of iron ore shipments are completed. Note that the bridges were not built for such transport requirement. 6. Intercede on behalf of WCL to use the former LMC’s Pier at the Free Port. Note that Bao Chico, a similar concession is building its own railroad and road, as well as its port from Gogalla, Gbarpolu County to Roysville, Bomi County. 7. GoL to tell China Union to grant WCL access to use its loading equipment at the Port, etc, etc, etc. Conclusion: As you can read, Bomi and the GOL are giving everything to WCL, and in return for what? Ruin as in Bomi hole? Assured of your understanding of my contribution to the WCL MOU discussions, permit me to conclude within the context of a previous author on the same subject matter as thus:

• Did the Ministry of Public Works conduct prior road assessment of all culverts and bridges along the road to determine their structural integrity/load-bearing capacity?

• Did the Public Works ensure that the contracting of the road rehabilitation/upgrading was done based on Government Policy and international or ECOWAS Road standards?

• Has the Policy validated that traffic signs are installed to ensure traffic safety?

• In lieu of plying the roads with heavy and gigantic machine-like trucks, why can’t the WCL construct dedicated lane for its trucking, consistent with the MDA? Is this not particularly prudent given that the only task WCL currently has is to only take the ore, and is absolutely not incurring any exploration or mining cost?

• Did WCL provide the government with a comprehensive plan required under the concessions agreement?

• Is there any reason why professional stakeholders from the affected counties were not engaged during the MOU stage? • Why did the WCL not begin operations even after it sold a percentage of ownership rights to raise funds? Among the many objectives of national transparency policies regarding the granting of concessions in Liberia, is the segregation of functions to ensure accountability at all levels of concession granting Ministries, Departments and Agencies of Government.

This is why concessions are granted through the actions of the IMCC and within the framework of the PPCC. Based on the framework of various public governance policies for concessions granting and monitoring, it is evidently obvious that the MOU with WCL is solely an instrument of key fiscal agent ministries within the Executive Branch, irrespective of the fact that it was announced by prominent members of the Bomi County Legislatures.

Additionally, no public pronouncement has informed interested parties that the MOU with the WCL is a derivative of the IMCC and Legislative processes, nor can this MOU be found at relevant Public Offices of both the government and at the local county levels, as named above. It was also established, as stated above, that the MOU represents many deviations from the Concession Agreement with the WCL, which is an action of the normal concession granting processes of Liberia.

Under the laws of the Republic of Liberia, the Executive alone cannot ratify the actions of the Legislature without a legislative engagement. Aware of these many contrarian steps within the MOU, and the fact that it is not an instrument of the IMCC, nor a ratification that emanates through the action of the Legislature, the MOU is fundamentally baseless and illegal. It therefore, must not be binding on the people of Bomi, Cape Mount, Gbarpolu and the Republic of Libera.