Monrovia – How did Liberia get here? That’s the question the London-based accounting firm Moore Stephens, wanted to know in 2013 when it dealt a major blow for the post-war nation, concluding in a government-sanctioned report that only two out of 68 concessions were fully compliant with the laws of the land.
Report by Rodney D. Sieh, [email protected]
Less than two years after its acquisition of four major iron ore assets in Liberia from BHP Billiton, Cavalla Resources – a wholly owned iron-ore holding company of Jonah Capital, chaired by Sam Jonah is already exploring non-traditional sources of funding, following a long line of companies that have come to Liberia with lofty ventures and lot of profits, yielding very little for those languishing at the bottom of the economic ladder.
Now Lawmakers want to know why? (See Letter)
Over the past 11 years, several shady investors have come through Liberia’s doors, embracing the “Open for Business” pitch trumpeted by the Ellen Johnson-Sirleaf-led government.
Does Ellenilto ring a bell?
The subsidiary of the Engelinvest Group controlled by Jacob Engel, it can be recalled, used Liberia as a bargaining chip to enhance its image as a concession giant and walked away with US$123.5 million after selling its interest to Sesa Goa, a unit of Vedanta Resources.
The company later resurfaced in the West African nation of Togo where it has been trumpeting that it could produce annually five million tons of phosphate, fertilizers and phosphoric acid with total revenues of 28 billion dollars during project life.
Ellenilto had rights to Liberia’s Western Cluster project which consists of three mining concessions, the Bomi, Mano and Bea, with over three billion tonnes of iron ore resource. By the time Ellenilto walked away from the project, its investors had US$33.5 million in cash from the deal.
Remember Prince Dr. Arthur Ikppechukwu Eze?
The “god father” of Dunokofia Kingdom, located in Nigerian state of Anambra who is also the owner and Chairman of Atlas Oranto Petroleum International Limited, which secured significant upstream in Liberia for offshore blocks 12 and 14. Eze would later flip the prized acreage to Chevron, walking away with millions in the process.
Now comes another deal that has all the makings of yet another flip script written all over it.
At issue, is the controversy surrounding the recent acquisition of four major iron ore assets in Liberia from BHP Billiton by Cavalla Resources – a wholly owned iron-ore holding company of Jonah Capital, chaired by Sam Jonah, a Ghanaian businessman, who is the Executive Chairman of the fund based in Johannesburg, South Africa.
In a communication obtained by FrontPageAfrica, it appears that less than two years after the acquisition of the interest from BHP, Jonah is already exploring non-traditional sources of funding, to flip the project to another company.
‘BHP Still Holds Asset’
One lawmaker told FrontPageAfrica on condition of anonymity Tuesday that it would be inconceivable for Jonah Capital to sell an asset they do not fully own because as far as the Government is concern, the assets have not been transferred to Jonah Capital.
“BHP is still the holder of the asset. The instrument that gave the asset to BHP is law and so any change to that law needs to be rarified. BHP cannot just walk away from and give Liberian asset to another company.”
Jonah Capital (Pty) Ltd., through its subsidiaries, according to its website, explores, develops, and produces mining and mineral resources in Africa.
“The company’s portfolio of assets includes iron ore, copper, coal, gold, cobalt, uranium, and industrial minerals. Jonah Capital (Pty) Ltd. was incorporated in 2002 and is based in Johannesburg, South Africa.
It has additional offices in Accra, Ghana; Monrovia, Liberia; and Kasempa, Zambia.
In August 2014, Jonah Capital and BHP Billiton announced that they had entered into an agreement whereby Cavalla Resources Limited would purchase the entire iron-ore interests of BHP Billiton in Liberia.
BHP Billiton’s Liberian iron ore interests comprise the exclusive rights granted over four exploration areas; Goe Fantro, Kitoma, St John River South, and Toto; a further exploration license, Kitoma II, as well as the right of first refusal over three additional exploration areas.
The 1.9-billion-ton Joint Ore Reserves Committee-compliant resource includes 132-million tons of 57%-iron DSO.
At the time of the acquisition of the BHP assets, Cavalla Resources COO, Fidel Jonah, declared that: The acquisition for us was a company maker. Within those assets, there are development assets, near-term assets, and long-term assets.
Considering where the market is, all focus has to be on development assets; assets that you can develop today.
The winners are going to be the lowest-cost assets.
There’s one asset called the Goe Fantro, and this Goe Fantro asset is about 70km from the coast.
There are roads, it’s 22 dollars on the boat, so, even at today’s prices, it makes money. Till date, we’ve been funding [it with] our own internal balance sheets, we are currently investigating some non-traditional funding sources,” Jonah added.
John Barton-Bridges, CEO of Jonah Capital and MD of Cavalla Resources Ltd, at the time said: “This is a major step for Cavalla Resources in the development of our iron ore business in West Africa as it provides Cavalla with multiple additional iron ore resources that are very significant in size and strongly complementary to Cavalla’s low-cost Buchanan Project.
In addition, the acquisition provides Cavalla with multiple options in terms of future development prospects.”
Cavalla completed a Definitive Feasibility Study for its Buchanan Project, which was estimated to produce 1.2Mtpa of 65% Fe concentrate expected to commence production in 2016.
As part of the acquisition details, Cavalla was to construct a new iron ore berth within the Port of Buchanan for the Buchanan Project and Jonah Capital executed an agreement with the National Port Authority of Liberia regarding port usage and land lease.
Total operating cost for the Buchanan Project was to be less than $22/t, loaded on board at the Port of Buchanan.
At the time, Cavalla said the acquisition will enable it to accelerate production from the first of BHP Billiton’s licensed areas located approximately 70km from the port of Buchanan, which will increase Cavalla’s production to 6.2Mtpa by 2017, at an overall total operating cost projected to be less than $32/t.
Following commencement of production, Cavalla’s long-term strategy is to continue to develop the other BHP Billiton assets in a phased approach. Cavalla also holds six exploration licences in Liberia covering approximately 4,000km2.
Lawmakers Blow Alarm
But with much of those pledges yet to come to fruition, two lawmakers – Henry Fahnbulleh (District No. 4, Montserrado County) and Bill Twehway (District No. 3, Montserrado County) are raising red flags.
In a letter to House Speaker James Emmanuel Nuquay on Monday, March 27, 2017 obtained by FrontPageAfrica, the lawmakers unveiled a breach of the Mineral Development Agreement.
The Letter Reads:
Dear Speaker Nuquay,
We present compliments and wish to draw the attention of plenary to a gross violation of the Mineral Development Agreement signed between the Government of Liberia , BHP Billiton(Liberia) Inc. and BHP Billiton Iron Ore Holdings PTY Ltd relative to the restriction on traders.
Honorable Speaker, it has been discovered that BHP Billiton Iron Ore Holdings PTY Ltd in 2016 transferred their assets to Jonah Capitals without the acquiescence of the Legislature.
What is troubling is the fact that the transfer to Jonah Capitals was only done with the Executive Branch, contrary to Section 23.1, which states:
“That no transfer of (1) this agreement or a mining license, or (2)any rights of the company in a MINE or any immovable infrastructure (other than in ordinary course of renewal and replacement of its properties and other than transfer of products in the ordinary course of business is permitted unless the transfer has received the prior written consent of the government.”
Honorable Speaker, government, as used in the paragraph mentioned supra, means the branches that were involved in the crafting of the very Mineral Development Agreement, which are also under obligations to give their approbation to the transfer.
This is not solely, the exclusive preserve of the Executive Branch. Article 29 of the 1986 Constitution clearly delineates the function and responsibilities of the Legislature.
Honorable Speaker, as contained in Section 23.4 of the MDA in the restriction on changes of Control, nothing confers onto the Executive Branch the authority to negotiate and ratify said agreement at the same time.
Ratification, as we have emphasized, is the sole prerogative of the Legislature.
We therefore crave the indulgence of Plenary to invite the Ministers of Lands, Mines and Energy, Justice, Finance and the Liberia Revenue Authority to appear before Plenary on Thursday, March 30, 2017 to show cause why the transfer was concluded without Legislative approval.
Interestingly, both Jonah and Cavalla have been trumpeting that the deal had the blessings of the government in a bid to foster economic growth.
But with lawmakers now raising alarm that the deal was sealed without their knowledge, industry observers say the fact that the deal was not properly executed to begin with puts Liberia at risk of yet another deal with warning signs pointing to losses for the financially-strapped government on the way out.
Technically, one observer pointed out to FrontPageAfrica Tuesday, the assets should revert to the state if BHP abandons them.
Thursday’s hearing involving the Ministers of Lands, Mines and Energy, Justice, Finance and the Liberia Revenue Authority could offer some answers as lawmakers attempt to find out why such a major concessions transfer was concluded without Legislative approval, drawing scrutiny on yet another major investment opportunity bearing fringes of complications.