Sierra Leone’s ministry of mines debunks allegations of illegal shipping of iron ore

Sierra Leone Telegraph: 6 February 2021:

Following the publication yesterday of allegations made in parliament this week by the opposition APC party parliamentary leader – Chernor M. Bah, accusing the Bio-led government of secretly permitting the Chinese mining company – Kingho Mining Company Ltd to ship millions of dollars worth of iron ore from the shores of Sierra Leone without parlaiment’s approval, the ministry of mines and mineral resources has responded in a presss statement.

Justifying its decision to allow the shipment to go ahead, the ministry of mines says that:

“The ownership of the iron ore stockpiled at the Pepel Port rests with the State and under the authority of the Minister of Mines and Mineral Resources. Hence, the Minister of Mines and Mineral resources urgently put modalities in place through the Cabinet to legally, morally and ethically authorize Kingho Investment Company Ltd to export (on a one-off commercial basis as agreed in the One-Off APA) the Iron Ore Stockpile at the Pepel Port on behalf of the State.

“An Advance Pricing Agreement, which is a requirement (when selling to.an affiliated company) in the Mines and Minerals Act 2009 and Extractive Industries Revenue Act 2018 (as enacted into law by Parliament), does not (and had never been) have to go to Parliament. An Advance Pricing Agreement is an executive, operational and  regulatory instrument developed and implemented by the Regulatory Agency (NMA ) and the MMMR in consultation with Ministry of Finance/NRA; not by Parliament.”

This is the full statement published by the mimnistry of mines: 

“Kingho Mining Company Ltd was granted a Large-Scale Mining Licence by the GOSL on 8 January 2020. On 21 December 2020, Kingho Investment Company Limited (the parent Company for Kingho Mining Company Ltd and Kingho Railway and Port Company Ltd), submitted an Expression of Interest (EOI) to export the iron ore mineral product stockpiled (Iron Ore Stockpile) situated at Pepel Port site on behalf of the GoSL on commercial basis.

The EOI, as submitted by Kingho Investment Company Limited (KICL), covers the Iron Ore Stockpile at the Pepel Port site only. The EOI also drew the attention of the GoSL to the fact that the Iron Ore Stockpile is being stored on a pad that will be used by Kingho Mining Company Ltd (KMCL) for stockpiling its iron ore transported from the Tonkolili Mine Site that will be in production in January/February 2021.

Furthermore, KICL indicated that considering the volume of Iron Ore stockpile and the space it occupies, agreeing to export the Iron Ore Stockpile now will create sufficient space for its incoming iron ore from the Tonkolili Mine Site.

The GoSL, on 8 January 2021, concluded the GOSL-Kingho Rail and Port Lease Agreement (Lease Agreement) with Kingho Railway and Port Company Limited to operate the Tonkolili-Pepel Railway and Pepel Port facilities.

Also, the two subsidiary companies of Kingho Investment Company Limited (i.e., Kingho Mining Company Ltd and Kingho Railway and Port Company Ltd) are at an advanced stage of the mobilization and site preparation to commence operations at the Tonkolili Mine site and Pepel Port.

These recent developments put Kingho Investment Company Ltd in a better position to have the right of first refusal to export (on a one-off commercial basis) the Iron Ore Stockpile at the Pepel Port on behalf of the State.

Having thoroughly assessed the situation both locally (i.e., nature of the iron ore product, current state of preparedness and acquisition of right to operate the Railway and Pepel Port by Kingho Rail and Port Company Ltd) and internationally (i.e., current global price of iron ore), the GOSL asked KICL to tentatively make marketing arrangements and secure a third-party buyer for the Iron Ore Stockpile.

In January 2021, the NMA conducted a detailed assessment and verification exercise (including volumetric drone survey) at the Pepel Port to ascertain the tonnage (quantity) and quality of the iron ore already stockpiled at the site and also collected representative samples of the iron ore stockpiles for laboratory analysis to ascertain the product quality, including moisture content and Transportable Moisture Limit (TML).

The iron ore product from the Tonkolili Mine Site historically fetches a considerably lower price in comparison to the benchmark prices of iron ore products with a similar iron (Fe) content. Benchmark prices only cover a certain range of product specifications – iron ore in particular is known to display an extremely large range in product specifications depending on, for example, their geological properties, the geography and climate of the area it is mined in.

Accordingly, even though the iron ore product from the Tonkolili Mine Site has a 57-58% Fe content (and thus falls into the bracket covered by the Platts’/TSI’s 58% Fe iron ore spot price index), it became evident that this product was always valued significantly lower than the benchmark product due to its inferior specifications.

Not only does this product display a much higher alumina (Al2O3) content than commonly preferred (6-7% instead of the 1.5% prescribed by the benchmark), it also has extremely high levels of moisture (15% instead of the maximum of 9% prescribed by the benchmark).

Moreover, this product is also marred by a large loss of ignition (LoI) and general efficiency losses in handling of the product due to the high clay content and the chemical properties of the ore. All these properties combined cause this Iron Ore Stockpile to be of significantly inferior quality in comparison to other companies’ products with a comparable iron (Fe) content.

The MMMR and the NMA in collaboration with the relevant MDAs estimated a fair price on the stockpiled iron ore mineral product as it leaves the Pepel Port. However, it is important to note that sales of iron products seldom take place at this point (i.e., as the iron ore product leaves the Pepel Port), so the method chosen was determined by a trade-off between the ease of administration and the desire to provide an economically efficient and equitable system.

In this specific case, the valuation points included published price (including deductions, given the specifications of the iron ore product in question) and Free on Board (FOB) – deduct freight costs, insurance, any legal costs, quality adjustments and marketing fees, etc.

GoSL and Kingho Investment Company Ltd negotiated a One-Off Advance Pricing Agreement (APA) prior to the export of the Iron Ore Stockpile at the Pepel Port, subject to a Cabinet concurrence.

The APA determines in advance the terms and conditions of the one-off commercial transaction/sale of the Iron Ore Stockpile and ensures price transparency and predictability, based on publicly published iron ore price indices.

As part of the One-Off APA negotiations process, the NMA, MMMR and MOF/NRA ensured that Kingho Investment Company Ltd committed to providing certain critical information in relation to the sale of the Iron Ore Stockpile at the Pepel Port.

The documents included: Provisional invoice; Freight invoice from carrier; Draft survey report; Sales contract with third-party; Copy of certified laboratory report for shipment samples taken; Customs certificate at the port of delivery (e.g., Qingdao); Final invoice; Supporting documents that can explain all differences between the Platts Iron Ore price and the quoted “base price” (e.g., size of the particles and penalty for it, moisture penalty, TiO2 penalty, LOI penalty, etc.); and an Excel file tracking shipment and status/availability of the requested documents, as well as provisional, revised and final invoices.

The ownership of the iron ore stockpiled at the Pepel Port rests with the State and under the authority of the Minister of Mines and Mineral Resources. Hence, the Minister of Mines and Mineral resources urgently put modalities in place through the Cabinet to legally, morally and ethically authorize Kingho Investment Company Ltd to export (on a one-off commercial basis as agreed in the One-Off APA) the Iron Ore Stockpile at the Pepel Port on behalf of the State.

An Advance Pricing Agreement, which is a requirement (when selling to.an affiliated company) in the Mines and Minerals Act 2009 and Extractive Industries Revenue Act 2018 (as enacted into law by Parliament), does not (and had never been) have to go to Parliament. An Advance Pricing Agreement is an executive, operational and  regulatory instrument developed and implemented by the Regulatory Agency (NMA ) and the MMMR in consultation with Ministry of Finance/NRA; not by Parliament. (End of Statement).

Is this the end of this political row, or will the opposition parliamentarians come up with further revelations about this Chinese iron ore shipment deal? 

11 Comments

  1. The Ministry of Mines and Natural Resources’s press statement seems to be a carefully crafted attempt to explain away government’s action in disposing the way it did of the iron ore stockpiled at the port of Pepel. All of sudden, stung and rattled by the Opposition leader’s allegations of illegality in the way the deal was done, the Ministry comes up with an explanation to the effect that the whole thing is nothing more than a storm in a tea cup: the iron ore was of inferior quality anyway and the stockpile itself needed to be cleared to make way for Kingho Mining Company’s more important operations. One is left to infer that the normal process of marketing the product aimed at generating optimum income was bypassed because deemed to be pointless and a waste of time.

    The question though is who stands to benefit from a transaction done so hurriedly? Government? Kingho Mining Company? Third Party buyer? It is anyone’s guess. And could measures not have been taken much earlier to avoid underselling the product, resulting at the same time in freeing up the space it occupied at the port? So rather than dissipating the layer of opacity and obfuscation surrounding the one-off commercial transaction, the Ministry’s press statement simply thickens it.

    That said, one good thing to take away from the sorry sale of our iron ore is that the Opposition leader has succeeded in forcing the government into a corner, subjecting its action to much needed parliamentary scrutiny and public outcry. Kudos to him, and to all those arguing for complete transparency in the way government conducts its business.

  2. Diehard PAOPA apologists who erroneously deduce that the APC leader of parliament was playing cheap politics, must be ashamed of themselves and buried their hands into the sand for their ignorant assertions. Reading through this press release, any sane and learned individual will quickly realize that the UNDER THE TABLE DEAL the ministry officials signed with the Chinese company indeed has criminal and dubious intent. Almost half of the press release focuses on efforts to devalue the iron ore that was shipped, with the ministry even going extra length describing different species of iron ore, with the one in question being the least valuable as per their assessment.

    Most importantly to cover their criminal intent, the necessity of clearing up space needed for the Chinese company to start their operation was emphasis, with the nonsensical declaration of the deal being a ONE TIME deal, parliament does not have to be consulted, rather the ministry officials and cabinet members have the onus to call the shots. I don’t know about you, but if it walks like a duck, runs like a duck, swims like a duck and quacks like a duck, then it must be a duck. The smell of corruption is writing all over this purported ONE TIME DEAL. Kudos to honorable Chernor Bah for highlighting this dubious deal to the nation. We hope opposition figures will continue to hold this criminal PAOPA regime accountable.

    • This government is really running our economy like a criminal enterprise. The way they make back-room deals, without any parliamentary oversight, is slowly but surely elevating our country to the status of a failed police state. The way government minsters operates, and putting the fear of God to the opposition, that dare ask reasonable questions, is like an organised mafia crime family. Under the current climate our country found itself in, the idea that a deal like this one off shipment can be made, without the opposition being made aware, or party to the decision-making process of the deal itself or even a courtesy Email, from the Minister of Mines and natural resources, informing the opposition about what’s going on.

      Let’s face it that is why we have an opposition, more like a government in waiting, makes you wonder why was the deal is shrouded in secret. The fact that they have gone to lengths explaining their actions, any reasonable person will start to think something fishy went on, that was not meant for public consumption. But for the honesty and tenacity of the opposition APC, that blindsided the government, now the chickens have really come home to roost. What this Minister has succeeded in doing, is to open a Pandora’s box of questions, that requires explanation in parliament. So far he has succeeded in putting a whole different meaning to the word ORGANISED CRIME. More like under Bio, we are dealing with an organised crime group. You are sworn to silence. These are made men, not rats.

  3. I suppose other Iron ore producing countries like Australia, The United States, Brazil and Russia don’t get the same terms and conditions from mining companies wanting to buy or extract their iron ore. The sort of price offers, where the buyer acts like the seller, dictating the prices. like the take it or leave it offers only applies to our country. We should be smatter than that. Can you imagine a Chinese foreign company telling Australians, one of the largest iron ore producing countries in the world, that they have to lower their iron ore prices because they feel the iron ore is not good enough. They wouldn’t dream of that. And if they do, the Australians will tell them to jog on.

    Right now the Chinese are in a binder with the Australian and the US government, with the previous Trump administration imposing tariffs on their steel industry. Biden is yet to reverse any. Same with Europe. So China is in desperate mood to kick start their already booming economy. The construction industry, the railway industry, the Bridge, the stadiums, the Solar industry, all have appetite in one way or the other for our Iron ore. And China is engaged in the largest Belt and silk road development, linking China, Africa, Asia and Europe with one freight route. More like our iron ore is in demand. We are unique in that our country is one of few in the world bless with this natural gift. Are we going to take advantage and use it for the betterment of all Sierra Leoneans? That’s sixty millions dollars questions.

  4. We have two types of iron ore in our country, steel-less iron which is the most expensive iron in the world and it is mined in Lunsar. A normal iron ore, which is the largest iron ore in Africa and it is mined in Bumbuna. Please, ACC should look at that for the benefit for our country

  5. We should focus on how our minerals are taken out of our country and account for every ton of iron ore. Our leaders are wicked. The iron ore is enough for all citizens to enjoy. Bumbuna and Lunsar is our country’s money making machine to develop and change the life for every citizen.

  6. I am a driller. I have worked for all the mining companies in Sierra Leone – for both African Minerals in Bumbuna, London Mining and Cape Lambert in Lunsar, during exploration. Sierra Leone is very very rich.

  7. Iron ore develop Australia and we have the second largest deposit of iron ore in the world. Sierra Leoneans don’t deserve to suffer. All Sierra Leoneans should benefit from our minerals; all Sierra Leoneans should be paid every month whether you are working or not. Our leaders are wicked.

  8. It is all very well for the Ministry of Mines and minerals, to put out a press release, explaining their actions for the authorisation of this one-off shipment of iron ore, by Kinghor mining, because they are running out of space in their deport at Pepel. What is wrong with expanding it? This is an other PR stunt, that sounded more like a company press release than a minister in charge of looking after the interest of Sierra Leoneans. It is all well and good to quote the constitution, when it fits your agenda. But no one heard from the Bio government quoting the constitution when they were abusing the human rights of Rt. Major Paolo Conteh, and Dr. Blyden. Under the current toxic atmosphere of corruption cases, it is only right Mr. Bah demand explanation from the ministers for this shipment.

    Once that urgent question has been tabled in parliament, and in the interest of transparency and accountability, the Minister should come and explain his decision. At the moment no one is accusing you of any wrong doing. The current atmosphere we fond ourselves, as a government ministers your actions, or the lack of it is scrutinise. You have to be whiter than white. Period. The APC is doing their job as an opposition. It seemed to me they are dammed if they do and dammed if they don’t. The public is always crying out for strong opposition to this Bio government or any government for that matter. Whoever negotiated with the mining company, that minimises the effectiveness of our Iron ore, is not aware, the Chinese economy is booming again whilst the rest of the world is still fighting COVID19. And our country is one of few countries around the world that produce this iron ore.They need our iron ore. Whatever ever way one looks at it, they should have been charged more.

  9. Gentlemen – Members of Parliament representing the Legendary APC, push has now finally come to shove; this is your finest moment, an era that will solidify your places in history as legendary heroes, if you can only summon the courage to do the right thing.The time is now to gallantly stand against the criminal tendencies of the notorious SLPP Cabal. It is a moment for serious commitment to be made in the interest of our beloved Sierra Leone, my only home, to back up our words. Anyone who remains complicit and fails to fall in line with the enthusiastic desires of our suffering millions to rid our beloved nation of these inept, self-seeking, freeloaders will be considered as enemies of the people who have no intention to help us uproot abject, humiliating poverty in Sierra Leone. Who is it that was so wet behind the ears they did not see the fabricated, flimsy excuses coming directly from State House? If the shipment of iron ore was done legitimately and transparently, then why are we hearing about it only when the Hon leader Chernoh Bah blew a loud whistle on their underhanded improprieties?(lol)

    No shame in their game – brazen thieves that believed they will never get caught, now struggling to entangle their thieving selves from an intricate web of deceit, treachery and lies. Criminals galore!(lol) Folks, be vigilant and alert – SLPP business is not only “Funny Business” but “Monkey Business” also.(lol) A loud shout-out going out to our Hon.Chernoh Bah for his untiring courageous patriotic efforts; do your thing – keep on incinerating these criminals with the fires of Truth.

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