Sierra Leone mulls mining reform, royalty hike

FREETOWN – Sierra Leone’s parliament was to vote yesterday on a bill that would hike royalties on the extraction of diamonds, gold and other precious metals and give government the right to take a stake in big mining projects.

The bill aims to remedy the effects of years of mismanagement, corruption and a 1991-2002 civil war that have hamstrung the West African nation’s mining potential, leaving it among the world’s poorest countries.’We want an act that will bring predictability, consistency and sustainability to our mining sector,’ trade and industry minister David Carew told Reuters by telephone from London, ahead of an investment conference today.Sierra Leone’s gem-fuelled civil war killed some 50 000 people and left infrastructure and farmlands in ruins, pushing out many large foreign firms that had sought to develop the country’s vast mineral deposits. Companies that remained sought favourable terms for their operations.’We found out that over the years people were negotiating their own agreements outside the mining act. As a result there were various qualities of agreement inconsistent with our policy, negotiated at a time when the country was vulnerable,’ Carew said.The bill would raise royalty rates, give government the option to take a share in large projects, increase mining companies’ obligations to develop local communities and ensure they cannot sit idly on cheap licences.Among the new proposals is a hike in royalty rates to 6,5 per cent on diamonds, up from five per cent, and to five per cent on gold and other precious metals, up from four per cent.Companies would need to spend 0,1 per cent of annual gross revenues on community initiatives, and new entrants would work under a new non-exclusive ‘reconnaissance’ licence, which will replace the ‘prospecting’ licence and is renewable only once.Carew said the government has successfully renegotiated a former ‘special agreement’ with Koidu Holdings, a private Israeli-owned company that mines the country’s deepest vertical kimberlite diamond pipe.He said officials are now reviewing the country’s deal with Sierra Rutile, owned by AIM-listed Titanium Resources Group, which mines the world’s third largest deposit of rutile, used in paint pigment and toothpaste.The vote on the bill will come on the eve of the Sierra Leone Trade and Investment Forum in London, sponsored by the World Bank and UK aid agency DfID, which the country hopes will attract a raft of interest in the economy still emerging from its civil war.Former British prime minister Tony Blair, who sent in troops to stabilise the country during the war, will attend the conference, and billionaire George Soros – who is investing in agriculture in the country – will send a message of support.In recent years Sierra Leone has become one of the continent’s top reformers, keen to become investor-friendly and rising seven places to 30 over the past two years in the widely-viewed Ibrahim Index of African Governance. -Nampa-Reuters