After nearly two years of legal battle, the Sierra Leone Government and a US owned firm, SL Mining, have announced an out-of-court settlement over a dispute triggered by the cancellation of the company's mining licence.
The government in 2019 accused the miner of violating its licence agreement by, among others, failing to pay royalty on exported iron ore.
SL Mining, a subsidiary of the US-based commodity trader Gerald Group, acquired its licence in 2017 to operate the Marampa Iron Ore project, located in the northern district of Port Loko.
Marampa is believed to hold an estimated one billion tonnes of iron ore with a potential lifespan of 30 years. The mine has an output of two million tonnes per year and produces a high-grade iron ore concentrate branded “Marampa Blue”.
SL Mining acquired the project after several failed attempts by other international companies. It restarted operations in August 2018. And by June/July 2019, the company began marketing and shipping the iron ore concentrate to steel mills in China.
Soon after, the Sierra Leone government ordered the company to suspend export, amidst allegations of violating the licence agreement.
The company was ordered to pay a $1 million (performance) bond as a condition to lift the suspension.
“We need serious investors and not ones that can hold on to our mineral wealth yet starve us from our dues as a nation,” then Mines Minister, Rado Yokie, said on a live radio programme.
At the same time the government also cancelled two licences belonging to the Chinese firm, Shandong Iron and Steel Group, for similar charges.
SL Mining accused the government of extortion.
After several exchanges, the company in August 2019 filed for arbitration. And in retaliation, the government cancelled the company’s mining licence altogether in October 2019.
The legal challenge was being heard under both the International Chamber of Commerce’s International Court of Arbitration and the International Center for Settlement of Investment Dispute (ICSID).
According to separate statements by both the government and the company, they have mutually agreed that all parties will withdraw their claims and allegations in the courts.
The Gerald Group statement listed seven terms under which the agreement was reached, including the withdrawal of the cases.
They agreed to form a new company, NewCo, with 90 percent interest for the company and 10 percent “non-dilutable interest” for the government.
Gerald Group also committed to increase its production, with commencement of operations slated for June 1.
The company, according to the terms, will also have the immediate right to ship its current stockpile of 707,000 tonnes of iron ore. From the proceeds, it will pay the government a fixed sum of $20 million in two instalments.
Negotiation for the new mining lease agreement is expected to be completed this month, according to the statement.
The Gerald Group describes itself as the oldest and largest employee-owned metals merchant in the world.
The Group’s Chairman and CEO, Craig Dean, was quoted in its statement expressing delight that they have resolved their differences, paving the way for a “fresh start.”
The Mines ministry, in its statement, said the new agreement will be negotiated “to ensure greater benefit for the people of Sierra Leone.”
The dispute between the two added to Sierra Leone’s economic challenges, coming at a time when the country’s mineral sector was struggling to recover from the double effects of the 2014-2016 West African Ebola epidemic and the fall in international prices of iron ore.
The suspension of SL Mining's licence became a political issue.
The initial licence was granted by the APC-led Ernest Bai Koroma administration, which is now the main opposition.
The cancellation of the company’s operations crippled the local economy in the opposition-controlled town, and led to a deadly riot there.
The government accused officials of the company of inciting the violence, and a top executive of the company was even briefly detained.
The SL Mining deal was investigated by a Commission of Inquiry that was established to look into the activities of the Koroma administration.
The new agreement signed on May 7 was not immediately made public and the news came to light on Monday after a photo of the signing ceremony appeared on social media. Shortly after, the government issued its statement confirming the deal.