Liberia: The case against ArcelorMittal’s deal (Pt1)

The New Dawn Liberia The New Dawn Liberia

21st January 2022

Experts sound warning

The third proposed amendment of the ArcelorMittal’s Mineral Development Agreement (MDA) currently before the Liberian legislature is not in the best interest of the country if the deal remains in its state, experts have warned.

The proposed MDA among other things will see the global steel giant undertaking the expansion of the railroad and the port of Buchanan in Grand Bassa County but also seeks some exclusive control to the detriment of other future users-something that could deny the government and country much-needed revenue for development and increase the pocket of the company.

In their analysis, experts warned that for instance, the debate over the exclusive right the company seeks as it relates to its proposed expansion project will grant exclusive rights, thereby denying other users.

The New Dawn Liberia The New Dawn Liberia
Analytical chart 1

Experts say this makes the deal bad because according to them, there will be no new users during the expansion period, there will be a loss of rail use revenue to the Government of Liberia and create delays in other mining projects.

The ArcelorMittal MDA also seeks ad hoc committee on controversy. On page 11 of its MDA under again the User Access and Future Expansion of the Railroad Article 3. e, 8e states: 3. e“If there is a Temporary Unused Capacity and condition A to D above are met, the Concessionaire will enter into the relevant rental agreement to the effect of subparagraph 7 above.”

Subparagraph 7 on page 10 of the MDA states: “In the event the ongoing Railroad Capacity Expansion has been completed to haul 15MWMTPA of finished products, but the expansion of the Concessionaire’s mining and processing operation reach 15MWMTPA, production (including its commissioning or ramp-up) has been delayed, leading to the temporary availability of an annualized unused capacity of at least 1.5 MWMTPA on the Railroad for the following 12-months period as determined by the Concessionaire, acting reasonably and the latest forecasted progress project completion and ramp-up schedule for the mine and concentrator (the temporary Unused Capacity), the Concessionaire shall upon request and subject to the principles set out in subparagraph 9, below make available for rental such temporary Railroad unused capacity to an authorized eligible applicant using such eligible applicant’s own rolling stock, a portion of the totality of such unused Railroad capacity up to a maximum volume of 3MWMTPA, subject to conditions” listed in A, B. C. D and C.

Experts say there is no mechanism for a binding decision on this aspect of the AML MDA, meaning the decision is not binding.

AML plans to seek more rights beyond the ongoing and additional expansion as captured on page 9 of the same User Access and Future Expansion of Railroad in Article 3. e -6 2nd paragraph which states: “For the avoidance of doubt, in addition to the expansion rights set out above, the Concessionaire shall at any time have the right to apply for further Railroad expansions to meet the needs of Operations, in accordance with the Railroad System Operating Principles.”

Experts say this will give AML the right to request more capacity above 30MTPA, maxing out the capacity of the rail.

AML deal also seeks exclusive rights that are its additional railroad capacity to reach 30MTPA with a payment of US55Million to the Government of Liberia. This is under Page 6 of User Access and Future Expansion of the Railroad. Page 6 Article 3. e.2, while page 7 Article 3. E.2B speaks of the payment and Article 3. E. 2D (i) on construction exclusion.

Again here, experts say this would mean that there would be no new users during the period of 10 years. This they say will result in a significant loss of rail use revenue to the government, delay for other mining projects and loss of mining revenue from other potential companies.

In its proposal for payment to government as it relates to the deadline extensions construction exclusion pay the Liberian Government US$4 million per year up to 3 years –construction not started. And when the construction reaches substantial completion pays US$2.3 Million per year.

But again experts warned that under such arrangement ArcelorMittal can extend exclusion by merely paying annual fees. In addition, this will lead to more revenue loss and delay other mining projects. To be continued


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