BOOMING MINING SECTOR MAY BRING NEW RAILROAD

UNCLAS CONAKRY 001004 SIPDIS SENSITIVE SIPDIS E.O. 12598: N/A TAGS: EMIN ECON ETRD PGOV GV SUBJECT: BOOMING MINING SECTOR MAY BRING NEW RAILROAD ¶1. (SBU) SUMMARY. Long-time bauxite and iron ore mining investors are stepping up operations in Guinea, while Chinese and Brazilian companies are looking to carve out niches for themselves. Meanwhile, one company is looking to build a multi-billion dollar tran-Guinea railroad in order to transport their iron ore. END SUMMARY. ¶2. (SBU) On August 22, Econoff met with Mr. Moumini Sylla, National Director of Mines. He stated that Guinea's mining sector is booming, with several new projects either underway or in the feasibility study stage. -------------- Bauxite/Alumina Sector Continues to Expand -------------- ¶3. (SBU) Guinea's bauxite/alumina sector, which generates over 80% of government revenues according to Sylla, continues to grow as investors explore and develop new opportunities. Sylla said that Global Alumina has already begun construction of a new bauxite mining project near Boke, which will produce 3 million tons annually. Another nearby project, owned by multi-national corporation BHP-Billiton, is underway. Rainer Engels, Vice President of BHP Billiton in Guinea, stated that this new project will also produce 3 million tons annually. (Note: BHP-Billiton has a 33% interest in Global Alumina.) In addition, Sylla said that U.S. company Alcoa is conducting a feasibility study on a new project in the north of Guinea, while Rusal, a Russian company, is considering expanding its current operations in Fria. ¶4. (SBU) The National Director confided that Chinese and Brazilian bauxite companies are also exploring new mining projects. He said Henan-China is looking at the Telemele area, which is located several hours from the Rusal concession at Fria. Sylla also identified Brazilian company CBRD as working around Tougue, a remote area in Middle Guinea. In addition, newspapers are reporting that Chinese firms recently met with the GoG and proposed building a hydro-electric dam at Souapity in exchange for bauxite concessions while Brazilian oil companies are rumored to be lining up to bid on off-shore oil concessions should the Hyperdynamics contract be cancelled. -------------- Iron Ore and a New Railroad? -------------- ¶5. (SBU) Sylla stated that British-Australian multi-national company, Rio Tinto, has a contract with the GoG for an iron ore concession in the forest region. Although mine construction has not yet begun, he said that the company projects initial annual production at 30 million tons of high quality ore, rising to 100 million tons at full production. He also confided that, currently, the company is arranging financing for construction of a 1000 km trans-Guinea railroad to link their concession with a future port at Binty, near the border with Sierra Leone. According to Sylla, Rio Tinto proposes to share the use of the railroad with BHP Billiton's iron ore concession on Mt. Nimba. ¶6. (SBU) NOTE: When Econoff met in July with Rainer Engels, Vice President of BHP Billiton in Guinea, Engels expressed skepticism for Rio Tinto's dedicated trans-Guinea mining railroad proposal since it would be much cheaper to simply build a 250 km spur onto an existing railroad in Liberia and transport iron ore through Liberia instead. END NOTE. -------------- We Will Not Renegotiate! -------------- ¶7. (SBU) In a July meeting, Mr. Engels also discussed the GoG's current review process for existing mining contracts. He stated that renegotiation was out of the question, and that BHP would only consider enhanced social investment programs, such as investing in community projects (schools, infrastructure, etc.) BROKENSHIRE