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.

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Bauxite/Alumina Sector Continues to Expand
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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.

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Iron Ore and a New Railroad?
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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.

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We Will Not Renegotiate!
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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