GLOBAL ALUMINA MINE PROJECT ON HOLD

C O N F I D E N T I A L SECTION 01 OF 02 CONAKRY 000267

SIPDIS

SENSITIVE

C O R R E C T E D COPY - ADDING PARA MARKINGS, PARA ONE

E.O. 12958: DECL: 05/13/2019
TAGS: EMIN ELAB PGOV ASEC GV
SUBJECT: GLOBAL ALUMINA MINE PROJECT ON HOLD

REF: CONAKRY 0265

CONAKRY 00000267 001.2 OF 002


Classified By: POL/ECON CHIEF SHANNON CAZEAU FOR REASON 1.4 B AND D


1. (SBU) SUMMARY. A May 7 visit to the Global Alumina mine site
in Boke confirmed that the company has put its $4.7 billion
investment on temporary hold. The construction contractor
Bechtel was expecting to receive an official notice to
proceed in early 2009, but has now downsized operations until
the contract comes through, which may not happen until
towards the end of 2010. In the meantime, Bechtel is
focusing on its contracts with other companies and doing some
smaller, funded earthworks projects for Global Alumina. The
Bechtel representative also discussed the company's recent
labor issues and their generally favorable interaction with
the Guinean Government since the December 23 coup. END
SUMMARY.


2. (SBU) Pol/Econ Chief traveled to the Boke Region on May 6
and 7 to meet with various contacts in the mining sector,
including Rick Wickwire, the Construction Manager for
Bechtel, which is the contractor preparing the mine site for
the Global Alumina project between Sangaredi and Kamsar.

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BACKGROUND
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3. (SBU) Bechtel has been working the Global Alumina (GA)
site since 2007, although the company has not yet received an
official notice to proceed from GA. The mining concession
encompasses 690 square kilometers and is estimated to contain
1.4 billion tons of exploitable bauxite. Jointly owned by
Global Alumina ($33%),BHP Billiton (33%),Dubai Aluminum
Corp. (25%),and Mubadala (8%),the project will ultimately
generate at least $4.8 billion in investment. (COMMENT. Some
unofficial estimates value the project at upwards of $7
billion, but the company officially claims the smaller
number. END COMMENT). The project includes plans to build
two refineries, one at the mining site for initial
processing, and another at the port of Kamsar for secondary
processing. These refineries would be the first of their
type in Guinea as most bauxite is exported in its rawest
form. Once Bechtel receives the notice to proceed, the
company anticipates that the construction could be completed
within four to five years.

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BECHTEL IN A "HOLDING PATTERN"
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4. (C) According to the construction manager, Mr. Wickwire,
Global Alumina was prepared to issue a "notice to proceed"
for the construction contract in early 2009. However, GA has
since postponed the decision indefinitely due to the global
economic crisis. "We are still in the pre-funding stage and
that won't change until the economic situation improves,"
Wickwire said. However, he said Bechtel is still continuing
operations based on a number of contracts it has with other
foreign companies, as well as the trickle of cash that GA is
still sending intermittently. "We're essentially just doing
earthworks right now...we're not pouring any concrete." He
later added that Bechtel has significantly cut its workforce
as a temporary measure.

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NO PROBLEMS WITH THE CNDD
--------------


5. (SBU) In response to a question about relations with the
GoG since the December 23 coup d'etat, Wickwire said the
company has absolutely no complaints. "They have pretty much
left us alone...I think they understand that the company has
to operate freely in order to generate revenues." he said.

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LABOR ISSUES
--------------


6. (C) In fact, Wickwire said the GoG was very helpful to
Bechtel during a recent labor strike. The company spent
nearly two months handling an extensive local labor strike
that ended on May 4. Wickwire explained that the strike was
due to general dissatisfaction with wages, which he
attributed to two separate issues. In 2007, Global Alumina
reportedly promised a significant increase in jobs for the
local community, but has not been able to deliver on that
promise due to the economic crisis. "The locals have no
understanding of the project timeline," Wickwire added.

CONAKRY 00000267 002 OF 002




7. (C) The second issue is the 100% salary increase CBG
(Guinean Bauxite Company) gave to its workers toward the end
of 2008 (reftel). Wickwire said that the CBG raise is
causing problems for all the other mining companies because
no one can afford similar increases. He questioned how CBG
could afford it and speculated that the decision may have
been more political than economic. Wickwire pointed out that
Bechtel is a construction company, not a mining company, and
as such generally pays lower wages. Since local laborers do
not necessarily make this distinction, CBG's raise made
Bechtel's wages look that much worse. Wickwire clarified
that Bechtel does not employ many local workers, but that the
company's subcontractors do. In effect, the strike was not
against Bechtel, but it had a significant impact on Bechtel's
operations.


8. (C) Wickwire said that the GoG played a critical role in
resolving the strike and getting people back to work. The
strike was reportedly illegal because the laborers had all
signed contracts that restricted them from striking. Despite
the illegality, Bechtel's subcontractors offered a 15% raise.
The Minister of Mines apparently met with the workers and
informed them that the strike was illegal and that they
should report back to work. According to Wickwire, the
Minister told the workers that they should thank God for the
small increase they received and warned them that if they did
not return to work, their employers would be fully within
their rights to replace them. A few days later, everyone
went back to work, although Wickwire admitted that the issue
is not resolved and he expects further labor troubles down
the road.

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COMMENT
--------------


9. (SBU) Despite the tangible effects of the global economic
slowdown at the construction site, the GlobQ Alumina project
is impressive. It is expected to bring significant
investment in infrastructure, jobs, and revenues to the
Guinean economy. Progress has slowed considerably, but the
project is ultimately expected to move forward. According to
an international press report, the chairman of Global
Alumina, Mr. Karim Karjian, said that the company expects to
begin constructing the refineries by the end of 2010. In the
meantime, Bechtel's strategy seems to be one of reducing its
profile in order to stay on the ground until the money starts
flowing. END COMMENT.
RASPOLIC