A record investment of $205m by an international consortium, including the Africa Finance Corporation (AFC), to develop a high-grade bauxite mine in Guinea is generating new hope in this West African country.
Guinea was one of three resource-rich Mano River Basin states that were stricken by the Ebola crisis in 2014 – the other two were Liberia and Sierra Leone. Guinea, a nation of 10.5m people, has suffered enormously from the effects of the disease and the international isolation it engendered. This is the largest investment in mining in West Africa post Ebola.
President Alpha Condé of Guinea, accompanied by the country’s minister of mines, Abdoulaye Magassouba, local chiefs and international dignitaries attended the ground-breaking ceremony on 3rd February at the mine site, Bel Air which is conveniently situated only 15km from the country’s Atlantic coast.
The proximity of the mine to the coast is an important factor in reducing the cost of installing infrastructure as well as cutting back on logistical costs of shipping the ore to its key market in China. With prices of virtually all mineral products dependent on demand and supply fluctuations, production cost reduction makes Bel Air globally very competitive.
Alufer, an independent mineral exploration and development company with significant bauxite assets in Guinea, holds the ratified mining convention and is planning to produce 5m tonnes of bauxite per annum from Bel Air by the third quarter of 2018. This would increase Guinea’s total output, currently around 18m tonnes, by more than a quarter. Bauxite is primarily used in the production of aluminium.
The bauxite at Bel Air has been described as very high quality and capable of fetching premium prices in global markets, particularly in China, which is currently remodelling its industrial output towards domestic consumer production. The current demand for aluminium is outpacing supply.
Guinea currently has around 33% of the world’s reserves of bauxite. Alufer also holds licences linked to the Labé Project in central Guinea. Both projects are believed to hold over 3bn tonnes of resources.
The company began exploration in 2011 but it was not until last year that all the contractual issues, feasibility studies and paperwork had been sorted out. Bernie Pryor, CEO of Alufer, said: “Financing projects such as Bel Air in this short timeframe is rare in the mining sector. We only completed our definitive feasibility study in May 2016 and to secure funding within seven months is an incredible achievement.
I am convinced that this demonstrates the quality of the project and our team. Looking forward, we are committed to taking the project to commercial production as soon as is practical.”
Construction of related infrastructure is believed to be already under way, with first commercial production scheduled for Q3 2018. This will be followed by ramp up to first phase capacity of 5.5m tonnes, with the potential to expand to 10m tonnes per annum.
The AFC, an investment grade rated multilateral infrastructure financier that celebrates its 10th anniversary this year, is the sole African private-sector investor in the project. The pan-African institution has been rapidly gaining an international reputation as perhaps the soundest investor in this sector based on its deep knowledge of the African infrastructure landscape.
The AFC has also gained invaluable experience in building and developing African economies that have suffered conflict and crisis. For example, it has been instrumental in the reconstruction of Côte d’Ivoire’s economy following the country’s civil war through investments such as the Henri Konan Bridge, while in Liberia it financed the post-Ebola rebuilding of fuel import and storage facilities damaged by the country’s long-running civil conflicts. Its investment in Guinea’s infrastructure will help to rebuild and diversify the economy following the Ebola crisis.
Oliver Andrews, the AFC’s chief investment officer said: “As global demand for aluminium increases, AFC is proud to be the sole private-sector African investor in the Bel Air Mine, developing a world class mine that adheres to best practice environmental principles. We are also encouraged to see that Alufer has been working with the local community to develop sustainable projects which assist in the provision of drinking water, as well as development of local infrastructure and job creation”.
Chinese demand stokes prices
Alufer has signed a six-year off-take agreement with Orion Mine Finance, to market the product and secure revenue during the ramp up. China is expected to be the biggest market for the bauxite.
The price of bauxite has risen 65% in the last three years. Given the fundamentals, analysts predict a bauxite price super-cycle. This is excellent news for the investors in Guinea’s new mine at Bel Air. The increased production from Guinea will come as a relief to Chinese refiners and aluminium off-takers.
Its aluminium production has increased 400% over the past five years leading to a vast expansion of its smelting capacity, currently at around 50m tonnes. However, the declining quality of domestic bauxite in China, as well as diminishing supplies of high-grade ore globally has increased the impetus for refiners to secure long-term supplies.
Mining accounts for around 70% of Guinea’s exports. In addition to its huge reserves of bauxite, the country also has one of the largest untapped iron-ore reserves in the world and also substantial amounts of gold and diamonds. These minerals still await full development.
Perhaps with an investor such as AFC with its deep understanding and commitment to African development taking the lead, countries like Guinea can finally enjoy the full benefits of its natural endowments.
The AFC will host Africa’s premier international infrastructure summit: AFC Live – Building Tomorrow’s Africa Today: Financing Infrastructure in the World’s Last Frontier Market” in Abuja, Nigeria, from 15th–16th May 2017. (www.afc-live.com)