Chinese Company Seeks 25-Yr Iron Ore Deal

A Chinese company, Bao Chico Resources, has asked the Government of Liberia to grant it a 25-year Class A mining license to extract iron ore.

The company’s request, which President George Weah has bought into, has been communicated to members of the legislature for ratification despite the record of China Union, another Chinese iron ore mining concessionaire, which struggled to make an impact and, in a space of few years, shut down its operations.

The US$2.6 billion agreement, which was signed with the China Union in 2009 under the administration of then-President Ellen Johnson Sirleaf to excavate iron ore from the country’s former Bong Mines, did not go as planned, as the company remains shut down since 2014.

Since then, the iron ore concession – the area where the ore mining was done – only boasts of idle machines gathering rust.  The company, according to its management, had to close due to the fall in the global price of iron ore and the impacts of Ebola in 2014. The 25-year agreement was expected to generate between 3,000 to 4,000 jobs with an additional 15,000 indirectly, but it hardly happened. 

The Legislature has again started the process of ratifying another Mineral Development Agreement (MDA) with a Chinese Company, Bao Chico Resources Liberia Limited. On their 59th day sitting August 31, members of the House of Representatives voted unanimously to forward the 25-year MDA to the Committees on Investment, Mines & Energy, Judiciary and Ways, Means, Finance & Development Planning to scrutinize and report to the August Body within one week.

The MDA, which was submitted by President Weah for ratification, seeks to grant the Bao Chico Resources Liberia a Limited Class A mining license to extract iron ore for 25 years. The President indicated that there will be huge direct benefits in the forms of employment and revenues, including the payment of all taxes and duties; payments of royalties, and a signature fee of US$3 million.

“Honorable Speaker, this Agreement aims at revitalizing our economy and is in support of the Government's pro-poor agenda. I, therefore, trust that the Legislature will ratify it in a timely manner,” the President wrote. However, the President surprisingly did not state which one of the country’s remaining iron ore deposits will be given to the company and the total number of jobs the company is expected to create. 

Liberia still has a number of iron ore deposits including the Putu Mountain in Grand Gedeh County, the Western Cluster in Bomi and Grand Cape Mount Counties, as well as the coveted and virgin Wologizi Mountain range in Lofa.  In the President’s communication, he said “there will also be an annual social contribution of US$300,000 on the effective date until the fifth anniversary of the effective date, and an annual social contribution of US$500,000 from the sixth anniversary of the effective date until the end of the term.”

President Weah added that furthermore, US$10,000 will be given Gbarpolu County as General Education Funding, while  US$50,000 will be provided annually as Scientific Reserves Fund, commencing on the start of commercial production and payable thereafter on the anniversary of the effective date, through the term, are among other economic and social benefits. 

Put into perspective, the Bao Chico Resources deal dwarfs in comparison to ArcelorMittal Liberia, the country’s only functioning iron ore concession, which is now making annual contributions of US$3 million toward the social development funds across Grand Bassa, Bong and Nimba counties. This is in addition to royalties, taxes, railroad and road infrastructure, as well as a TVET institute. 

Granted that the terms of the deal would depend in part on the specific iron ore deposit -- the location. And with Gbarpolu County being the only known beneficiary province, the county is not really known for iron ore deposits, rather diamond and gold. Therefore, the omission of the location of the proposed Bao Chico Resources concession might be a cause for concern. 

Bao Chico Resources, Liberia Limited, according to a 2015 LEITI report, is a non-publicly listed iron ore company that is ultimately owned by the Government of China. The Mineral Exploration of the entity is owned by Bao Chico Resources, Liberia Ltd., which is 100% owned by Bao Chico Resources. Bao Chico Resources is owned as follows: Baosteel Resources, 50.1%; CHICO (China Henan Cooperation Group Co.), 40%; and Chico Africa Development, 9.9%. All three of these entities are 100% owned by the Government of the People’s Republic of China. The company, according to President Weah, was originally granted an exploration mining license in 2008 (MEL 12005) in accordance with Section 1.2 of the exploration regulations for the exploration of mineral products within the area specified on the license, which covered a total area of 87.4km². “The license was further renewed on the 15th of August 2013,” President Weah’s communication noted. The company’s exploration under the above license was carried out in Bomi County.