London Mining Company came to Sierra Leone in 2005 and has done all negotiation openly and transparent from the previous government until now.
London Mining is a multinational that has mining contracts in several countries including Brazil, China, Greenland and they have been working in the open with democratic governments. So it is no different when they came to Sierra Leone.
At no stage was LMC and, we believe, the Government aware of any interest by NACE in these deliberations. Indeed the Sierra Leone public and in particular, the people of Port Loko District where LMC will be carrying out its operations, were well aware of the company’s discussions with Government and sought at various stages to give moral support.
Even on the day of executing the MLA, the Minister of Mineral Resources insisted on having press coverage and announced the pending ratification by Parliament. This event was broadcasted on the national SLBS TV. The MLA was subsequently sent to the Clerk of Parliament, who distributed copies to all 136 Members of Parliament, a few weeks before it was scheduled for debate and
The ratification debate was marked by universal expressions of optimism and support by members of all political parties, even those who had objected to the passage of the Mines and Minerals Act of 2009 presented by the same Minister barely a few weeks earlier. That NACE is just now becoming aware of this process as it claims is unfortunate, but even if true, does not invalidate the transparent process which culminated in the said ratification by Parliament of the MLA.
Clause 5 of the MLA deals with Fiscal issues. The incentives contained therein were ratified by Parliament pursuant to the provisions of section 40 (4) of the Sierra Leone Constitution, 1991, Act No.6 of 1991, which authorizes the President (or his designees) to enter into agreements, provided such agreements are ratified by Parliament. The MLA agreement in this case does not differ from other large commercial transaction agreements executed in the past across various industries (including, for example agriculture). Indeed such discretionary authority is reposed in most heads of governments around the world, when the public interests could better be served by establishing a specific regime, especially relating to attracting reputable investors into an otherwise difficult investment climate. Re-opening of the dilapidated Marampa Mines which had been effectively closed for over three decades without attracting reputable investors, clearly qualified for such special considerations.
The MLA having been duly ratified by Parliament is subject to its own statutory regime and cannot therefore be said to contravene other laws, including the Mines and Minerals Act of 2009.
The set of fiscal incentives were negotiated with Government tax experts over a period of several months and was finely balanced to yield a positive net present value on the capital investment over a period of 10 years, while maintaining reasonable tax revenues to the Government. These negotiations were characterized by openness, to the extent that LMC made available to these experts the economic model for its operations, to be used in evaluating the effect of various tax structures.
Working under existing structures would have meant a net loss of over $70 million on an investment of over $80 million. Clearly, no business could make such an investment decision. The final set of incentives the parties settled upon and contained in the MLA, will yield the Government over $200 million in the 10-year period covered by the fiscal incentives (see attached table titled “London Mining Benefits to GOSL”).
Currently, we believe that GOSL revenues will be even higher, as we are projecting to bring forward our primary ore mining date and increase our mining rate beyond those assumed in our initial model.
The Fiscal section of the MLA is compliant with the Mines and Minerals Act, 2009 in all material respects. It must be noted that although negotiations leading to the execution of the MLA had taken place before the Mines and Minerals Act, 2009 became law, the basic royalty rate of 3% in the Mines and Minerals Act, 2009 is reflected in the MLA. Furthermore, while there may be slight accounting difference in the definition of market value (which can arguably be subjective) and “free on board” prices, the deduction of sales and other taxes prior to calculation of royalties is reasonable, as it prevents double taxation.
We should note that under these incentives, London Mining will, unlike past agreements, not be completely exempt from any category of taxes existing at the time of negotiations. We should also note the significant additional economic benefit to the national economy brought about by the strong provisions in the MLA for preference in hiring Sierra Leoneans and procuring goods and services through Sierra Leonean companies.
On purely legal terms, Clause 6(c) of the MLA, cannot be said to place LMC above the law, since the MLA is law subject to its own statutory regime. Such provisions are quite common in past agreements (we can provide specific reference if needed), to avoid confusion in interpretation. More importantly, it provides a level of political certainty which most reputable investors would demand. In its absence, an investor will have to take very expensive political risk insurance which, for a marginal investment, can alter the investment decision. In this instance there likely would not have been an investment case unless the Government gave further fiscal incentives to cover such risk premiums.
In conclusion, LMC commends the Government, Parliament and people of Sierra Leone for creating the enabling environment whereby a responsible, credible and well funded company like LMC can reopen the Marampa Mines, thereby creating opportunities and employment for the people of Sierra Leone and in particular, our areas of operation in Port Loko District.
We regret that the position taken by NACE is based on less than full consideration of the facts and the law in this case.
LMC remains committed to transparency in all aspects of its operations and would urge groups such as NACE to contact our Communications Office if they are indeed serious about the facts before adopting positions of extremely destructive advocacy.