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C O N F I D E N T I A L SECTION 01 OF 03 FREETOWN 000056 
 
SIPDIS 
 
E.O. 12958: DECL: 02/03/2020 
TAGS: ECON EMIN PREL SL
SUBJECT: SIERRA LEONE:  "BIGGEST IRON MINE IN AFRICA" 
 
Classified By: DCM Glenn Fedzer for reason 1.4 (B) 
 
¶1. (U)  Summary:  President Koroma formally commissioned what 
he called "the biggest iron ore mine in Africa" January 22 in 
the hills east of the newly-finished Bumbuna dam.  African 
Minerals Ltd. claims it will be able to rebuild the iron-ore 
port at Pepel and the railway from Lunsar, build a new 
railway to Lunsar from the north, and begin exporting iron 
ore by 2013, with projected annual export of 43 million tons 
annually.  More realistically, a competing company, London 
Mining, says it hopes to start shipping 1.5 million tons from 
the mine at Lunsar, unused since 1976, working up to at least 
5 million per year.  The new mining law is a step forward, 
although the increased levy on precious stones may stimulate 
greater diamond smuggling.  End Summary 
 
¶2. (U)  President Koroma on January 22 convened much of the 
cabinet at a ceremony near the village of Ferengbeya (in the 
Sula Mountains east of the newly-completed Bumbuna dam) to 
commission formally the operations of African Minerals Ltd. 
for the mining of the multi-billion-ton (note: billion, not 
million) iron-ore deposits located there.  At the ceremony, 
the chairman of African Minerals, a British-based Romanian 
named Frank Timis (once convicted in Australia for possession 
of heroin with intent to supply), claimed that his company 
would be exporting iron crust by the end of 2010, and iron 
ore by 2013, entailing rebuilding the port at Pepel (across 
the bay from Freetown), rebuilding the railway to Pepel from 
the old iron mine at Lunsar, and building a new railway from 
the new mine to Lunsar, with a projected annual export of 43 
million tons of iron ore annually.  According to press 
accounts, one source of funding for this ambitious 
infrastructure is China, whose China Railway Materials 
Commercial Corporation has reportedly bought a 12.5 percent 
stake in African Minerals.  (Note:  The Chinese Foreign 
Minister visited Sierra Leone January 13-14 and announced 
construction of an array of new projects in Sierra Leone.) 
 
¶3. (U)  Oluniyi Robbin-Coker, an economic advisor to Koroma, 
told Ambassador Cheshes January 27 that African Minerals' 
activities were, "of course, speculation."  He noted that the 
company's share value in London had jumped twenty-fold over 
the year 2009 (from 20 pence to 405 pence), although the 
company had no track record for taking a large mine to full 
production.  He admired Frank Timis as courageous and clever 
at marketing.  Everything African Minerals had done in Sierra 
Leone to date was based on an exploration (versus mining) 
contract.  Robbin-Coker said that there was a widespread 
perception, "to which there is some reality," that Sierra 
Leone's mineral assets were in the hands of exploration 
companies.  He anticipated that Timis, having raised large 
sums of money and made a vast profit on the stock market in 
2009, would now "cash out" in favor of a "reliable mining 
company."  In fact, Robbin-Coker said that he was actively 
looking for a top-notch company to buy out Timis and asked if 
DCM knew of any interested American "big boys." 
 
¶4. (C) Lansana Fadika, Sierra Leonean investor in African 
Minerals, claimed January 27 that the Chinese had put 120 
million into the railroad-port-road project, but he otherwise 
deflected substantive questions.  On 3 February, Chinese 
diplomats expressed concern over the legitimacy of African 
Minerals and said that no contract had yet been signed. The 
diplomats added that Chinese companies had limited experience 
in Africa, and frequently made mistakes that needed official 
intervention and guidance. 
 
¶5. (SBU)  David Keili, Sierra Leonean Managing Director for 
London Mining Ltd., gave an overview January 29 of his 
company's activities at the old iron-ore mine near Lunsar and 
a more-sorrow-than-anger assessment of his competitor African 
Minerals.  Keili reviewed the sad history of Lunsar/Marampa: 
The British company Delco had operated the mine, which opened 
in 1930 and was strategic in World War II, but Delco was 
closed down "from one week to the next" in the mid-1970's on 
orders of President Siaka Stevens.  The company's extensive 
infrastructure, including the railway from Lunsar and the 
port at Pepel, were abandoned.  London Mining had a contract 
with the government of Tejan Kabbah to begin mining but fell 
afoul of the new government elected in 2007, eventually 
losing rights to the railway and Pepel. 
 
¶6. (SBU) Keili said that discord between the present 
government and London Mining, which had come very close to 
forcing London Mining out of the country altogether, had been 
resolved in the course of 2009 and the company now felt 
"relatively secure" in its mining contract, signed at last on 
December 31, a day after President Koroma signed the new 
mining law.  This contract covers all of Delco's former 
iron-ore holdings at Marampa (Lunsar).  London Mining is 
 
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building a new road from Port Loko to an offloading facility 
to be built north of Freetown at Tawfaym on Port Loko Creek, 
from which barges will be towed to a massive crane up the 
coast, which will be able to fill the largest ore ships. 
 
¶7. (SBU) Keili said that over its 50-year span Delco had 
mined perhaps 60 million tons of iron ore at Marampa and had 
projected, when it folded in 1976, that 89 million tons 
remained.  With modern drilling techniques and a somewhat 
expanded area, London Mining now believed there might be 300 
million tons to be mined.  London Mining would start with the 
"low-hanging fruit," the extensive tailings available at 
Marampa (technological limits resulted in Delco setting aside 
huge amounts of ore that can now be exploited).  London 
Mining hopes to begin shipping in January 2011, with 1.5 
million tons to be exported in the first year, rising to 
perhaps 5 million or even 8 million tons/year, with revenues 
of at least $300 million per year (compared, for example, to 
Sierra Leone's mining sector's entire earnings of $170 
million in 2009). 
 
¶8. (C)  On the question of whether the loss of Pepel was a 
major blow, Keili said London Mining's operating costs might 
have been lower with Pepel, but Pepel was now in terrible 
condition.  He said that iron-ore reserves in Tonkolili were 
indeed on the order of billions of tons, as Delco had known 
many decades ago and as a reputable surveying company had 
confirmed for African Minerals, but no mining company had 
heretofore believed that the ore was of sufficiently pure 
quality to be worth mining, on top of the huge infrastructure 
costs.  The idea that such infrastructure could be put in 
place in a mere year or two was, Keili believed, not 
credible.  (Note: Post concurs with this assessment.)  During 
a road trip to Lunsar January 28, DCM observed the 
dilapidated state of what had once been a vast mining 
community (replete with a golf course and separate clubs for 
senior, intermediate, and junior officials).  The rail tracks 
have been largely pulled up.  An official from London Mines 
who guided DCM through the ghost town said that the railcars, 
railroad, and port at Pepel had -- amazingly -- remained in 
useable condition until the previous two years, when African 
Minerals had taken control of them; he said that the rails, 
railcars, and port infrastructure had now all been 
dismantled, cut up, and sold for scrap. 
 
¶9. (U)  Keili described the new mining code as a good law 
which was perhaps still insufficiently detailed, but the 
problem lay not with the quality of the law but in whether it 
would be implemented.  The law, he said, addressed the 
serious problem of awarding exploration contracts over vast 
areas for long periods of time.  African Minerals, for 
example, had an exploration contract which covered "virtually 
half the area of Sierra Leone," and with the new law, if 
applied, that would no longer be possible. 
 
¶10. (U)  The new law limits new exploration contracts to 250 
sq.km. (about 10 miles by 10 miles) for a maximum of nine 
years, with an escalating minimum expenditure requirement. 
Mining contracts will now also be much more detailed and 
restrictive, with a maximum area of 125 sq.km. and a 
requirement for a community-development agreement.  (Keili 
noted that London Mining will pay one percent of gross 
revenues into a community fund, versus the 
previously-required 0.1 percent.)  The new law keeps the 
level of royalties for non-precious minerals at three 
percent.  (Keili said that the real benefit to Sierra Leone 
is not the royalties but employment of and procurement from 
Sierra Leoneans.  DCM observed first-hand that London Mining 
is both hiring and procuring on a significant scale at 
Lunsar.) 
 
¶11. (U)  The new law increases the royalties from precious 
minerals: 
 
-- 15 percent for "special stone" (a new category for 
precious stones valued at more than $500,000), 
-- 6.5 percent for precious stones (up from 5 percent), 
-- 5 percent for precious metals (up from 4 percent). 
 
The diamond market remains depressed in Sierra Leone due to 
global recession and hoarding among diamond merchants (who 
prefer to hold on to diamonds until prices go back up). 
According to official Sierra Leonean statistics, the value of 
diamond exports decreased from 141.5 million dollars in 2007 
to 99 million dollars in 2008 to 79 million dollars in 2009. 
The increase in royalties for diamonds would appear to 
increase merchants' motive to hoard and smuggle.  It is 
difficult to know what percentage of Sierra Leone diamonds 
evade the legal system for mining and exporting, but it is 
fair to conclude it is significant percentage. 
 
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CHESHES