Sierra Leone Passes Major Diamond Good Governance Test
April 15, 04 by Chaim Even-Zohar
This time, influence peddling, bribes, presents or promises didn’t help: the tender commission awarding very profitable exploration licenses showed that a government body can do the right thing, and do it successfully. We did report already that a Sierra Leone Tender Committee, headed by the nation’s Vice President Solomon Berewa, has awarded a two-year Exploration License for the Tongo Diamond Field to Koidu Holdings S.A., a diamond mining and exploration company with extensive mineral interests in the Republic of Sierra Leone. Koidu Holdings is controlled for 60% by the Steinmetz Diamond Group, which is also the operator of the Koidu Mine.
The government had originally granted the (88 square kilometer) mining lease to Rex Diamond Mining Corporation Limited, a small Antwerp-based diamond mining and exploration company, in February 1994. Following the official declaration of peace, announced in early 2002, companies that had been active in Sierra Leone prior to the war were invited to continue their work. The declaration of peace removed the 'force majeure' that had been declared by all foreign companies operating in Sierra Leone following the outbreak of renewed hostilities in May 1997. A letter issued by the Ministry of Mines to exploration and mining companies in mid 2002 required them to confirm that they would restart their operations or give up their mineral rights. Rex Mining failed to commit sufficient resources to their exploration programs. As a result, the Government cancelled their Tongo and Zimmi mining leases in October 2003.
In late 2003, a number of junior exploration and mining companies expressed an interest in obtaining mineral rights in the Tongo Diamond Field. In an effort to introduce greater transparency into the granting of a new mineral right for the former mining lease area in the Tongo Diamond Field, the government decided to offer the former mining lease area by bids (for exploration licenses) from interested companies. The advertisement published in local newspapers and the Internet stated that application forms could be obtained from the Geological Survey. The advertisement asked that, in addition to providing ten completed application forms, interested parties should make a non-refundable payment of $5,000 by bank draft to the Director of Mines.
The advertisement included a statement that 'Companies are guaranteed a Mining Lease in accordance with the Mines and Mineral Act 1996 if prospects prove economically viable.' Other than some basic details on the dykes and 'blows' that had been discovered previously no further geological information was provided. Submissions from two companies, West Africa Trade House and Gem Fields Resources Limited (a company believed to be controlled by John Boulle), for a license covering the former Tongo Mining Lease Area were received respectively shortly after the Government had officially cancelled the Rex Mining leases.
Other bids came later from Calulo Investment (Proprietary) Limited, Gemfarm Investments (controlled by Gershon Ben-Tovim), Mining Sierra Leone Limited and Sierra Leone Minerals Limited. The bid also drew major league players such as Alrosa, Argyll Resources Corporation (a daughter of the listed African Marine Minerals Corporation), Lev Leviev’s LL Mining Corporation BV and Koidu Holdings.
Though the present policy of the government is to grant an Exploration License on a 'first come first served basis' as described in the Minerals Act, the Government, having considered the amount of interest being expressed in this area by exploration and mining companies, decided to invoke Section 15 (3) of the Mines and Minerals Act, which states 'Notwithstanding any other provisions of this Act, the Minister may designate an area in which minerals have been discovered and may cause any unallocated mineral right to be awarded by public tender.'
There were eleven bids on the table. The Tender Valuation Commission has created a very precise scoring mechanism, giving certain weights to (1) the company’s background and experience; (2) the company’s financial situation and (3) the company’s technical abilities. In all these categories there were further sub-scores for specific items.
And then two things happened: On the one hand, the street in Freetown was full of unproven rumors of influence peddling, of attempts to “buy” committee members, etc. And then, on the other hand, there were the results. When the score cards are compared, it seems that most companies scored similar scores for similar strengths and weaknesses. There were almost no deviations in the scoring and the two front runners, Koidu Holdings and Gem Fields Resources, scored very closely, necessitating the commission to look very careful at each category.
The results of the bid evaluation process show that Koidu Holdings S.A. was unanimously voted first, followed by Gem Fields Resources Limited in second place, and Argyll Resources Corporation (a company associated with African Marine Minerals Corporation) in third position. According to Vice President Berewa “the stated commitment of Koidu Holdings S.A. to a rapid evaluation of the Tongo Diamond Field, the experience of their staff in appropriate underground mining methods and technology, and the work the company has already done in bringing the Koidu pipes into production must have been considered in the evaluation of the bids for a unanimous decision by all the committee members. Koidu Holdings S.A. is therefore declared the winner of the bid.”
We think there are two major additional winners: Vice President Solomon Berewa and the people of Sierra Leone. As we so often talk about “weak governance”, “corrupt regimes”, etc. we also should have the guts to say: we salute you, Sierra Leone. The way this tender process was conducted inspires confidence, it gives hopes, and it gives the right signal to foreign investors. The best company won – on its merits, and only on its merits. This also means that Sierra Leone will optimize the benefits to its own people.