It should be noted however that the mining contracts’ review has led to a war of words between the Ministry of Mines and the Marampa Iron Ore Mining Company – SL Mining Ltd., following what the government refers to as the refusal of the company to answer questions about the value of its iron ore production and non-payment of royalties and taxes.
According to the Ministry of Mines, the government is losing hundreds of millions of dollars in royalties and taxes, through evasion by several mining companies, which is causing immense poverty for millions of Sierra Leoneans.
But critics say that whilst it is legitimate for the government to carry out a review of mining contracts, the Ministry of Mines cannot unilaterally suspend or terminate any mining contract without due process of law and the approval of the country’s parliament which in the first place had sanctioned those contracts.
The government is equally unequivocal and resolute in its response. It says that for far too long, successive governments have allowed mining companies to take advantage of the country’s weak institutions and poor governance, to rob the people of Sierra Leone of hundreds of millions of dollars in taxes and royalties every year. This has to stop, the government said in a release.
Replying to this letter written to SL Mining Ltd by the Minister of Mines, Foday Rado Yokie on 14 August 2019, the directors of SL Mining Ltd explained their points which included that fact that they are ready to work with the Bio-led government.
Firstly and as stated above and in prior correspondence, including from our international lawyers representing us, the suspension on shipping is unlawful and there are no grounds for such under SL Mining’s large scale license agreement ratified by the Parliament of the Republic of Sierra Leone (the “MLA”) or pursuant to any other laws in Sierra Leone, including the Mines and Minerals Act, 2009 (the “Act”). Furthermore, under the MLA, SL Mining has an enshrined right to export iron ore from its Marampa project.
With respect to the conditions set out in the Letter. There are no grounds for seeking such and they are at odds with the MLA and the Act and we address each of the points in your letter.
The bond referred to is neither relevant nor required. The fact simply is that the Marampa mine was categorically re-opened and is in production. In addition, and as proof of such, we have made three shipments of Marampa iron ore, before being prevented from further export under the illegal export ban. Even if a bond was put in place it could never be called on as SL Mining did make substantial progress towards the re- opening of the Marampa Mine within a period of 12 months from the date of ratification of the MLA.
The request for a bond while SL Mining is not allowed to ship unless it agrees to a list of made up demands not based in law or logic is clearly an attempt to extort US$ 1 million. The Letter clearly states that the fact that SL Mining has reopened the mine in a timely manner and successfully shipped three cargoes is considered a failure and therefore the bond would be cashed. This approach shows a total disregard of what we have achieved within the required timeframe and as previously agreed with the NMA during 2018 (and despite the illegal imposition of Executive Order No. 1 in the meantime). We firmly disagree with any outrageous and illegal tactics.
An advance pricing agreement is neither relevant nor required under the MLA and therefore imposing a shipping ban is a form of extortion as we are not able to earn revenues while the Ministry and the NMA make demands that are against the law and our MLA. The initial three sales of the Marampa Blue were ultimately to third party buyers and not being sold ultimately to any affiliated company of SL Mining. Having said that, as we have said before, we are amenable to have one in place for affiliated sales, and the principles have been provided to the NMA for consideration without response, and therefore we have provided an electronic copy.
To be abundantly clear, in our MLA under section 5.2(c), and we quote “Prior to the disposal of any minerals to affiliated parties, SL MINING and GOSL shall enter into an Advance Pricing Agreement establishing guidelines for determining the deemed Arm’s length sale value…”.
We have quoted the above, as the DG of the NMA has misinterpreted the law and did not understand that SL Mining has the right to export and ship to any third party it so chooses without prior notification, consent, or approval of the NMA. In other words, an advanced pricing agreement is not required UNLESS, and only unless SL Mining sells ultimately to an affiliated party.
In section 4.6 of the MLA, we have the enshrined right to export. We quote “SL MINING shall have the right to export all iron ore and associated minerals or mineral concentrates raised or obtained in the course of mining operations to any country other than countries to which the laws of The Republic of Sierra Leone prohibit such exports”.
The only circumstance in which the law allows the Minister to prevent the disposal of any minerals (export ban in SL Mining’s case) is when the mineral right holder fails to pay its royalties by the due date. In the case of SL Mining, the suspension and export ban were made 42 days before any royalty payment was due.
As already noted, SL Mining will and has always had the intent to pay its royalties by the due date and remain in full compliance with its obligations.
SL Mining continues to be in full compliance of the MLA. The payment of the three royalty amounts (able to be paid only due to the shipments made before SL Mining was illegally prevented from further shipping activity) will only be made pursuant to the timing requirements of the MLA, and with proof of such payments being supplied. June shipments are been paid by mid-August 2019 while July 2019 shipment by mid- September 2019, as established in the MLA. SL Mining takes its royalty payment obligations (and all payment obligations) under the MLA very seriously so to ensure that Sierra Leone benefits from the Marampa project.