Today we’d like to welcome Leonard Lawalan an Analyst with Global Risks Group UK to MetalMiner. Leonard lives in Guinea and caught up with Dr Dave Smith, the CEO of multi-billion dollar Rio Tinto Simandou iron ore operations in Guinea as a follow-up to an earlier MetalMiner post.
Rio Tinto is one of the largest mining companies with 65,000 employees worldwide. The company’s Africa operations are in Guinea, Namibia, South Africa and Madagascar. The company recently raised 19b dollars from a Chinese mining group. Much of this will go toward the Simandou operations in Guinea.
This two-part exclusive interview will appear today and run through Monday. The interview occurred in mid-May at Dr. Smith’s offices in Corniche Nord, in Conakry, Guinea.
Leonard Lawal: The new government in Guinea wants the mining companies to renegotiate their leases, what gives for Rio Tinto regarding this development?
Dr Smith: The President of Guinea, His Excellency Captain Camara, has suggested an independent and public review of the Simandou Mining Convention and the Concession and the transactions leading to the Northern half of the Concession being awarded, by the previous Government, to a small competitor.
Rio Tinto fully supports such a suggestion and is willing to provide data and documentations for review. To date we have co-operated with the Government and made available our exploration and project data. This included a feasibility study handed over to the Government last December.
Rio Tinto has said in the past it is willing to relook at the benefits flowing from the mining lease to all stakeholders ” particularly the population of Guinea. In return, Rio is looking for legal certainty of its tenure. We have already invested US$450 million on the project and community infrastructure and we must have legal clarity to underpin future investment.
Leonard Lawal: How does the average Guinean benefit from Rio Tinto’s operations in the country?
Dr Smith: Once the project starts production it will earn hundreds of millions in royalties and billions of dollars in taxes over the life of the project. This can underpin major infrastructure development in Guinea and benefit all Guineans. It is a country-changing project that will trigger significant regional development. Rio is also able to work with groups such as the World Bank, US Aid and the EU on regional programes such as education.
However, the Simandou project has, unfortunately, lost more than 4 years in approvals and legal delays. This is obviously harmful to everyone.
We recognize the large cash flows won’t start until the project commences full production. In the meantime, we are working with the people in regional areas and Conakry on a number of community projects. There is a huge range of these projects. They include transport buses and garbage trucks for Conakry, finance to help small businesses start, water distribution and communication projects, sporting facilities, road reconstruction and a new regional air port. We have also built new schools and renovated health centers and started agriculture projects.
We will also need many, many skilled trades people and professionals and these people need to have their training start very soon. We would like to start up Training Academies in Guinea to train Guineans youth for these skilled jobs. This would also include sending many young Guineans overseas to other Rio Tinto operations so they can gather practical experience to bring back here.
Leonard Lawal: When will the first phase of your exploration and evaluation work needed to develop a world-class iron ore mine at Simandou be operational?
Dr Smith: The first phase of our exploration and evaluation work is complete. This work was presented to the Government in December last year. The plan is to commence mining production at the end of 2013. The current issues around the Concession are testing this time frame but if we can work closely and speedily with the population and Government we believe it is still possible to meet the mining schedule.
Leonard Lawal: What is the percentage of your local hires/Guineans in top management?
Dr Smith: More than 90 % of the workforce is Guinean. 75 % of the senior executive team lives in Guinea. A number of the senior roles are filled by Guineans including: the Chief Financial Officer and Country Executive, the Engineering/Construction Manager and the Government Relations Director. We realize this is not enough and the succession plan puts emphasis on the expat roles being replaced by Guineans.
We also have about 20 Guinean geologists, many of whom are rising through the ranks and should be able to take future senior operational roles. This is on top of the many Guinean professionals and leaders we have in accounting, IT, Human Resources, Community Development, Environment and Safety.
Leonard Lawal: The point is that cheap funding is drying up in the West, but I guess Rio Tinto is in good shape with recent deals with many other mining giants like the Chinese. If all goes well, will a large chunk of the new round of funding be deployed to Guinea’s Rio Tinto’s Simandou’s operation?
Dr Smith: Like nearly all companies around the world, Rio is feeling the effects of the global recession. Unlike some of its smaller competitors however, it has access to lines of credit as well as cash flows from its multiple world class ore deposits and operations around the globe. These underpin a very healthy mid and long-term outlook.