London Mining plc (no connection with London Mining Network) has projects in Sierra Leone, Colombia and Greenland. Representatives of London Mining Network attended the AGM on behalf of colleagues at the National Movement for Justice and Development in Sierra Leone, who were unable to attend in person.
Notes of the AGM of London Mining plc, Wednesday 23 May 2012
The meeting was chaired by Deputy Chairman, Sir Nicholas Bonsor, as the Chairman, Dr Colin Knight, was ill.
Sir Nicholas Bonsor introduced the Board and said that he would begin by giving an overview of the company’s operations and answering questions sent in the day before by London Mining Network.
He said that Marampa is on track to provide high quality iron ore. 300,000 dry tonnes had been produced in the first quarter of 2012 and a large proportion of this had been shipped to Europe and China. The production target is 1.5 million tonnes this year. The expansion plans are working well. The company has commenced earthworks for the second phase. In 2014 they hope to produce 5 million tonnes. The company is now working on an Environmental Impact Assessment which should be completed in the fourth quarter of this year.
The coke ovens at the company’s coal project in Socha, Armenia, Colombia, have been completed. They produced 5800 tonnes of coke last year. Project development was held back by road blocks. The target is 200,000 tonnes.
At Isua in Greenland, the company has completed a bankable feasibility study. The payback period is 3.5 years. The potential mine life is at least 15 years. The permitting process is expected to take six months.
The company must continue to attract and retain good people. The countries where it operates must see long-lasting benefits.
1200 Sierra Leoneans are in training. The Marampa mine makes a substantial contribution to the economy of Sierra Leone through taxes, royalties and employment. It is stimulating the local economy but it also needs to minimise its negative impacts and to ensure worker safety. There were no fatalities in 2011 and the company intends to achieve zero harm.
The Board was strengthened in 2011 with the appointment of Colin Harris, Ben Lee and Luciano Ramos. Colin Harris has been a director of mining companies for 40 years. Ben Lee has been involved at Marampa. Luciano Ramos was responsible for the successful launch of the Brazilian operation which is the foundation of London Mining’s success.
Sir Nicholas Bonsor said that London Mining Network had submitted questions on the company’s relations with the Sierra Leonean government.
He said that London Mining plc (LMplc) is keen to make sure that local people, employees, the government and the country all benefit. The company has collaborated with the current and former governments. It works closely with the local community. It is dedicated to ensuring that its presence is valuable to local people and has a responsibility to make sure that the benefits of its presence spread through the local community. It works closely with the Paramount Chiefs. Chief Financial Officer Rachel Rhodes has been appointed an honorary Paramount Chief.
CEO Graeme Hossie said that LMplc takes a multi-stakeholder approach based on creating value, excellence and a win-win for all stakeholders. This is seen in Sierra Leone with the government, the community, local businesses and the environment. The mine is a holistic enterprise. The company has been in Sierra Leone for over 7 years. It has developed the Marampa mine, which had been derelict for 35 years. Sierra Leone was unable to attract the capital to develop the mine. LMplc took on the mine and the risks of operating in a country emerging from war. For many years Graeme Hossie has been representing the business possibilities of Sierra Leone to the international community. Some of the largest investment institutions have invested in Sierra Leone through LMplc – over $350 million in the first stage, and the expansion will require a further $700 million, and the total will eventually reach $2 billion. The closure of the Marampa mine had left the local community without an economy. All that has changed. The Mine Lease Agreement was ratified by Parliament. LMplc succeeded in what it set out to so. It had found more ore. The mine is now operating at its previous rate and LMplc expects to expand to 8 times the former size. This requires confidence among investors. The opening of the mine was attended by the President and Vice President, MPs, local community members and special guests. The significance is that LMplc has built a very high quality operation and employed over 2700 people. Many people rely on each salary, and paid employment begets more economic activity. The local community is booming. LMplc has caused this, including through its voluntary community development investment which is 100 times the requirement under the Mines and Minerals Act. It is looking to develop the community through bringing in international financial institutions, governments and NGOs to get involved in training and community programmes. LMplc has succeeded in bringing about what nobody else had wanted to do. Sierra Leone is now connected with emerging economies wanting iron ore. It is no longer solely dependent on aid. LMplc is being used as an example to encourage other companies to invest.
Rachel Rhodes said that the Mining Lease Agreement sets out the framework for how companies will invest and providing tax arrangements. The original MLA was unanimously ratified by Parliament in 2010. As part of an industry-wide initiative, the government reviewed MLAs. The Review Panel worked over a twelve month period and included government representatives and independent consultants including mini9ng specialists and lawyers. The Review concluded in 2011 and was discussed and ratified by Parliament in March 2012. The MLA is aligned with the new Mining Act, especially regarding royalties and rehabilitation. Fiscal terms are governed by the Income Tax Act, which enables the government to alter taxes as it sees fit in order to attract investment. The government has done this in relation to LMplc. In the Finance Acts, incentives are offered to investors. The Treasury has waived various taxes for all overseas companies, not just LMplc. Fiscal concessions are to attract investment but LMplc is voluntarily contributing 1% of its revenues to the local community, 100 times what is required by law. It is working with the World Bank and others to boost investment in training. It is committed to becoming EITI compliant, as is Sierra Leone, and LMplc is helping Sierra Leone and the Chamber of Mines to do so. LMplc is also committed to becoming Equator Principles compliant.
Roger Moody said that he had not scrutinised the company’s operations on the ground in Sierra Leone or elsewhere. He said that London Mining Network had hoped to bring Aminata Kelly-Lamin of NMJD to London for the AGM but that she had been unable to obtain a visa in time. NMJD is 13 years old and was set up as a national movement at the end of the war. As Aminata was unable to attend, she had asked Roger to represent NMJD’s views to the Board. She had asked Roger to present the questions which had been sent in advance. Roger noted that Rachel Rhodes had said that the MLA signed and ratified this year was aligned with the Mining and Minerals Act. The statement from NMJD challenges this view. According to NMJD, the 6% tax rate set for 2 years (rising to 25% in 2014) is not in conformity with the Act.
Rachel Rhodes replied that the Income Tax Act provides a framework from which the government can apply concessions to attract investment and that it has done so. It has applied absolute tax waivers on import duty for a number of companies. This is widely done in Africa and in the UK and Australia. The Income Tax Act of 2010 reduced corporate tax to 30%, from 37%.
Sir Nicholas Bonsor said that the Board did not wish to spend too much time on the details of relations with the government of Sierra Leone.
Roger Moody said that it was important to discuss these matters in front of shareholders and that he had a statement from NMJD.
Sir Nicholas Bonsor said that he did not want to receive a statement and that Roger should restrict himself to asking two further questions. He said that he was willing to talk about the issues after the formal meeting. Roger replied that he could not accept any offer of a private meeting, as it was essential that shareholders and other investors should be made aware of the issues.
Roger said that according to the Community Development Fund agreement, funds are to be used within Sierra Leone for communities, and that the NMJD was concerned that these funds might be used for other purposes
Rachel Rhodes said that the Mining Act requires companies to contribute 0.01% of revenues and that LMplc is putting in 1%. The additional contributions that are not going through local communities are going through national organisations.
Roger said that there is currently a cut off point of 3.5 million tonnes of annual output, beyond which the 1% contribution may not be applied. However, production is projected to rise beyond 16 million tonnes. Would the community contributions be capped at the lower figure?
Rachel Rhodes repeated that the company is currently contributing 100 times what is required by law – but this did not answer Roger’s question.
Roger asked why the company had not signed Community Development Agreements with the host communities in the Marampa, Maforkie and Burch Kasseh Makonitch chiefdoms.
Rachel Rhodes said that the company is in the process of negotiating agreements with these communities. They will conclude these negotiations as soon as possible. Just because agreements have not yet been signed, it does not mean that the company is not working with the communities and contributing to the fund.
Roger asked whether, given that NMJD was not at the AGM, the company would be willing to meet with them in Sierra Leone.
Graeme Hossie replied that the company had attempted to do so. He said that lots of prejudice comes up, perhaps reinforced by the actions of other mining companies in other countries. The company wishes to build a dialogue with NGOs and would be happy to meet with Aminata to resolve her concerns.
Another shareholder asked how long the licence for Marampa is. The answer was 25 years, but it is renewable.
There was another question, asking what EITI is. LMplc is committed to EITI.
Another question concerned interest rates paid on financing, which seemed very high. The answer was that this was the going rate.
Another question was what the company was doing in Chile. Answer: exploring.
Another question was who was the shipping agent transporting ore from Sierra Leone. Answer: mostly Glencore, with a further 2 million tonnes via Vitol. The company agrees the cost of shipping based on spot prices.
Richard Solly of London Mining Network asked two questions on the company’s operations in Colombia. He pointed out that the Annual Report said that an ESIA is being conducted during 2012 on the Socha project and asked whether it would be available, when complete, to shareholders. The answer was that the ESIA will be ‘available to be discussed with shareholders’ and that key findings will be published. He noted that in Resolution 11 the company sought approval for political donations up to a total of £100,000 over the coming year, and that the explanation in the Notice of Meeting stated that this included donations to bodies ‘concerned with policy review, law reform, the representation of the business community and special interest groups’. He asked whether the Board intended to support any such groups in Colombia and if so, which ones. The answer was that the company does not  have any plans to support any organisations at present but that the Board wishes to have the ability to do so.
The formal resolutions were then put to the vote and accepted, and the AGM ended.
Immediately afterwards, Sir Nicholas Bonsor greeted Roger and Richard and expressed the wish that Roger would visit LMplc’s operations in Sierra Leone.
Rachel Rhodes then approached Roger and opened a conversation. She said that the UK Government’s Department for International Development (DfID) had helped write the new Mining Act and were involved in discussions over the MLA. She said that some of the criticism of the company in Sierra Leone had taken place in the context of the General Election, with the opposition party wanting to pressure the governing party.
Roger said that part of the context was also the way in which Sierra Leone had been screwed earlier and that this is what NMJD had been set up to counter.
Rachel Rhodes replied that investing in a country that a lot of banks will not touch is quite something in itself. The government alters tax arrangements to attract investment. Artisanal and illegal mining have no environmental or health and safety standards. LMplc is bringing together funders to come to the Chamber of Mines. Sierra Leone does not yet have the right skills. LMplc wants to employ local people, so how do they train them? LMplc is processing its product in Sierra Leone. It would like discussions with NMJD. The company is doing  a good job. Rachel said she goes to Sierra Leone a lot. It is being transformed. The international perception of the country is inaccurate. Rachel is also trying to attract other investment.
Roger noted recent incidents at African Minerals.
Rachel said that if African Minerals does well, it is good for the country. The recent violence was the result of failure to engage with the local community and on employment issues. Government ministers went to the community to calm things down. African Minerals had had management changes, and community and employee relations had been neglected. LMplc has invested heavily in community and employee management. An ex-Rio Tinto Alcan officer has been appointed Head of Sustainability. It is difficult to manage people’s expectations. There is a need to invest in training so that the company can give people work.
Roger said that he could see that Rachel was genuinely committed. He asked whether she really thought that Marampa would still be operating in 25 years time. He noted the reduction in demand from China.
Rachel said that she was certain the mine would continue to operate as long as it had resources. One billion tonnes is either indicated (80%) or inferred (20%). At 17 million tonnes per annum, that will give a 25 year mine life. She added that a problem is how to survive iron ore price fluctuations. You have to be efficient and avoid stoppages. She said she was not worried about a drop in demand. LMplc is competitive with the big companies, Rio Tinto, Vale and BHP Billiton, because of its low marginal costs. China has a lot of small iron ore mines which have high marginal costs. Rio Tinto, Vale and BHP Billiton will make sure that the price does not fall below a certain floor. The average grade of the Marampa deposit is 35% – but because of in-country beneficiation, the product eaches a 65% grade . Production costs are $35 to $40 per tonne. It is low in impurities. African Minerals produces red direct shipping ore, but LMplc provides a dark grey premium product. She did not address the reduction of demand from China, even though it is one of the company’s two main markets.