Alufer Mining rapidly advancing the Bel Air project in Guinea
Alufer Mining Ltd. is an independent private mineral exploration and development company headquartered in London, with significant bauxite assets in the Republic of Guinea, in West Africa. Bauxite is the main commercial mineral from which aluminium oxide is extracted, which in turn is smelted to form aluminium metal. The company is focused on the development of the Bel Air project, which is expected to commence production in 2018. Significant capital has been invested in exploration since January 2011 and substantial work programmes have been identified both at Bel Air and at Labé, which was Alufer Mining’s original bauxite asset.
The mining industry in Guinea accounts for over 70% of the country’s exports (African Business Magazine, March 2017). Guinea has deposits of bauxite, iron ore, gold, and diamonds all with significant geological potential. Guinean bauxite reserves contribute to 94% of Africa’s reserves and 25% globally. Bauxite from Guinea has certain qualities which make it useful to Chinese refineries. Medium and long term bauxite demand is high, driven by growth in key sectors including transportation, construction, and consumer products.
RCF has built a strategic partnership with Alufer Mining. RCF’s Fund VI was originally approached by Alufer in May 2011 for funding to conduct exploration on Bel Air, but declined due to the early stage of the project. RCF kept in contact with the Company over the next two and a half years and began to look seriously at the Project again in Q4 2013, upon the completion of its 2013 Feasibility Study. In 2013, the original management team of Alufer Mining approached RCF representative, Mike Price, in London with an intriguing project proposal. RCF was extremely interested in this project for a variety of reasons. Firstly, RCF believed the envisioned project in Guinea would have a lot of material to offer, aside from having potentially one of the biggest bauxite resources in the world. Secondly, RCF identified that the Bel Air project had an attractive logistical advantage. Generally, the majority of bauxite deposits are inland. However, the Bel Air project was unique in that it is located right on the coast. Thirdly, the deposit was of a good quality, therefore from a mining perspective, RCF believed it would be relatively easy to mine and anticipated it also could be easily exported straight away. In conducting its initial due diligence RCF identified that the company first needed to complete fundamental work to get to a satisfactory feasibility study, followed by the actual construction of the project.
As such, RCF became a key financier of the construction of the Bel Air project through its initial November 2015 investment in Alufer via a $10 million bridge loan funding completion of the Definitive Feasibility Study (“DFS”) of the Project. After the company’s early 2016 completion of the feasibility study, RCF further extended the bridge loan and an additional $4 million was provided to the Company in September 2016.
Successful completion of project financing was completed in December 2016 in collaboration with the finance institution Africa Finance Corporation (AFC), and with specialist mining investor, Orion Mine Finance. After significant negotiations with the Company led by RCF, a project financing package was agreed upon by the investment groups to provide US$110.0M in a combination of equity and convertible debt.
Construction activities commenced in 2017, resulting in the growth from 15 employees to 1000 employees – over an estimated 15 month construction period.
At present, along with its ongoing financial assistance, RCF continues to assist in the facilitation of new appointments to the Company’s management team and governance committees to strengthen the expertise required for the ongoing work to fast track the project. As part of the financing package, RCF developed an independent board of directors and three separate committees:
- The first committee is the Project Development Committee, which is chaired by RCF’s Allan Brownrigg, and oversees the construction and monitors the contractors, ensuring the project is on time and on budget.
- The second committee is the Environmental, Social and Governance (ESG), chaired by RCF’s Allison Forrest. Community relations are fundamental as the project employs many local people and the Government of Guinea also being a major shareholder in the project.
- The final committee is the Marketing Committee, encompassing the process of setting the offtake agreements for the purchase of materials, which is chaired by RCF’s Mason Hills.
The significance of the project in Guinea
This project is very significant for the Guinean Government, who holds a 25% stake in the mine. The project is a milestone that will contribute to the development of the mining sector in Guinea, helping create around 3,500 direct and indirect jobs during its construction phase. Alufer Mining plans to extract bauxite using surface equipment that limits the negative impact on the environment and local communities; and transport will be undertaken with trucks to be loaded onto barges that deliver to vessels at sea.
The $205 million deal is one of the largest foreign investments in the country since the 2014 Ebola crisis.
The project is anticipated to be completed in September/October 2018. It has a nameplate capacity of 5 million tonnes per annum but can be easily scaled to 10 million tonnes per annum. It is one of the major projects of the Guinean Government and is of national significance, both in terms of the employment and community benefits it brings to the country.
RCF conducted significant risk work and took due diligence measures with the project. In 2014 the largest outbreak of Ebola hit multiple countries in West Africa, with Guinea, Sierra Leone and Liberia suffering most. Furthermore, Guinea historically had a reputation for corruption that had pervaded, in particular, the mining sector, as evidenced the international scandal involving the Simandou Project. RCF General Counsel Cassie Boggs and RCF representative Mike Price first visited Guinea in May 2014 to conduct preliminary country due diligence in an effort to assess country risk. While in the country, RCF met with Ambassadors from the US, UK, South Africa, the Guinean Minster of Mines, Deputy Chief of Staff to the President, Mining Advisor to the President, the IFC, and along with other Guinean governmental, international-affairs, and business representatives. In parallel, RCF also engaged a London based law firm with significant experience in West Africa and Guinea to assist in certain legal due diligence, and a political risk consultant with extensive experience in Guinea to review and update political risks, conduct inquiries and to consider certain specific issues regarding the application and enforcement of environmental standards and regulations in Guinea, corruption issues, and issues of general political stability.
After the conclusion of its diligence, RCF was pleased to find that President Conde and Minister of Mines Kerfalla had demonstrated decisive governmental leadership in combating corruption, by requiring an unprecedented level of transparency in regards to the review and issuance of mining licenses, including the publication of all mining agreements on the Internet. RCF continues to monitor the country’s anti-corruption climate along with Alufer’s actions in Guinea through internal due diligence and third party consultants to ensure it maintains its strict procedures and complies with all local and international laws.
In February 2016, the Guinean Government and Alufer Mining signed the Mining Convention for the Bel Air bauxite project, and in his address, Prime Minister of Guinea Mr. Mamady Youla, commented “Efforts since 2010 to boost economic activity in developing countries have ended up paying off and the signing of the bauxite project Bel Air is a good example. This is a strong signal to the international community and investors. After two years of courageous struggle against Ebola, the fight against the epidemic is finally won, and the development of Guinea can resume vigorously”.