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GOL: ArcelorMittal fails to adhere to the terms of MDA

By Jonathan Browne

The Government of Liberia bluntly accuses Concessionaire, ArcelorMittal Liberia (AML) Limited and its Principal, ArcelorMittal Limited, of default in adhering to terms of the amended Mineral Development Agreement (MDA) of January 23, 2013.

The government here thru the Ministry of Mines and Energy on 22 May 2022 made the observation in a written notice to the Chief Executive Officer of AML, Mr. Joseph Coenen, who is resident in Buchanan, Grand Bassa County.

In the letter of notice, Mines and Energy Minister Gesler E. Murray, says AML, has for a prolonged period, been in default of certain material obligations under the MDA.

It cites among others, the company’s failure to comply with its debt-equity ratio, failure to satisfy production schedule and failure to maintain railroad, which the government says constitute serious and prolonged breaches of a material obligation by AML.

Minister Murray notes that Article XVI, Section 3 of the MDA provides that “[At no time shall the ratio of debt of the Concessionaire to Equity of the Concessionaire Exceed 3:1. For purposes of this Section 3, “Debt” shall mean the long-term debt of the Concessionaire, and “Equity” shall mean the shareholders’ equity in the Concessionaire as defined by standard accounting practices.”

However, he reveals that the unaudited balance sheet of AML, as at December 31, 2020, provided by AML to the Government, the equity as of that date was US$249 million, and Debt was US$1,515 million, which results in a ratio of Debt to Equity in excess of 5.8:1 or nearly two times the permitted ratio, saying “This is a serious and prolonged breach of AML’s material obligations under Article XVI of the MDA.”

In failure to satisfy production schedule, the government cites Article V Section 1 of the MDA which states that “Subject to the availability of economically mineable Iron Ore reserves, the Concessionaire shall, during the Operating Period, extract at least as much Iron Ore per year from the Production Areas.

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But government notes that based on available records, AML has failed to meet the Run of Mine Production levels in every Commercial Operations Year, something, the Liberian authorities describe as a serious and prolonged breach of AML’s material obligations under Article V of the MDA, which has resulted in significant loss of revenue to the Government and will continue so until this breach is cured by the company.

On failure to maintain the railroad, the Ministry of Mines and Energy further cites Article IX Section 3(d) of the MDA, which requires AML, to among other things, “invest in the rehabilitation and maintenance of the Railroad in accordance with standard industry practices during the term of the Agreement.” 

However, Minister Murray reveals that based on an inspection of the railroad conducted by independent expert in May 2019, AML has failed to comply with this standard.

The government says the forgoing serious and prolonged breaches of material obligations of AML under the MDA constitute Events of Default under Article XXIX Section 2(d) of the MDA.

Meanwhile, the Liberian government says in line with Article XXIX Section 3 of the MDA, it hereby offers AML and its |Principal, an opportunity for consultation on how to resolve these outstanding matters, and warns that if it reasonably determined that one or more of the foregoing matters cannot be resolved by consultations, it may send a further notice, terminating the consultation period relating to such matters and to instead, demand the company to cure such matters in 60 days or as may be reasonably required to do so. 

At the same time Liberia’s Minister of Justice and Attorney General, Cllr. Frank Musa Dean, says contrary to ArcelorMittal Limited’s claims that the Government of Liberia’s execution of the Ivanhoe Framework Agreement constitutes “a serious encroachment on its rights under the MDA, particularly Articles XI (3) (d) and Article IX(3)(e)”, and that if the Government were to give effect to the [Ivanhole] Framework Agreement, this would give rise to further violations of AM’s rights under the MDA”, the Agreement is consistent with the MDA.

In a letter dated May 20, 2022, to the Vice President and Group General Counsel of ArcelorMittal Limited, Mr. Sapan Gupta, based in London, UK, Justice Minister Dean explains that the Mineral Development Agreement expressly provides that the Government must comply with its obligation under the MDA when giving effect to the Ivanhoe Framework Agreement.

He says the parties to the IFA included this provision to ensure that there would be no conflict between the Government’s obligations under the MDA and its obligations under the Ivanhole Framework Agreement.

Meanwhile, the Attorney General directs that based on Section 33.3(b) of the MDA, all communications from ArcelorMittal Limited to the Government of Liberia on the MDA should be addressed to the Minister of Mines and Energy instead, with copies to the Minister of Justice and the Minister of Finance, respectively.

‘While I have elected to respond on this occasion in the interest of time, I hereby request that henceforth, AM and AML should adhere to this MDA provision with respect to communications such as this one relating to rights under the MDA”, Cllr. Dean’s letter concludes.

ArcelorMittal Limited and the Government of Liberia signed a Mineral Development Agreement on August 17, 2005, which was subsequently amended on January 23, 2013, but implementation by the company has not been satisfactory to both the Government and People of Liberia with many terms yet to be fulfilled 16 years after.https://thenewdawnliberia.com/aml-gol-draw-battle-line/

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