4C Buried Secrets

R-0048 a reporter at laRgE bURiEd sEcrets How an Israeli billionaire wrested control of one of Africa’s biggest prizes. bY paTRick radden keefE 50 THE NEW YORKER, JULY 8 & 15, 2013 TNY—2013_07_08&15—PAGE 50—133SC.—Live art r23707—CritiCAL PHOTOGRAPH TO BE WATCHED THROUGHOUT THE ENTIRE PRESS run—pLEASE PULL KODAK APPROVAL PROOF F0R PRESS COLOR GUID- ANCE 4C ne of the world’s largest known de- As wealthy countries confront the posits of untapped iron ore is buried prospect of rapidly depleting natural re- insideO a great, forested mountain range in sources, they are turning, increasingly, the tiny West African republic of Guinea. to Africa, where oil and minerals worth In the country’s southeast highlands, far trillions of dollars remain trapped in the from any city or major roads, the Siman- ground. By one estimate, the continent dou Mountains stretch for seventy miles, holds thirty per cent of the world’s min- looming over the jungle floor like a giant eral reserves. Paul Collier, who runs the dinosaur spine. Some of the peaks have Center for the Study of African Econo- nicknames that were bestowed by geolo- mies, at Oxford, has suggested that “a gists and miners who have worked in the new scramble for Africa” is under way. area; one is Iron Maiden, another Metal- Bilateral trade between China and Af- lica. Iron ore is the raw material that, once rica, which in 2000 stood at ten billion smelted, becomes steel, and the ore at Si- dollars, is projected to top two hundred mandou is unusually rich, meaning that billion dollars this year. The U.S. now it can be fed into blast furnaces with min- imports more oil from Africa than from imal processing. During the past de- the Persian Gulf. cade, as glittering mega-cities rose across The Western world has always China, the global price of iron soared, thought of Africa as a continent to take and investors began seeking new sources things from, whether it was diamonds, of ore. The red earth that dusts the lush rubber, or slaves. This outlook was in- vegetation around Simandou and mar- scribed into the very names of Guinea’s bles the mountain rock is worth a fortune. neighbor Côte d’Ivoire and of Ghana, Mining iron ore is complicated and which was known to its British masters requires a huge amount of capital. Si- as the Gold Coast. During the Victorian mandou lies four hundred miles from the period, the exploitation of resources was coast, in jungle so impassable that the especially brutal; King Leopold II, of first drill rigs had to be transported to the Belgium, was so rapacious in his pursuit mountaintops with helicopters. The site of rubber that ten million people in the has barely been developed—no ore has Congo Free State died as a result. The been excavated. Shipping it to China and new international stampede for African other markets will require not only the resources could become another grim construction of a mine but the building story, or it could present an unprece- of a railroad line sturdy enough to sup- dented opportunity for economic devel- port freight cars laden with ore. It will opment. Collier, who several years ago also be necessary to have access to a deep- wrote a best-seller about global poverty, water port, which Guinea lacks. “The Bottom Billion,” believes that, for Guinea is one of the poorest countries countries like Guinea, the extraction of on the planet. There is little industry and natural resources, rather than foreign aid, scarce electricity, and there are few navi- offers the greatest chance of economic gable roads. Public institutions hardly progress. Simandou alone could poten- function. More than half the population tially generate a hundred and forty billion can’t read. “The level of development is dollars in revenue over the next quarter equivalent to Liberia or Sierra Leone,” a century, more than doubling Guinea’s government adviser in Conakry, Guin- gross domestic product. “The money in- ea’s ramshackle seaside capital, told me volved will dwarf everything else,” Col- recently. “But in Guinea we haven’t had lier told me. Like the silver mine in Jo- a civil war.” This dire state of affairs was seph Conrad’s novel “Nostromo,” the not inevitable, for the country has a Simandou deposit holds the promise of bounty of natural resources. In addition supplying what Guinea needs most: “law, to the iron ore in the Simandou range, good faith, order, security.” Guinea has one of the world’s largest As with deepwater oil drilling or with reserves of bauxite—the ore that, twice missions to the moon, the export of iron refined, makes aluminum—and signi- ore requires so much investment and ex- ficant quantities of diamonds, gold, ura- pertise that the business is limited to a nium, and, off the coast, oil. few major players. In 1997, the exclusive Guinea, in West Africa, is one of the world’s poorest countries. The iron ore buried inside PHOTO ILLUSTRATION BY AJ FRACKATTACK; PORTRAIT BY TOMER APPELBAUM TOMER BY PORTRAIT AJ FRACKATTACK; BY ILLUSTRATION PHOTO the Simandou range may be worth a hundred and forty billion dollars. THE NEW YORKER, JULY 8 & 15, 2013 51 TNY—2013_07_08&15—PAGE 51—133SC.—Live art r23707—CritiCAL PHOTOGRAPH TO BE WATCHED THROUGHOUT THE ENTIRE PRESS run—pLEASE PULL KODAK APPROVAL PROOF F0R PRESS COLOR GUID- ANCE 4C rights to explore and develop Simandou vies, a senior executive at Rio Tinto, told state.” A recent report by the Africa were given to the Anglo-Australian min- me that the company had invested hun- Progress Panel, which is chaired by Kofi ing giant Rio Tinto, which is one of the dreds of millions of dollars at the site, and Annan, suggests that well-connected world’s biggest iron-ore producers. In had been moving as expeditiously as pos- foreigners often purchase lucrative assets early 2008, Tom Albanese, the compa- sible on a project that would have re- in Africa at prices far below market value, ny’s chief executive, boasted to share- quired decades to complete. “This was by offering inducements to predatory holders that Simandou was, “without quite a shocking event for the company,” local élites. “Africa’s resource wealth has doubt, the top undeveloped tier-one he said. bypassed the vast majority of African iron-ore asset in the world.” But shortly In April, 2009, the Ministry of Mines people and built vast fortunes for a privi- afterward the government of Guinea de- in Conakry ratified the agreement with leged few,” it says. The report highlights clared that Rio Tinto was developing the Steinmetz. A year later, he made a deal the billions of dollars that Vale agreed to mine too slowly, citing progress bench- with the Brazilian mining company pay Steinmetz for Simandou, noting that marks that had been missed, and imply- “the people of Guinea, who appear to ing that the company was simply hoard- have lost out as a result of the undervalu- ing the Simandou deposit—keeping it ation of the concession, will not share in from competitors while focussing on that gain.” mines elsewhere. In 2010, several months after the Vale In July, 2008, Rio Tinto was stripped deal was announced, Guinea held its first of its license. Guinean officials then fully democratic elections since indepen- granted exploration permits for half of dence, ending half a century of authori- the deposit to a much smaller company: tarian rule. The new President, Alpha Beny Steinmetz Group Resources, or Vale—one of Rio Tinto’s chief compet- Condé, had run on a platform of good B.S.G.R. Beny Steinmetz is, by some es- itors. Vale agreed to pay two and a half governance and greater transparency in timates, the richest man in Israel; accord- billion dollars in exchange for a fifty-one- the mining sector. But as he took office ing to Bloomberg, his personal fortune per-cent stake in B.S.G.R.’s Simandou he faced the possibility that Guinea’s amounts to some nine billion dollars. operations. This was an extraordinary most prized mineral asset may have been Steinmetz, who made his name in the di- windfall: B.S.G.R. had paid nothing up traded out from under the country. He amond trade, hardly ever speaks to the front, as is customary with exploration li- could not simply void the contract. press, and the corporate structures of his censes, and at that point had invested “There is continuity of the state,” he told various enterprises are so convoluted that only a hundred and sixty million dollars. me recently. “I couldn’t put things back it is difficult to assess the extent of his In less than five years, B.S.G.R.’s invest- where they had been—unless I had holdings. The Simandou contract was a ment in Simandou had become a five- right on my side.” B.S.G.R. denied any surprising addition to Steinmetz’s port- billion-dollar asset. At that time, the an- wrongdoing: “These allegations are false, folio, because B.S.G.R. had no experi- nual budget of the government of Guinea and are a smear campaign against ence exporting iron ore. A mining exec- amounted to just $1.2 billion. Mo Ibra- B.S.G.R.,” a company spokesman told utive in Guinea told me, “Diamonds you him, the Sudanese telecom billionaire, me. If the Simandou license had been can carry away from the mine in your captured the reaction of many observers secured through bribery, then the deal pocket.

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