SIERRA LEONE EXTRACTIVE INDUSTRIES’ TRANSPARENCY INITIATIVE (SLEITI) Final REPORT ON SLEITI RECONCILIATION AUDIT (2013) FEBURARY 2016 Prepared by: Boas &Associates P. Box At 1367 Achimota-Accra Ghana Mobile: +233 244 326838 E-mail: [email protected] TABLE OF CONTENTS LIST OF ABBREVIATIONS/ACRONYMS .................................................................................................................... i STATEMENT FROM THE INDEPENDENT ADMINISTRATOR .............................................................................. ii EXECUTIVE SUMMARY .............................................................................................................................................iii 1.0: BACKGROUND ...................................................................................................................................................... 1 2.0: APPROACH AND METHODOLOGY .................................................................................................................. 4 3.0: THE EXTRACTIVE SECTOR IN SIERRA LEONE ............................................................................................... 6 3.1 MINING SECTOR .............................................................................................................................................. 6 3.2: OIL AND GAS ................................................................................................................................................... 25 4.0 RECONCILIATION PHASE ................................................................................................................................. 35 4.2 ACTIVITIES UNDERTAKEN AT RECONCILIATION .................................................................................. 47 4.3 RESULTS OF RECONCILIATION .................................................................................................................... 49 4.3.1 DISCREPANCIES ....................................................................................................................................... 53 5.0 OBSERVATIONS AND RECOMMENDATIONS ................................................................................................ 69 5.1 EXTRACTIVE SECTOR PAYMENTS AND NOMENCLATURE ............................................................. 69 6.0: CONCLUSIONS .................................................................................................................................................... 72 APPENDICES…………………………………………………………………………………………………………73 APPENDIX 1: TERMS OF REFERENCE…………………………………………………………………………….74 APPENDIX 2: DETAILS OF RECONCILIATION…………………………………………………………………..81 APPENDIX 3: DETAILS OF 2013 COMPANY PAYMENTS……………………………………………………….92 LIST OF TABLES Table A: Selected companies for 2013 SLEITI report. ................................................................................................ iv Table 3.1: Major operations in the Mining Sector ....................................................................................................... 7 Table 3.2: Royalty Rate for Categories of Mine Products .......................................................................................... 12 Table 3.3: Production and Export values of 5 major companies .............................................................................. 15 Table 3.4: Production and Export Values of bauxite (2010 -2014)........................................................................... 15 Table 3.5: Production and Export Values for Gold (2010-2014) ............................................................................... 16 Table 3.6: Production and Export Values for Iron Ore (2010-2014) ......................................................................... 16 Table 3.7: Production and Export Values for Illmenite (2010-2014) ........................................................................ 17 Table 3.8: Production and Export Values for Rutile (2010-2014) ............................................................................. 17 Table 3.9: Export Volumes and Values for Zircon (2011-2013) ............................................................................... 17 Table 3.10: Production and Export Values for Diamonds (2010-2014) .................................................................... 18 Table 3.11: Percentage Growth in 2013 Exports over 2012 Exports ......................................................................... 18 Table 3.12: Mining Contribution to National Exports (US$000)............................................................................... 19 Table 3.13: Contribution of 2013 Mining Revenues to Total NRA Collections ...................................................... 19 Table 4.1: Summary of reporting parameters for SLEITI 2013 report ..................................................................... 35 Table 4.2: Relevant revenue streams for SLEITI reconciliation report (2013) ......................................................... 37 Table 4.3: Revenue streams for SLEITI 2013 Reconciliation Report. ....................................................................... 41 Table 4.4: Selected companies for 2013 SLEITI report .............................................................................................. 42 Table 4.5: Government Entities and revenue streams for 2013 SLEITI report. ....................................................... 45 Table 4.6: Reconciliation by companies ..................................................................................................................... 52 Table 4.7: Reconciliation by Revenue streams ........................................................................................................... 53 Table 4.8: 2013 Receipt from compancies without reporting templates .................................................................. 54 Table 4.9: Resolutions of discrepancies on Extractive Companies payments ........................................................... 55 SLEITI 2013 RECONCILIATION LIST OF ABBREVIATIONS/ACRONYMS EITI Extractive Industries Transparency Initiative GGDO Government Gold and Diamond Office GoSL Government of Sierra Leone IPAU Integrated Projects Administration Unit MCO Mining Cadastre Office MLGRD Ministry of Local Government and Rural Development MMA Mines and Minerals Act 2009 MMMR Ministry of Mines and Mineral Resources MOFED Ministry of Finance and Economic Development NMA National Minerals Agency PMT Precious Minerals Trading NRA National Revenue Authority SLEITI Sierra Leone Extractive Industries Transparency Initiative SLL Sierra Leone Leone Boas & Associates i | P a g e SLEITI 2013 RECONCILIATION STATEMENT FROM THE INDEPENDENT ADMINISTRATOR The Sierra Leone Extractive Industries‘ Transparency Initiative (SLEITI) through the Integrated Projects Administration Unit (IPAU) of the Ministry of Finance and Economic Development procured the services of Messrs Boas & Associates as the Independent Administrator for the 2013 SLEITI EITI reconciliation report. The engagement was made in accordance with the International Standard on Related Services as applicable to agreed upon procedures. The assignment was conducted using procedures as set out in the Terms of Reference attached as Appendix 1 to this report, except where indicated otherwise in the report as well as its appendices. The procedures undertaken were not designed to constitute an audit or review made in accordance with International Standards on Auditing Engagements, and as such we do not provide any assurances other than those expressed in this report. Had we performed additional procedures, other matters would have come to our attention that would have been reported to you. The report is to inform SLEITI on the matters expressed in the Terms of Reference and not for any other purpose. Kwaku Boa-Amponsem Managing Partner Boas & Associates February 8, 2016 Boas & Associates ii | P a g e SLEITI 2013 RECONCILIATION EXECUTIVE SUMMARY The Extractive Industries Transparency Initiative (EITI) is a global standard that promotes transparency and accountability in the oil, gas and mining sectors. Implementing countries are required to produce annual reports that reconcile extractive sector payments to government receipts. In addition to that the standards require the provision of contextual information on the extractive sector. The summary below provides the key contextual information, results of reconciliation and some key findings and recommendations for 2013. OVERVIEW Sectors covered: Mining and Oil/Gas sectors. Licensing Regime: First come first served for mining and competitive bidding/licensing rounds for Oil/Gas. Regulation of the extractive sector: Mining: Mines and Mineral Act (MMA, 2009), National Minerals Agency Act (NMA Act 2012); Income Tax Act 2000, the Mines and Minerals Operational Regulations 2013(Statutory Instrument 12 of 2013) Oil/Gas-Petroleum Exploration and Production Act, 2011. Contribution of Mining sector to GDP in 2013: 2.6% Sustainability of extractive revenues The reserve position of the largest mineral export, iron ore is highly prospective with over 1 billion tonnes including a Probable ore reserve of 539 million tons grading 31.1% Fe, sufficient for over 40 years of mine life. Iron-ore projects are seen as key contributors to Sierra Leone‘s GDP growth with over US$ 1bn in exports in 2013 (Bank of Sierra Leone). Decline in international prices of iron ore resulted in slowed GDP Growth in 2014 of 7.1%. Based on ore