S Leone's new diamond search

2006-07-18 15:37

Panguma - A narrow path cuts through the dense jungle to a clearing the size of a football pitch where a dozen bare-chested workers dig in an open pit in Sierra Leone's diamond-rich eastern province.

There was nothing sophisticated about the work: the men used spades and pickaxes to get to the kimberlite - the source of rich deposits of diamonds.

Since the end of a 1991-2002 civil war in the West African country, there had been a boom in prospecting and exploration.

The battle for control of diamond reserves fuelled the war, which killed 50 000 people and became notorious for images of drugged up child soldiers and mutilated civilians.

Thousands of the United Nations peacekeepers helped return the country to peace, and elections were due next year. Now, dozens of international companies believed the chances of finding fabulous mineral deposits outweighed the risk of further instability.

Prospectivity in Sierra Leone 'excellent'

Kiran Morzaria, finance director of River Diamonds Plc, a UK-based international prospecting company, said: "The prospectivity in Sierra Leone is excellent and in addition the country has not been explored to its full extent.

"Sierra Leone has undergone some dramatic changes over the last two to three years and, with the help of the international community, has lowered its sovereign risk substantially."

The cash-starved former British colony now looked to private investors to boost its economy by searching for gold, diamonds, platinum, iron ore, bauxite, rutile and other minerals.

Mohamed Mansaray, director of Sierra Leone's Geological Surveys Division, said: "The geology is the attraction and we have a green belt similar to that in Canada, South Africa and Australia. We just haven't been able, nor are we able, to explore it ourselves."

With the help of donors, Sierra Leone had got some of its pre-war mines back up and running. The country had one of the world's largest deposits of rutile, a titanium ore used in making hi-tech alloys and paints.

This year, a consortium of European and United States investors exported the first rutile since rebels destroyed the existing plant in 1995. The diamond sector was also undergoing reform.

Exports soared from $1.2m to $140m

In 2003, Sierra Leone joined the Kimberley Process - the international mechanism that seeks to avoid the export of diamonds tainted by conflict or bloodshed. Official exports soared from $1.2m in 1999 to more than $140m in 2005.

Koidu Holdings Ltd was the only industrial miner exporting diamonds from Sierra Leone, but several new kimberlite deposits had been identified.

Sierra Leone was also hoping to capitalise on its gold. Negligible gold export figures indicated an unregulated sector in need of attention, and output volumes were unknown.

Alimany Wurie, director of mines at the ministry of mineral resources, said: "Many diamond companies are finding gold as a by-product in the tailings of diamond gravel and they are exporting it through the official channels.

"But, what we're really pinning our hopes on is the primary load gold, and we believe we'll have an industrial mine up and running in the next few years."

One mineral sector observer said that for the mining sector to function efficiently, it needed clearer regulations.

'There's just too much corruption'

The observer, who asked not to be identified, said: "At the moment, if I was a De Beers I wouldn't touch Sierra Leone with a bargepole: there's just too much corruption and a weak foreign investment climate.

"The government needs to turn the grey areas into black areas by taking firm decisions."

There was a concern that regional prospecting licences handed out by the government in the early post-war period left little room for new investors.

Three-quarters of the country was under exploration. In 2002, just eight companies held prospecting licences, but now more than 40 got them. Many others had reached the exploration stage, where they tested bulk samples to assess the viability of a mine.

Paul Temple, consultant for Management Systems International's Peace Diamonds Alliance project, said: "If the government is actually promoting private investment, how are they dealing with new licences when they've already given, for example, a third of the exploration land to Sierra Leone Diamond Company (SLDC)?"

Licences 'would be abolished'

SLDC, a UK-based diamond exploration and development company, was granted a regional licence covering 36 364 square km for exploration in 2002.

Sierra Leone's mining codes stated that an exclusive prospecting licence granted for two years could be renewed, but that 50% of the area must be surrendered upon renewal.

The mineral resources ministry acknowledged that this had not happened. But, it said that by the end of this year, these large-scale licences would be abolished.

Wurie said: "When companies like SLDC came into the country immediately after the war, there were few others coming in.

"We issued them a regional licence to carry out a geophysical survey. They have completed this and know the areas they want to concentrate on and they will relinquish the rest."

Companies already operating in Sierra Leone said a lack of infrastructure was the main barrier to investment.

Much of the wealth was in the east, worst hit by the war, where buildings, roads and the power network were destroyed.

- Reuters