Delta Mining Deal Comes Under Critical Spotlight Again -Highly Placed Analyst Unveils Flaws
The junior South African Company announced winner of bid by government's inter-agency group to level huge deposits of iron ore in the West Cluster is not going immune to penetrating critique from mineral experts and analysts.
Though the company concurrently retorts with subtle media stunts, the situation is not helping as knowledgeable individuals continue to unveil piles of flaws inherent in the deal and admonishing government to change its gear on the matter.
A highly placed source, who does not want to be named because of the sensitivity of his attachment to the official realm, says the Inter-Ministerial Mineral Technical Committee's award of the US$1.5b to mine the Western Cluster Iron Ore is deeply void of any sound economic, financial and technical analysis, which according to the source, carry fraud evident by the selection process.
It can be recalled, the Ministry of Land, Mines and Energy during the Expression of Interest (EOI) stage of the bidding, required companies submitting bids to have an annual turnover of at least US$1.3b.
According to the source, though Delta Mining Company had less than US$2m as annual turnover, the government nonetheless announced it winner of the bid.
Delta is not a publicly listed company and therefore its financial statements are privately guarded, as the company sought to bring strategic partners, such as Cape Lambert Iron Company, an Australian firm and the Industrial Development Corporation (IDC) of South Africa to the table.
But, according to the source, it turns that Cape Lambert had losses of US$3m in the last fiscal period, and the value of the exploration properties are listed around 35 Australian dollars.
“Only modest income in consultancies is noted on the company's income statement,” the unimpeachable source said. “The consideration by DMC of IDC as its strategic partner is incorrect, because IDC is a development bank like the Overseas Private Investment Corporation (OPIC) and could not be in partnership with DMC.”
The source, who is an acclaimed expert in the mineral sector said the IDC will finance or buy into a project only after a full blown feasibility has been completed.
“Therefore,” he said, “to list IDC as a strategic partner ordered on fraud and deception. In fact, the IDC documents within the bid document had the Republic of Guinea on the front cover of the company's profile.”
On the basis of the financial and technical strengths of Delta, grossly overlooked by the Mineral Committee, the expert says government would be taking a fatal drift if the bid won is converted into contract.
“Delta is seeking to leverage Liberian iron ore by securing a contract and then constructing a business and financing model to attract needed capital; this is usually a hit or miss proposition,” the source said.
“If the global economy experiences a major recession as it being projected and the demand for steel from China and India falters, the price of iron ore would plummet making the previously viable Western Cluster Iron Deposits most likely a marginal project or not profitable at all. This would kill the iron ore industry for at least ten years, since the cycle for steel is 50 years and we are in the middle of that growth curve.”
The mineral expert and analyst said Liberia would be seeking strategic partners with the ready capital to spend on the revitalizing the industry instead of depending upon a small exploration company that will take years to raise the necessary capital.
The inter-ministerial committee has had remarks indicating that the size of Delta should not prevent it from winning the US$1.5b project, because size does not matter. But our highly placed source countered that the committee members are mixing up green filed mining projects, where small exploration companies take the risks and develop the project up to a point and then bought by larger firms with deep pockets.
“The Western Cluster Deposits are largely previously developed properties,” the expert said. “The deposits are not green fields, since they were previously explored by major companies and once had proper infrastructure to support mining activities there.”
The inter-ministerial committee, in processing the bids of applicants, ranked the companies according to criteria, which according to our source, are not used in international tenders. The committee rated technical and financial capability at 20% while giving quality of written proposal 65%.
“On account of the logic of this process, Delta wrote a great proposal compared to other former bidders such as Mittal, Sino Steel and Tata,” the source said. “Should that be the basis for granting the South African company a 1.5 billion dollar project that has strategic national interest? Absolutely no!”
The expert source disagreed with propositions in the Delta proposal which promised to build processing and pellet plant at the Port, to rebuild transport routes and refurbish the Port, to construct mine infrastructure and to compete resource delineation.
As it take two years from the point of order placement for the manufacturer to deliver a gyratory crusher, an indispensable equipment for implementing DMC's pre-mining construction, our source says it is impossible for Delta to carry out the pre-mining construction mentioned in its proposal.
“Certainly, the Inter-Ministerial Technical Committee has done Liberia a great disservice by naming Delta as the bid winner when the company should not have been allowed to participate in the bidding, as its bid document showed that it had not met minimum requirements, such as the minimum annual turnover requirement,” the mineral expert said. “One can only wonder if money changed hands to declare Delta as the bid winner when it failed to meet the standards for participating for participating in the bidding after all.”
