CAN THIS BILLIONAIRE SAVE LIBERIA’S WESTERN CLUSTER?

ANIL AGARWAL, who worked his way from a scrap dealer to one of the richest men in the world is said to be working behind to scenes to rescue Liberia’s troubled Western Cluster now entangled in a messy controversy amid concerns that the winner of the bid, the Israeli firm Elelnilto lacks the financial and technical expertise for the project. Now a new report is for the first time suggesting that the Liberian government in direct negotiations with Sesa Goa Verdanta to rescue the Israeli company due to technical and financial deficiencies of Elenilto. But what is structure of the deal on the table?  How is Elenilto being accommodated and Why? More importantly, new information obtained by FrontPageAfrica raises human rights abuses by Verdanta based on allegations by the United Kingdom raising the stakes even higher for the coveted Western Cluster.

Rodney D. Sieh, rodney.sieh@frontpageafricaonline.com

Monrovia -

An Indian billionaire who worked his way from a scrap dealer to one of the richest men in the world is said to be working behind to scenes to rescue Liberia’s troubled Western Cluster now entangled in a messy controversy amid concerns that the winner of the bid, the Israeli firm Elenilto may be lacking financial and technical expertise to fulfill the project.

The India Times is reporting that the Liberian Government is in direct negotiation with Sesa Goa Verdanta Resources owned by Indian Billionaire Anil Agarwal.

The report published this week suggests that Sesa Goa is looking at investing $600M on the project over next three years. Since a mining concession right is being transferred in the deal, the upfront payment could be a token amount, the Times reported quoting sources.

In 2009, Liberia awarded Elenilto mining rights to develop the $1.6 billion Western Cluster iron ore project but the deal ran into trouble as reports suggested that the Israeli company lacked the financial and technical expertise for the project. FrontPageAfrica first broke the story that the government of Liberia was in negotiations with Sesa Goa for transferring the mining rights but was short on details of how much of the current responsibilities owned by Elenilto would be assumed by Sesa Goa, one of the largest iron ore producers in India.

Complicating matters, Elenilto has been engaged in a lengthy public relations battle against critics unhappy with the manner in which the bid was one. FrontPageAfrica reported Monday that the Liberia Anti-Corruption Commission has already sanctioned an investigation into how the entire bid was won, a decision which could delay conclusion to the deal and Elenilto’s fate.

For some time now the government of Liberia has reportedly been working diligently to find a firm to rescue Elenilto with steel giant Tata Steel deciding against, Sesa Goa Verdanta was seen as a possible suitor. Agarwal’s empire – Vedanta Resources – now spans four continents, with offices in London and operations in Zambia, Australia and India. The billionaire owns more than 50% of the shares in the company, earning him a place among the richest thirty people in Britain. But despite his successes, Argarwal has not escaped the scrutiny of criticism. Sesa Goa subsidiary, Vedanta Resources was recently criticized by the British government for not having a human rights policy, prompting the British government to declare that ‘a change in the company’s behavior’ was ‘essential’.

Due to the mounting tribal protests and international criticism of their actions in Orissa, India, Vedanta initiated a public relations offensive extolling their virtues. But several documentaries showing video and digital images have reportedly exposed the companies human rights credentials and made them vulnerable to be debunked.

The interest in Liberia is a rare departure for Agarwal, who has built a reputation buying cheap second-hand industrial plants, and newly-privatized companies at low prices. Liberia’s Western Cluster on the contrary has vast potential.

It is unclear how the ongoing feud over Elenilto would affect the future of Liberia’s Western Cluster, but Argawal has a reputation of ensuring 100 percent approval before proceeding with mining in countries he has worked. For example when the Indian government put a stop to Agarwal’s mine on the Dongria’s land, by refusing to issue the necessary clearance, in 2008, Agarwal said, ‘I can only promise that we will only start work if we have the complete permission of the Court and the people.’ As late as in August 2010, Agarwal said, ‘We are law abiding people. We will not start mining at all until and unless we get 100% clearance from the authorities concerned.’

Born in Patna, Bihar, in 1954, Agarwal’s father was a small-businessman. His father was into making aluminium conductors. He founded Sterlite Industries, a business operating in the industrial sector in 1976 and then in 1986 established Vedanta Resources, bringing together a variety of businesses owned by the Agarwal family.

In March this year, Vedanta reported 28% growth in its profit at $770.8 million for the year ending March 31, 2011 on the back of surge in prices across a wide range of commodities and record production. The company had reported a profit of $602.3 million in 2009-10. Revenues surged 44.1% during the year to $11.42 billion compared with $7.93 billion last year, the company said.

The mineral potential of the Western Cluster is divided amongst 3 deposits namely Bomi Hills, Bea Mountain, and Mano River.  The mining activities of both Bomi Hills and Mano River have been well recorded, while Bea Mountain is classified as a total green field’s project.

Economic observers are concernd that the lagging controversy and lack of closure on the Western Cluster issue could deny Liberia billions of revenue dollars it could use for development projects. But with so much potential, the Western Cluster has remained an iron ore cluster drowned in controversies since its first tender in 2008.

Amid the debate over how the lack of closure is impacting post-war Liberia’s progress, there have been some suggestions that the Liberian government create a state-owned parastatal Iron Ore Company with the same philosophies and management structures as any other International Mining Company. By doing this, the government of Liberia will remain in control of an irreplaceable asset, while offering a sustainable economic environment for the communities in which these deposits are located.

Others have argued however, that the development rights of the Western Cluster should be transferred into a Liberian registered company, which in turn is owned by preferably an off-shore entity. The purpose of the offshore entity is to offer flexibility to investors in trading in the shares of the project. The Government of Liberia, together with a structure which could either a Broad Based Economic Empowerment Structure, and or the Empowerment of certain Key business development structures.

For now though, the absence of a Liberian consortium, critics say raises questions about how the interest of the Liberians could be protected and a struggling post-war nation avoids falling into embarrassing pitfalls and repeatedly making millionaires out-of-fly-by-night investors looking to strike it rich.