By:- Ezekiel Duramany-Lakkoh
After the big fall in the global iron ore price, so many mining companies in the world either shutdown operations or redundant majority of their operation staff.
The slow down in the Chinese economy affected the demand for iron ore hence price for the Mineral decline from $ 185 per metric ton to less than $ 40 at present.
This resulted into more than 78% fall in prices and more than 78% fall in revenue for a big mining company (African Menirals). A company that was at the start of its infrastructural development.
The fall of price reduces investors’ confidence and triggered liquidity problems not only for AML’s operations, but also in the economy of Sierra Leone.
While operations costs (Salaries, taxes, utilities, contractors, surface rents.. etc…etc) remain unchanged or increase during the period because of inflation or other time value for money problems.
While majority of the iron ore companies shut down, Mr. Gibril Santigie Moseray Fadika, with the assistance of the President H.E. Dr. Ernest Bai Koroma and other officials of government were very instrumental to influence Shandong Steel to inject capital in a very standard administrative process.
While some skeptics are still questioning the quality and quantity of the Sierra Leone’s iron ore, the Chinese Government; leaders of the world’s current economic growth, believe in the quality investment of AML and the extent of the mining infrastructure, decided to partner with the government and few Sierra Leoneans, like Mr. Fadika to sustain the company during the price decline period.
Knowing that the price of iron ore is currently not competitive as against cost of operations, Shandong Steel through the Chinees Government is prepared to absorb a five years loss, but the loss should be depreciating cumulatively over the five years.
While other iron ore companies redundant all their staff, Mr. Fadika was able to negotiate the retention of all AML staff (not sub-contractors), who are currently under full salary since the company ceased operation.
It’s is very difficult and almost immposible for a mining company to continue to pay millions of dollars in salary cost, when it is not generating revenue.
To reduce the financial burden on the company, and to continue to put money in the pockets of thousands of the staff employed by Shandong Steel (formerly AML), the company negotiated with the National Revenue Authority (NRA) to defer the tax on employees’ salaries until the end of the year.
When an economy is stranded and corporate institutions are constrained to meet all commitments. A method known as quantitative easing is applied to caution economic shocks. Contrary to the revaluation of the current economic dispensation, the National Revenue Authority is risking the business of the biggest employer and economic driver in Sierra Leone for a PAYE that was negotiated with them to protect the Jobs of many Sierra Leoneans.
The President will not be happy when he finds out about this.
AML provided employment for more than 15,000 (fifteen thousand) Sierra Leoneans directly and more than 100,000 (one hundred thousand) indirectly.. and contributed to the 15.2% GDP growth of Sierra Leone in 2012. The second highest in the world.