FrancTrade view: The anticipated expansion in Guinea’s mining sector is welcome news. However, the industry, both in Guinea and globally, has been through turbulent times and metal prices are still well short of their pre-crisis highs. We understand that the government of Guinea is looking to diversify its economic base and boost telecoms, real estate and agriculture. It is the right thing to do. The huge dependence on China is a risk but may provide a short term panacea for the economy.
Industry players must remain deserving of tax breaks
Guinea, which hopes to trump Australia to become the largest exporter of Bauxite to China, may withdraw tax breaks from mining companies who may be abusing them. Over the last five years, tax breaks of up to USD 220 million have been granted to mining companies importing equipment and building materials in a bid to support the growth of the industry. However, given the impact of these fiscal concessions on public finances, the government is keen to ensure that mining companies are indeed respecting the tax regime under which they operate.
A panacea for a struggling economy
Guinea has the largest bauxite deposits in the world (over 25%) and, according to International Aluminium Institute, will export over 13 million tonnes in 2017, compared with just 300,000 tonnes last year. This robust increase in bauxite exports is expected on the back of weaker production from Indonesia and Malaysia where the government has restricted some mining activity. Guinea’s stable grade bauxite is therefore emerging as a strong alternative. Additionally, China Hongqiao Group Ltd which is the largest aluminium producer in the world controls bauxite reserves in Guinea. China’s import demand for bauxite now stands at 56 million tonnes, up nearly 90% from its levels in 2010.
According to the International Aluminium Institute, incremental global demand for Bauxite will reach 50 million by 2020. Bauxite is the primary ore for aluminium.