The government of Sierra Leone has ordered Octea, a diamond mining company operating the Koidu mine in eastern Sierra Leone to scale down operations until after 90 days so that government can sort out its differences with the company.

Koidu Holdings

Sierraloaded gathered this report in the latest edition of the authoritative Africa Confidential newspaper.

Otea owes a huge sum of money to the government of Sierra Leone (millions of dollars) but what seems to worry the government at this time is whether the company would be able to sustain its operations and thereby continue to maintain employment of the hundreds of Sierra Leoneans who depend on it for their livelihood.

The ebola epidemic has been partly responsible for the economic misfortunes of two other mining companies, African Minerals and London Mining both of whom mine iron ore in the north of the country. Octea is owned by Israeli businessman Beny Steinmetz who is also having problems with the government in neighbouring Guinea over the Simandou iron ore mine.

Sierra Leone’s Mines Minister, Minkailu Mansaray and his team met with Octea officials in London November 16, according to AC, Africa’s flagship of investigative journalism but nothing concrete seems to have come out of that meeting.

The future does not seem rosy for Octea; they owe money not only to the government of Sierra Leone to its main financier the British-owned Standard Chartered Bank and several other creditors.

There are speculations that Octea might continue mining operations until a few months next year and then close and run away like African Minerals owner Frank Timins did year at the height of the ebola epidemic.

But it seems like the Sierra Leone government will no longer tolerate surprises in the mining sector this time. It’s closely watching Octea and already drawing up it’s own plan in case Octea decides to fold up.

With the ebola epidemic now over, the mining industry and other businesses in the country are very likely to bounce back. African Minerals has already been taken over by a Chinese company, Sandung and seems to be slowly returning to normal. Sierra Rutile, which mines rutile in the south of the country is quite healthy even during the epidemic and London Mining has been sold to another company which plans to start operations soon.

So all eyes are now on Octea in Koidu. Will it be able to pay all its creditors or get a sympathetic payment arrangement? Will it able to fulfill all or part of its obligations to the government of Sierra Leone? Or would it simply cut and run next year? Those are the questions for now.

Britain’s Standard Chartered Bank is caught in the middle of an increasingly bitter feud between the Sierra Leone government and the heavily-indebted Octéa Limited, owner of the country’s biggest diamond mine at Koidu. After tense and unsuccessful talks in London starting on 16 November, Freetown officials called on Octéa, which owes about US$150 million in total, to impose a standstill at Koidu for 90 days, pending a detailed technical and financial assessment. Mining operations continue for now but officials said they feared that short-term actions by the company could endanger the mine’s future (AC Vol 56 No 23, Koidu’s future in the balance).

As the biggest bank in Sierra Leone, Standard Chartered has a particularly close relationship with the government and is under scrutiny for the way in which it spends funds there through a US$50 million credit facility with the CDC. The CDC is a development finance company wholly owned by the British government and the policies of the former Commonwealth Development Corporation are decided in coordination with the UK Department for International Development (AC Vol 51 No 9, CDC goes offshore).

At the same time, Standard Chartered is the biggest lender to Octéa, a wholly-owned subsidiary of Beny Steinmetz Group Resources. The Bank, we understand, also has exposure to other entities linked to BSGR. Citing client confidentiality, its officials told Africa Confidential they were unwilling to talk about these relationships.

However, AC has seen a letter from Standard Chartered to Octéa dated 5 August 2015 informing the company that it was in default on a $92 mn. loan from January 2011. Octéa had ’failed to comply’ with its obligations, the Bank wrote, by missing five consecutive monthly repayment installments, as well as missing a 25 March deadline for payment of the deferred principal amount. BSGR is guarantor of the loan.

The Sierra Leone government, to which Octéa owes payroll and other taxes of more than $13 mn., has raised concerns about the company’s solvency. Government officials say they expect Standard Chartered, the company’s biggest creditor, to take a constructive initiative on the Koidu crisis, which is further weakening the economy after a disastrous 18 months of falling growth and growing unemployment.