New Marampa licence fails to steady ship as investors abandon Gerald Metals

Troubling lawsuits, fleeing investors and some deep-seated concerns around the corporate social responsibility obligations may leave Gerald Metals’ top team of Craig Dean, Brendan Lynch, Pat Crepeault and Gary Lerner exposed as we head towards the new year.

I wrote last week about ongoing concerns around the management of the Marampa mine, a massive iron-ore deposit in East Sierra Leone. After Gerald Metals failed to restart production since taking ownership of the mine in 2016 through their ‘SL Mining’ subsidiary, fears that the company’s creditors would cut their losses began to circulate. Now, it seems the situation is far worse than first thought. Troubling lawsuits, fleeing investors and some deep-seated concerns around the corporate social responsibility obligations may leave Gerald Metals’ top team of Craig Dean, Brendan Lynch, Pat Crepeault and Gary Lerner exposed as we head towards the new year.

Last week the Government of Sierra Leone, which had been dissolved for the Christmas break since early December, rushed through the ratification of legislation that renewed Gerald Metals’ mining licence at Marampa [1]. After weeks of scrutiny and claims that Gerald Metals were days from having their licence revoked, the news will have come as a great relief to the company’s management team. However, this has proven to be something of a false dawn.

Since my last article for Mining Feeds, reports have now reached me that the Revolving Credit Facility, on which Gerald Metals relies to run its Marampa project, is undersubscribed.

In 2014, the last time the Revolving Credit Facility was renewed, appetite from investors was such that the facility had to be upsized by $50m to account for interest [2]. That confidence is now in short supply. Earlier this year, Gerald’s equity partners, Pengxin International Mining Co., jumped ship, which was worrying enough [3]. But now that several lead investors in the RCF, two Lloyds of London syndicates and a pair of Israeli and French banks, have completely pulled out of renewing their credit lines, serious questions must not only be asked over Gerald Metals’ continuing ability to guide Marampa through care and maintenance; they must be asked of their credit worthiness full stop.

So, what has gone so wrong for Gerald Metals, a veteran commodities house with 50 uneventful and profitable years of business, in their dealings in Sierra Leone?

For a start, investors know more than anyone that when it comes to a faltering business, the fish rots from the head. It is easy to point the finger at the disastrous iron ore price crash that shook the global industry in 2014; but whilst plenty of firms were rattled by the drop, very few are still yet to recover. Allegations of inexperience have been levelled at Craig Dean, the CEO of Gerald Metals, since he unexpectedly took the top job, joining the firm from Deloitte in 2013. Since then, it hasn’t been the easiest of tenures for Craig Dean: between fighting allegations of sexual harassment from his former General Counsel, Roxanne Khazarian [4], and being sued by Australian commodities giant, Cape Lambert Resources, for breach of contract [5], it’s hardly surprising the embattled CEO hasn’t kept his eye on the ball.

But in truth, the issues go far beyond management. Anger on the ground in Lunsar has grown since Gerald Metals has failed to make good on pledges to support local community projects around the Marampa site. Tensions were also raised last month when Ibrahim Alusine Kamara, an investigative journalist with the Sierra Express who had been routinely reporting on management issues at Marampa, ended up in hospital after a brutal assault.

With a Presidential election around the corner in Sierra Leone, foreign investors will be keeping a very close eye on things, paying particular attention to the current business environment. Sierra Leone relies on a vibrant mining sector both as its economic base and golden ticket to the global marketplace. So, the Bai Koroma administration must make sure that the sorts of issues we are seeing at Marampa are identified and addressed before investor confidence is damaged. After all, the fish rots from the head in government too.

By Raphael Thurber

Raphael Thurber is a respected resource writer and editor. A graduate of the College of William and Mary, Raphael is a longtime contributor to Yahoo Finance, with an interest in resource and investment journalism that spans over 10 years. As Editor of MiningFeeds, Raphael is responsible for assuring that the site remains a valuable knowledge resource for those in the mining sector.

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