Victor Boyarkin, the former lieutenant-colonel of Russian military intelligence and special operations chief for United Company Rusal, returned to the company on Monday after an absence of fifteen months. In Conakry, the capital of Guinea, his arrival is anticipated shortly for a fresh attempt by Oleg Deripaska, Rusal’s chief executive, to relieve new pressure on Rusal to reopen the Friguia (Fria) alumina refinery and bauxite mine, and spend several hundred million dollars committed earlier to investment in Guinea.
The Guinean President, Alpha Conde (image, right foreground), has started to prepare his presidential election campaign for the poll, which is due in less than a year’s time. In Friguia, where Rusal is the principal source of employment, the alumina refinery has been closed since 2012, and according to local sources, the city is “dead. People are starving, and only a heavy military presence can keep things quiet. Conde has nothing to show for his presidency, and unless he can persuade Rusal to reopen the refinery, he must persuade the Russians to make a large compensation to help the city.”
The Guinean Mining Minister, Kerfalla Yansane, has told sources in Conakry, the Guinean capital, the production complex will be restarted. Officially, Rusal says on its website that the refinery, with design capacity to produce 618,000 tonnes of alumina a year, “plans to boost the alumina output to 800 thousand tonnes per annum by the end of 2013.” That promise would require an expansion of the Friguia bauxite mine above its 2.1 million tonne annual production capacity. In fact, in April 2012 Rusal stopped production at both the refinery and the mine, claiming “Friguia stopped producing alumina in April 2012 as a result of a strike held by court to be illegal.”
In Rusal’s annual report for 2013, auditors calculated an impairment charge for Friguia of $167 million. Rusal reported a loss of $325 million in its March quarter report, and has been cutting aluminium production at its Russian plants, so there is no foreseeable need for additional supplies of alumina.
Since 2009 the Guinean government has been claiming that Rusal underpaid for the privatization purchase of the Friguia assets three years before; and then violated its production and revenue undertakings. The government took local court action to nullify the original privatization; Rusal overturned the judgement in the higher Guinean courts, while challenging the Guinean government’s compensation claims in a Paris arbitration proceeding.
A report by Alex Stewart International (ASI), commissioned for the Guinean government in 2010, calculated that the revenue losses to the government between 2006 and 2009 totalled $142.4 million. According to the ASI report, “based on information provided by the Government of the Republic of Guinea, it is the opinion of Alex Stewart International LLC that the Government has grounds to claim damages from US$960 million… to possibly more than US$1 billion… from RUSSKIJ ALUMINIJ LLC for the illegal possession and exploitation of the FRIGUIA complex under the illegal holding of the FRIGUIA company.”
Rusal has disputed the calculations. It acknowledges its income tax rate in Guinea is zero. This past March Rusal sources said that since the production halt at Friguia, equipment has been stolen or damaged. Restarting the plant would take up to eighteen months, the source estimated.
cknowledged that Monday (June 16), was his first on the new job. Officially, he is an assistant to Rusal’s deputy chief executive, Vladislav Soloviev (right).
Boyarkin left Rusal in March of 2013. He had been first introduced to the Guinea negotiations by Deripaska in Paris in October 2009. Over the protests of the Guinean opposition, Rusal has managed to continue mining and exporting bauxite from its Kindia mine; and to secure its concession for the undeveloped Dian-Dian deposit without a significant investment to build a new mine or alumina refinery. For the new terms of the Dian-Dian concession, click. In Rusal’s report for 2013 there is no reference to spending on the proposed new bauxite mine at Dian-Dian, which is due to open in 2015. For the record of Boyarkin’s Guinean negotiations, read this.
According to a Guinean source, speaking this week, “at most Rusal wants a small bauxite mine at Dian-Dian, but never the refinery that was agreed to when they were awarded the concession. There are enough reserves at Dian-Dian for three refineries. Rusal won’t open even one.”
Alpha Conde is liable to change his mind,” says one of his former advisors. “Rusal has been on the backburner for Conde and the government while they concentrated on the Simandou iron-ore concessions of Rio Tinto, Vale and Beny Steinmetz. That has produced good PR for the government, but not much will come of it. If Boyarkin has been brought back into negotiations for Rusal, it’s because there is a new crisis. Or because Conde has created one, and revived old demands for Rusal to spend real money in the country.”
Boyarkin was a military intelligence officer with diplomatic accreditation in South America in the 1990s. When he left Rusal in 2013, he moved to the arms export agency Rosvooruzheniye, which is currently involved in negotiating delicate combinations of arms sales and mine concessions with several African governments – Angola, the Republic of Congo (Brazzaville), Uganda, and Zimbabwe. For more on the Congolese arms deal, read this. For the Zimbabwe story, click. In March eyewitnesses reported seeing Russian Mi-24 attack helicopters in Conakry. It is unclear whether these are newly supplied, or are from the Guinean Air Force inventory and have been recently refurbished for operations.
Asked to confirm its intention for Friguia, Rusal said it is preparing a response. A Moscow head hunter is currently advertising for a lawyer to work for Rusal in Guinea on a two-year contract.