Did Liberia Award Its Gold Mine Field To A Bankrupt Company?

By J. Yanqui Zaza

Hummingbird Resources

Let’s take a break away from the money laundering debate or the source of the $536M loan and focus on the concessionary agreement awarded to “Hummingbird…which currently holds 14 exploration licenses for all minerals, covering over 7,000 square kilometers located within a significant proportion of eastern Liberia…” The Hummingbird Resources concession was one of those proposed agreements which were submitted for approval by former President Sirleaf but was not approved before she left office. (Daily Observer). Further according to reports, the company is expected to mine about 14 trillion ounces of gold over the 20-yr lifespan of the project. (Daily Observer). The World Bank affiliate, International Finance Corporation (IFC), is said to have invested US$8m in the project.

Just like his predecessors, President Weah is faced with the tasks to make a decision between of what Professor, Dr. Nicola Fuchs-Schundeln called “Self-Interest vs. the Common Good.” For instance, did the government award the concessionary agreement to Hummingbird Resources because of Special Interest such as the World Bank, Liberia’s lender, and economic adviser? Or, will the government protect the interest of Monrovia-Landlords against the interest of tenants, will the government differentiate some desired bonus payments from bribery; will the government prevent concessionary companies from polluting communities or exploiting Liberia natural resources?

Let us review the 9-yr consolidated financial statements, including Hummingbird, Liberia, if any.

AUDITED CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING LIBERIA’S HUMMINBIRG           

ITEM	2008	2009	2010	2011	2012	2013	2014	2015	2016
(LOSS)	<526K>	<312K>	<1M>	<2M>	<3M>	<3>	<3M>	<4M>	<8M>
ASSETS	3M	4M	15M	52M	51M	62M	97M	109M	139M
CASH	404K	719K	7M	32M	15M	13M	9M	9M	53M

SOURCE: 2008-2016 AUDITED FINANCIAL STATEMENTS. The sign (<>) represents negative amounts, the letter M represents millions of dollars and k represents thousands of dollars.

The combined income statement of each of the nine years did not show any revenue but reported losses. So, why did our government award lucrative gold minefield to a business that has not generated any revenue from 2008 to 2015, including the year it was awarded the concessionary agreement? More so, it has no information or history on labor issue since it had limited Liberian employees, if any.  Nor does it have a history of honoring environmental laws or history of paying taxes to a government on time. Did our government receive and review Hummingbird Resources’ revenue projection and cash flow? If not, how did our government determine the economic viability of Hummingbird Resources (Liberia)?
The previous government, which was anti-poor, awarded sweetheart deals, and also instituted anti-poor economic arrangement, thereby, did not generate adequate resources to finance programs. In fact, Mr. George Will, a conservative writer of the New York Times, argued that big business wanting to reduce the influence of government bureaucrats usually reduce government revenue, consequently, starving it from funding programs. Well, guess what, if Liberia were to efficiently generate adequate revenue and invest in agriculture, healthcare, housing, education, etc., it would not have become cash-strapped.  

On the other side of the coin, why would a slave-plantation-type industry such as the Liberian Firestone Rubber Plantation invest in education since it depends on unskilled workforce to make more profits? In fact, American Medical Association, to increase its profits, lobbies Congress to limit the supply of physicians and competition from non-physicians, according to a book called “Free to Choose,” authored by Mr. Milton Freidman, Nobel Memorial Prize-winning economist.  

Globally, big business usually shifts money away from poor citizens to its rich client as Ms. Saskia Sassen explained in her book called “Expulsion-Brutality and Complexity.” During the 2008 financial crisis Greeks taxpayers bailed out the banking industry and became $3, for example, 300 billion debt country, primarily because fraudulent financial assets called derivatives, Ms.  Sassen added. How did Greece become bankrupt? She explained that Goldman Sachs deceptively persuaded Greece to invest into portfolios, portfolios that Goldman Sachs knew were worthless, obligating Greece to reimburse investors for the worthless.

In the case of Hummingbird Resources, its management can use accounting principles and legal rules to shift money away from Liberia, for example, by increasing Hummingbird Resources-Liberia’s expenses (for instance, royalty expense and management fees). In another example, it could reduce Hummingbird Resources-Liberia’s taxable income by using some portion of the accumulated net operating loss of $24M (i.e., the combined losses from 2008-2016) and some portion of the $6M stock options (future salary) offered to its chief executives.

It is okay to deduct royalty fees, for the parent’s goodwill or patent. However, management should use industry standard royalty rate. Additionally, management fees paid to a foreign parent for work performed on behalf of a domestic subsidiary can be considered as a regular business activity. Again, management should be discouraged from overestimating such expenses.

Did our government learn any lesson from the 66 fraudulent concessionary agreements that former President Ellen Johnson Sirleaf government signed and awarded to profiteers? Did the World Bank, Liberia’s economic adviser, recuse itself, if it were involved in negotiating the Hummingbird Resources concessionary agreement since its 100% owned subsidiary (International Finance Company) is one of the owners? Was Hummingbird Resources incorporated for the sole purpose of mining gold in Liberia since a significant portion of its assets was allocated to Intangible Exploration and Evaluation assets?

Finally, awarding gold minefield covering 7,000 square kilometers to a company that has zero revenue, and has accumulated over $24M net operating loss from 2008 through 2016, is not a good beginning for the Pro-Poor Government.

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