April 24, 2024
The Sierra Rutile company, the sole rutile producer in Sierra Leone, has shut down its Area 1 production site following a dispute over tax obligations with the government. Sierra Rutile accounts for roughly 20% of all exports (5% of GDP), as shown in the chart below. The dispute, known as the “third agreement”, concerns the fiscal regime applying to the remaining production from Area 1 operations, which is Sierra Rutile’s main mining and mineral processing site. In January 2024, despite the company's vital role in the mining industry, crucial for the country, the government decided to exclude Sierra Rutile from the fiscal regime of the “third agreement”. Instead, they reverted to the fiscal regime of 2001. This sudden change would impose substantial tax obligations on the company for the 2023 financial year, causing major financial and operational sustainability issues, as stated by Sierra Rutile.
While the sides were engaged in negotiations, there has been little to no progress in resolving the issue. Therefore, in mid-March 2024, Sierra Rutile published an official statement announcing the suspension of all mining and processing activities at Area 1, resulting in approximately 25% of staff receiving redundancy notices. According to Sierra Rutile, they resorted to these drastic measures due to the government's reluctance to reevaluate the tax requirements on the company.
While the Area 1 site is on hold, attention is shifting towards the new Sembehun project, which holds large rutile deposits and has been given a green flag by the country’s Environmental Protection Agency. The total cost of the Sembehun project amounts to a staggering USD 337 million and provides rutile deposits to be mined for over 13 years. However, the success of the project to a great extent relies on the negotiations between the two parties. As of now, the most likely scenario is that the Area 1 production site will remain closed, and all focus will shift towards the new mining site, unless the government of Sierra Leone reintroduces the previous tax rates for Sierra Rutile.
