After Diamonds, Iron Foments Sierra Leone Tensions

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"Disappointment over employment pledges are becoming a political hot potato."

In the civil war of the 1990s, rebels in Sierra Leone went into battle singing "Mr. President, where are our diamonds?"

Eight years after the end of hostilities that claimed 50,000 lives and rocked a fragile region, Sierra Leone faces new tensions over its resource riches. This time around, the controversy surrounds not gemstones but iron ore.

In a country where average income is $340 a year, emotions run high over a resource wealth which if managed properly could allow Sierra Leone to put its painful past behind it and enjoy some semblance of prosperity.

But local disappointment over employment pledges that have yet to come true and resentment over special tax treatment given to international mining firms are becoming a political hot potato for President Ernest Bai Koroma's government.

Police used teargas and live rounds last month to break up a protest by locals in the central Tonkolili district after a land dispute over the mining site of London-listed African Minerals turned nasty.

Security forces say they merely fired warning shots into the air to disperse the crowd. But several people were badly beaten and in the days that followed, the thatched-roofed village of Kemedugu was like a ghost town as its men fled.

Mindful of the impact that mining revenues could have on the country's finances, Sierra Leone last year drew up a new mining act in a bid to ensure they were used properly, but neither the London Mining nor African Minerals deals conform to its provisions or preceding tax legislation.

At the time the deals were struck Sierra Leone specified a corporate tax rate for mining companies of 37.5%.

Yet London Mining is initially paying six%, and is exempt from royalty payments when in a tax loss position. African Minerals is paying 25% tax.

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