Chapter 297: The Gap Between Spot Price and Contract Price
Conte had once again won Guinea's presidential election without any surprises, securing 93% of the vote and maintaining his grip on power. The international community had various opinions on this result, with opposition parties openly criticizing Conte, claiming that he would never permit a fair election. There were also rumors circulating about his deteriorating health, suggesting that he might not be able to complete his current term.
In Guinea, each presidential term lasted eight years. Conte's current term was scheduled to conclude at the end of 2010. The rumors of his poor health weren't baseless. Over recent years, he had frequently traveled to France for medical treatment and rest, returning to Conakry just before the election.
At this moment, Conte lay quietly in a private room deep within his presidential residence, eyes closed as though resting. His attendants stood silently outside, making no sound, while heavily armed guards stood watch at the door.
Larry, however, showed no hesitation as he entered directly, ignoring protocol. He saw his father resting and paced around impatiently, unwilling to wait for Conte to awaken naturally.
"Father, I have something important to discuss with you," Larry said bluntly.
Conte slowly opened his heavy eyelids and glanced at his son. Despite his advanced age and declining health, Conte still possessed an imposing presence that made him appear as a fierce, aging lion. Only Larry dared disturb him during his rest.
"What important matter could you possibly have?" Conte loved this son dearly, but he was not satisfied with Larry's way of handling things. The young man was too focused on money and leisure.
"I want you to reject Lituo's application to extend their exploration license!" Larry went straight to the point.
Upon hearing this, Conte slowly stood up and stretched his weakened body. Even now, he still stood over 1.8 meters tall and had a robust physique. In public, his appearance rarely betrayed any sign of illness.
"When did you start caring about such things?" Conte had always hoped Larry would take an interest in governance. Instead, Larry had consistently shown little interest in politics, preferring instead to dabble in business. Conte was surprised by Larry's sudden involvement in matters related to mining rights.
Mineral resources were Guinea's primary economic lifeline. Taxes from bauxite mining constituted the majority of national revenues.
"I've always been interested!" Larry responded urgently, focused entirely on his own project. "You haven't approved Lituo's application for extending their exploration license yet, have you?"
"You're referring to Newfield Company's exploration rights over the 1,400 square kilometers in Nzérékoré, correct?" Conte was fully informed about Guinea's mineral resources, aware of their potential for wealth creation and thus closely monitoring them.
"Yes, Newfield is Lituo's subsidiary," Larry confirmed.
"This exploration permit has already been extended once. Ever since Newfield obtained the rights, they haven't invested any substantial capital or performed actual exploration work," Conte said clearly, demonstrating that his mind was still sharp. "We have already informed Lituo they must immediately provide us with a detailed exploration plan and commit substantial investment. Only then will we grant them another extension."
"So, it hasn't been approved yet?" Larry asked hopefully, flashing a wide, eager grin.
"Lituo is currently preparing a detailed exploration plan for our review," Conte confirmed with a nod.
"Can't we take the exploration rights back?"
"Technically, yes. Their rights have expired, and since they haven't complied with investment obligations, they've indeed breached the contract terms," Conte responded thoughtfully, looking curiously at Larry. "But why would we want to revoke their rights?"
Conte understood that attracting international mining companies to invest deep within Guinea's southeastern mountain region was difficult. Lituo had shown willingness, and they were grateful. Why would he push them out and revoke their license now?
"Give those exploration rights to this Chinese company instead!" Larry quickly handed Conte a detailed folder about Li Tang's Prosperity Holdings, containing comprehensive documentation of their mining projects, including the Talego copper-gold mine, the Pebble Project, and Chichester iron ore mine.
"A Chinese company?" Conte was initially skeptical. He quickly flipped through the documents, his expression gradually turning from suspicion to astonishment as he read about their impressive mining ventures.
"Well?" Larry urged anxiously.
"I've heard of this company," Conte admitted carefully. As a political leader, he regularly monitored global mining developments, although he hadn't expected Larry's investor to be such a significant international player. "Let me verify their identity with the Chinese embassy first."
Conte promptly arranged for his assistant to call the Chinese consulate, quickly confirming the identity was genuine.
"Why did they approach you specifically?" Conte asked cautiously.
"Don't worry about why they came to me. Just give them the exploration rights!" Larry insisted impatiently.
"Compared to Lituo, this company lacks the international prestige and influence," Conte remarked thoughtfully.
"But this company promised immediate investment of $50 million to start exploration, unlike Lituo, who has been dragging this out for years!" Larry emphasized.
"Fifty million U.S. dollars?" Conte repeated slowly.
"Exactly!" Larry confirmed eagerly.
Conte had dealt with even larger investment projects before. Many cooperation agreements with French and American companies had involved hundreds of millions of dollars. Still, a pure exploration investment of fifty million dollars was rare and appealing.
"This decision ultimately belongs to Minister Praka," Conte reminded Larry about procedural responsibilities.
"You just need to tell Minister Praka!" Larry pressed urgently. Because Praka belonged to a different ethnic group, Larry knew that without Conte's support, Praka wouldn't listen to him at all.
"This issue is very sensitive. I must discuss it with Praka first," Conte refrained from making an immediate decision.
However, shortly after Larry left disappointed, Conte's secretary delivered the news: the exploration rights would be split in two. The southern half would remain with Newfield, while the northern half would be given to the Chinese company.
After receiving this confirmation, Li Tang and Zheng Jinhui visited Minister Praka again and formally signed the exploration investment agreement. At the same time, Li Tang established the Simandou Iron Ore Company in Guinea, successfully securing exploration rights to Simandou Blocks 1 and 2.
Li Tang wasn't a man who ignored favors, especially given that he intended to operate in Guinea long-term. He didn't forget Larry's role. However, he quickly realized Larry was incompetent. Entrusting a $25-million drilling project entirely to him would have been reckless.
Thus, after some negotiation, Simandou Iron Ore Company contracted drilling services to a French-owned drilling lease company. Larry received neither company shares nor direct cash rewards. Instead, the French company's owner transferred some valuable properties worth over two million dollars in France directly to Larry, cleverly removing Larry's financial trail from the local operation.
Meanwhile, Newfield's application for extension of exploration rights was approved, but their request to convert exploration rights directly into mining rights faced complications. Although granted an extension, the exploration area was halved.
Naturally, Lituo paid close attention to the rights issue. They alone knew that the iron ore deposits at Simandou surpassed even their prized deposits in Australia's Pilbara region. Ore grades there regularly exceeded 66%, significantly higher than the standard 62% used for international iron ore pricing benchmarks. Ore of such high quality needed little processing, potentially offering massive profits upon extraction.
Lituo executive Veduka urgently traveled from Perth to Conakry to clarify the situation with Minister Praka. Once he learned the truth, he confronted Li Tang angrily at the hotel, barely containing his fury.
"Simandou iron ore belongs to us! How dare you steal half our concession!" Veduka shouted, seething with resentment. They had already suffered defeat once when competing indirectly with Li Tang over the Talego copper-gold mine in Mongolia, a loss still fresh in their minds.
Li Tang calmly smiled, unaffected by the accusations. "Your exploration rights expired. You can verify this with the Ministry of Mines and Geology. They'll confirm that since you failed to invest in the required exploration activities, your rights were partially revoked. This action fully complies with local regulations."
"You sabotaged us!" Veduka accused bitterly.
"That's not my fault," Li Tang replied evenly, offering no justification. "Guinea didn't revoke your entire concession—they left you the southern half. If you're genuinely grateful, quickly invest and start real exploration. That would be the best show of respect for Guinea."
Realizing further argument was useless, Veduka left, bitterly threatening legal action. "You broke the law! We'll take you to the international court!"
"Suit yourself," Li Tang shrugged indifferently.
He recalled the historical legal battles surrounding Simandou, involving Lituo, Salty Sea Valley Group, China Aluminum Corporation, and even an Israeli diamond magnate. Initially, Lituo had secured a 25-year mining concession despite minimal exploration investment. When Guinea later reclaimed part of this concession due to unmet obligations, lengthy international lawsuits erupted.
However, circumstances were different this time: Li Tang had acted decisively before Lituo could secure mining rights, seizing the brief window of opportunity. Now his primary task wasn't predicting future legal entanglements but inspecting the actual terrain and formulating a realistic exploration strategy.
The journey from Conakry to Guinea's southeastern interior was over 600 kilometers of rugged dirt roads, violently shaking their bones during the ride. Li Tang traveled with his trusted colleagues, Lei Pingjin included, along with officials from the Ministry of Mines and Geology and Fazzini, the French drilling contractor.
Fazzini had extensive experience in Guinea's mining sector, with businesses in logistics, transportation, and drilling services. To ensure security, Li Tang had also hired a professional security team.
They first arrived at Guinea's southeastern border, finally setting eyes on Mount Nimba, Guinea's highest peak.
Mount Nimba stood tall and verdant, a lush mountain rising from the tropical savannah, a sea of greenery stretching as far as the eye could see.
Hidden beneath this lush carpet of grasses lay an iron ore deposit of global significance—the Nimba Iron Ore Deposit.
This treasure trove held more than two billion tons of iron ore, with grades peaking at an astonishing 78%!
The ore deposit itself was split by the border between Guinea and Liberia.
Back in the 1980s and 1990s, extraction at Nimba had come tantalizingly close to fruition. Liberia had a railway running east-west through its territory, perfectly suited for transporting iron ore from Mount Nimba to the western coast's ports.
Tragically, just when development agreements had nearly reached implementation, Liberia was plunged into civil war. The critical railway was severely damaged, leaving this world-class iron ore deposit suspended in limbo.
"Hematite!" An official from Guinea's Ministry of Mines and Geology pointed out, picking up a reddish-brown rock from an exposed section of the ore body.
These stones, rich in high-grade iron, were distinctly different from ordinary rocks, appearing almost like lumps of rusted iron.
Hematite and limonite were primarily iron oxide, though limonite contained additional water content. Upon closer inspection, it was clear that the iron ore here differed notably from the ore found in the Pilbara region of southern Australia.
"Take careful note of the geology here," Li Tang instructed his team. He picked up and carefully examined rocks along the way, analyzing geological strata. "The better you understand the geology at Nimba, the easier it will be to carry out exploration work at Simandou."
"Will our upcoming project at Simandou have similar geology to this?" Lei Pingjin meticulously recorded notes, asking Li Tang questions along the way.
They'd already obtained geological data on Nimba from the Ministry of Mines and Geology, but the northern region, Simandou, remained largely unexplored, and geological data was scarce.
However, the geological characteristics, particularly the origins and features of the iron deposits, were essentially identical. Understanding the geological conditions at Nimba was therefore crucial to conducting effective exploration at Simandou.
"Yes, they're essentially identical and not far apart," Li Tang confirmed confidently. "Make sure you're clear on the lithology of the ore layers, as well as the surrounding rock types. This will be critical."
...
Veduka returned hastily to Perth.
This issue had spiraled far beyond his expectations, leaving him deeply frustrated. Facing Alba, his anger boiled over again: "It has to be Li Tang! That troublesome bastard is definitely behind all this! He stole half of our exploration rights!"
Alba listened intently as Veduka recounted everything, and his own anger quickly flared up.
For someone to openly snatch away their exploration rights from under Lituo's nose was sheer provocation.
"Are you certain it was the Li Tang we know?" Alba asked, seeking confirmation.
"Yes! I personally met him in Conakry!" Veduka assured him. "Simandou Blocks 1 and 2 are now registered under a newly established company—Simandou Iron Ore Company. Just recently, this new company received a 50-million-dollar transfer from a Chinese bank!"
"What's his intention?" Alba asked, clearly annoyed.
"They've already started exploration work at Simandou!" Veduka knew Alba would share his outrage. This was a direct affront—Guinea was practically siding with Li Tang against them.
They had hesitated to invest in exploration, yet Li Tang had boldly done exactly the opposite, immediately beginning exploration. Was he intentionally provoking them?
Bang!
Alba slammed his fist on the table in frustration. "Li Tang has gone too far! What did the officials from Guinea's Ministry of Mines and Geology say about this?"
"Minister Praka said halving our exploration area was Conte's decision."
"Conte?" Alba was confused. "Why?"
"When Guinea saw Li Tang's immediate transfer of 50 million dollars, their stance changed. They now firmly support Li Tang," Veduka explained. "Although Praka agreed to extend our exploration rights by two years, they require us to start exploration within that timeframe."
Alba fell into thought, eventually looking up sharply at Veduka. "Why is Li Tang so determined to enter Guinea, specifically targeting Simandou? Only our top executives and a few key exploration department personnel know about Simandou's high-grade iron ore potential. Who leaked this information to Li Tang?"
Veduka immediately stiffened in shock. Such information was a highly sensitive trade secret. Lituo's exploration division was managed directly by the corporate headquarters precisely because of the strategic importance of these assets.
If anyone had leaked details of Simandou, it would be a catastrophic breach.
"I'm the only one in our department who has ever interacted with Li Tang, and I swear I never mentioned anything about Simandou's geology!" Veduka anxiously defended himself.
Alba scrutinized Veduka's face carefully, finding no reason to doubt him. Deep down, he trusted Veduka's loyalty.
"This situation is unacceptable. We must seek justice!" Alba didn't dwell further on the possibility of internal leaks, trusting that no one would make such a foolish mistake. "I'll continue negotiating with Guinea. If it comes to it, we'll have no choice but to seek international arbitration."
"Li Tang..." Alba seethed. "This Chinese guy is too arrogant!"
Veduka remained frustrated but cautiously suggested, "Lianying Mining signed an iron ore transportation agreement with our group. What if we refuse to honor that contract?"
After a brief pause, Alba shook his head. "That would violate the agreement and cost us heavily."
"So, we're just going to let him bully us without any retaliation?" Veduka fumed indignantly.
"We'll show him how foolish it is to challenge Lituo." Alba snorted confidently, having formulated another idea. "I'll contact Hu in Haigang immediately. He's the best person to handle this."
Hu referred to Hu Shitan, Lituo's highly effective regional manager based in China.
In his Haigang office, Hu Shitan sat across from a delegation from Hualing Steel in Sanxiang Province.
"President Zhu, your visit is so sudden! I didn't even have time to greet you properly," Hu warmly greeted Zhu Youxin, general manager of Hualing Steel.
Hualing Steel was Sanxiang Province's largest steel enterprise, importing nearly ten million tons of iron ore annually from Lituo. They had a longstanding, close partnership.
Accompanying Zhu was procurement director Ji Lianghan, who handed Hu Shitan a shipping manifest, complaining, "One million tons of iron ore scheduled for last month have been severely delayed. Delays sometimes happen due to maritime conditions, but this time, last month's shipment wasn't fully delivered, and this month's hasn't even arrived yet!"
He pointed urgently at the calendar, "The month's almost over. Our factories depend on this iron ore to maintain operations. Your delays are seriously disrupting our production!"
"Director Ji, we're here to resolve issues, not argue. There's no need to raise your voice," Zhu reminded him calmly.
Hu Shitan examined the manifest with apparent confusion. "Did this really happen? I'll need to check with our trading division. Iron ore shipments are supposed to be punctual. Such prolonged delays are unusual."
After checking documents briefly, Hu straightened up apologetically. "President Zhu, Director Ji, we've known each other for many years. You know my character. Give me some time, and I'll provide you a satisfactory answer. Just give me a bit of time to investigate thoroughly."
He clasped his hands together respectfully, even slightly bowing.
Despite being Lituo's regional head, Hu consistently adopted this polite approach, earning him many favorable impressions among business partners.
President Zhu had little choice but to accept Hu's assurances. "Our factories urgently need this iron ore. We'll trust you to handle this quickly."
"Absolutely!" Hu nodded earnestly. "I take full responsibility for any disruption. Once I find out what happened, I'll personally apologize."
"No apology necessary—just resolve it soon," Zhu replied firmly, unwilling to plead with Hu.
After all, their iron ore contract with Lituo was clearly stipulated, covering pricing, delivery methods, and schedules.
"I'll get back to you within three days!" Hu escorted them to their car.
Returning to their hotel, Zhu remained uneasy despite Hu's promises. If the iron ore didn't arrive soon, the plant faced shutdowns and massive financial losses.
He sent Ji Lianghan and others to investigate the situation directly at Haigang's docks and warehouses.
Ji quickly returned, reporting, "Lituo's ships keep docking at Haigang regularly."
"So, no production or transportation issues?" Zhu had assumed external factors were involved.
"Look at this, President Zhu." Ji handed over another shipping receipt.
"What is this?" Zhu asked, confused.
"This cargo of 200,000 tons should have entered inland via Xiangjiang, delivered directly to our Sanxiang docks."
"This was our shipment!" Zhu realized in shock. "Why is it here in Haigang?"
"I don't know why it's here, but I learned these 200,000 tons were unloaded into Haigang's warehouse and immediately sold as spot cargo."
"What?" Zhu gasped aloud.
"When I arrived, the entire batch had already been sold at spot prices—$40 per ton FOB plus additional costs. That's significantly higher than our contract price."
Zhu stared silently. Their contract price was $32 per ton FOB. Since April, spot prices had surged rapidly, reaching $40, aligning with next year's long-term price agreements negotiated by the steel industry.
This gap between spot and contract prices was clear, lucrative, and obvious.
"Is this order coming directly from Lituo headquarters or is Hu Shitan behind this?" Zhu muttered bitterly.
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