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negotiations which were held between B.M.C. and the Government,
mainly represented by J. Milton Weeks and Cyril Bright,
Secretaries of the Departments of the Treasury and Planning and
Economic Affairs respectively. These negotiations focussed on a
revision of the 1964 pricing formula. In 1964 B.M.C had agreed
that for a period of ten years the sales price of its
concentrated ore would be the same average price the German steel
works had paid L.M.C. during the past five years. As prices
dropped substantially in the years following this agreement the
owners of the mining company wanted to revise this pricing
agreement according to which they were paying more for the
concentrates produced by their own company in Liberia than it
would cost to buy them on the international market.
An attempt to have this arrangement changed, already made in
1966, failed, although a compromise was reached in that any
production in excess of 3 million tons could be sold at the
prevailing world market prices. (This largely explains Bong's
expansion activities of 1967 - see Table 16 the "Summarized
History of B.M.C"). The second effort of the Germans was more
successful In September 1968 it was agreed that Bong would be
allowed to abandon the 1964 pricing arrangement in exchange for
(I) a withholding tax (on interest payments) provided, however,
that a tax credit be obtained in the country of the investor(s)
(which was realized 1971 and 1974 with respect to the German
and Italian investors respectively, see above), (II) a vague
promise to undertake as soon as would be possible an appropriate
modification of the debt-equity ratio, and (III) an expansion
programme of approximately $ 44 million (98).
Though the Treasury did benefit from these withholding taxes, the
majority of B.M.C.'s loans were exempted from this tax (i.e. the
interest payments made on loans from the Kreditanstalt fur
Wiederaufbau which loans formed the major portion of B.M.C.'s
indebtedness in combination with the exemption granted to
Finsider). This, together with the loopholes included in the
provisions of the 1974 Supplemental Agreement with respect to
the maximum debt-equity ratio of 3 : 1, makes the overall result
of the 1968 revision of the pricing formula appear to have been
to the advantage of B.M.C. and to the disadvantage of the
Liberian Treasury.
The 1974 Supplemental Agreement
In April 1973 negotiations started for a review of the 1958
Concession Agreement. A supplemental Agreement was concluded on
December 16, 1974. The signing coincided with the merger of
B.M.C. and DELIMCO, a merger which was effective retro-actively
to January 1, 1974, and which made B.M.C. the Concessionaire.
The ownership structure was not fundamentally changed, the
Government maintaining its 50? interest through the ownership of
the Class A Common Stock of B.M.C. whereas an equivalent amount
of Class B Common Stock is being held by the private investors,
the owners of the German, Italian and Dutch steel works.