The_Open_Door_deel1

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Note that until i960 L.M.C.'s annual income from the sales of
the Bomi Hills ore exceeded the total revenue of the Republic
of Liberia.
Mote;
(1) three months only
S ource:
- Concession Secretariat, Ministry of Finance, Monrovia.
agreement. Through this collateral agreement L.M.C, agreed to pay
a corporate income tax as soon as it would have repaid the | 4
million loan from the Export-Import Bank and would have completed
the return of the invested capital, about t 4.6 million, or from
April 1, 1957, whichever date was earlier. Furthermore, the
company would pay an extra royalty of $ 1.50 on each ton of ore
shipped as from April 1, 1952 until it would start paying income
taxes (30). As the profitibility of the mining operations
exceeded all expectations (partly as a result of favourable iron
ore prices on the world market) the company's aggregate net
profits, i.e. after paying royalties, amounted to $ 11.7 million
within three years of commencement of the mining operations, thus
exceeding the initial investment capital of about $ 10 million
(the sum of $ 4.6 million equity investments and about I 5
million loan capital). Consequently, in 1955, L.M.C. started
paying income taxes as had been agreed in the collateral
agreement. According to this agreement the company would pay
income taxes at a rate of 25? of net profits during the first
five years, followed by a ten-year period with an income tax
liability of 35?, and 50? income tax during the remaining years
of the concession. Thus, the Republic of Liberia started to share
in the profits of the company, though in a very disproportionate
manner, after the Exim-bank had been paid $ 4,4 million
(principal plus interest). The L.M.C. shareholders on the other
hand received in 1954 and 1955 an amount of $ 4,6 million by way
of redemption of preference shares which had been given to them
by the company as a credit against the Bomi Hills ore body.
The Directors had ascribed to these shares a notional value of
$ 12 million in 1952 (the balance - $ 2.8 million - was
subsequently treated as a capital reserve). The 1954 payment
represented, 'in effect, the repayment of the shareholders'
initial subscriptions (31). In the period 1951 through 1962 cash
distributions to L.M.C.'s shareholders amounted to $ 69.6 million
(excluding the amount of $ 9.2 million paid in 1954 and 1955),
The Liberian Government received in this period $-36.8 million in
royalties and income taxes from the company. Due to the
discrepancy between the principle of "equal sharing" (of profits
between foreign investors and the Republic) and its practical
outcome in the case of L.M.C, combined with the desire to bring
L.M.C. into line with the two other iron ore mining companies
- LAMCO and DELIMCO - which had agreed that the Liberian
Government should receive 50? of their net profits, and