Chinese firm loses battle for Kilembe mines

Chinese firm Tibet Hima has lost a battle to keep its 25-year mining lease for copper and cobalt deposits in Kilembe mines in Kasese, western Uganda.

This is the second Chinese company to lose lucrative deals in Uganda’s oil, gas and mineral sector, after Guangzhou DongSong Energy Group Co Ltd lost the oil refinery bid due to failure to meet bidding requirements.

Until September 2017, when the government terminated the concession, Tibet Hima held leases covering 1,550 square km that run up to the border with the DRC.

Kilembe mines has an estimated four million tonnes of copper deposits, and an estimated three million tonnes of cobalt.

Unlike Guangzhou, which has remained quiet so far, Tibet Hima took the matter to court.

Last month, Tibet Hima made a plea to the High Court’s commercial division seeking a temporary injunction stopping the government from interfering with the concession until the court makes a final judgment on the main case it had filed earlier challenging the cancellation.

Tibet’s lawyer Alfred Oryem said failure to grant the interim order against the government would render the main case insignificant. Tibet’s main argument is that besides acting arbitrarily by using the military to forcefully evict them, the firm still has rights over the business.

“If the court does not halt the termination, the applicant will suffer loss of the invested monies,” Mr Oryem argued.

Losses

Tibet Hima says it has already sunk $33 million into the venture. It could lose the money if the court does not restrain the government, whose actions it described as arbitrary and illegal.

However, Justice Elizabeth Alividza, while overruling the injunction, said Tibet Hima had acted late as the government was already in charge of the mines.

Documents confirmed that Tibet’s concession was duly terminated last September, but the company officials refused to sign the report.

Court documents reveal that termination notice was issued in June 2017. According to the concession agreement, such notice last for 60 days and upon expiration, the concession is automatically terminated. The 60 days expired on September 5, 2017.

“The chronology leaves no doubt in my mind that termination became effective on September 5, 2017. Kilembe Mines Ltd forcefully evicted the applicant and took over the mines on February 14, 2018,” Justice Alividza said.

She advised Tibet-Hima to seek alternative remedies.

Concession

In September 2013, the government awarded the concession to Tibet Hima, a subsidiary of Tibet Automobile of China, to rehabilitate and run Kilembe copper mines in Kasese for 25 years.

The concession also obliged the company to increase power generation at River Mubuku from 5MW to 12 MW. The company was to invest $175 million over the concession period.

Tibet Hima beat four other companies to the deal. They are Ginko Energy Investment Company (China), Sino-Steel (China), Konkoba Copper Mines PLC (Zambia) and Shree Minerals (Australia).

Although Tibet was still in court, the government is already searching for another investor because of alleged breaches of the concession agreement.
The government cites several breaches including failure to pay to $1million concession fees.

Taxes

In addition, Tibet was to pay royalties on minerals extracted and taxes and signature bonus. It was in the concession agreement that the company would equally, process the ore to 99.9 per cent pure copper for export. It was envisaged that a copper smelting plant would be up and running by 2015.

A monitoring report by officials from the ministry of energy revealed that occupational hazards and safety provisions were not adhered to as workers were found without protective gear, and the underground ventilation not working properly.

It also emerged that the company did not have the required technical capability.