3 July 2017

Uganda: Kilembe: How the Once Vibrant Copper Mines Ended Up in Ruins

Photo: Monitor
In ruins. A section of the dilapidated Kilembe Mines in Kasese District (file photo)

In Uganda, some things no longer surprise and if they do, it is usually the time taken to unfold that come out as the surprise. A Daily Monitor expose published on Monday that President Museveni ordered for the termination of the $175m (about Shs620 billion) concession awarded to a Chinese company to revive Kilembe Mines amidst claims of top officials having pocketed bribes, is one of those things. However, to anyone who had been to the mines since the deal was awarded in 2013, it was just a matter of time.

On November 2 last year, Tibet Hima Mining Company (THMCOL), the Chinese company that was granted the concession running until 2038, wrote to the ministries of Energy and Finance requesting for permission to export ‘bulk copper’ concentrates (crashed ore) for “metallurgical testing” which the company argued would then inform establishment of a smelter plant and machinery at the revamped Kilembe Copper Mines in Kasese District.

After several back and forth exchanges, THMCOL officials were invited and a meeting was convened at the Directorate of Geological Survey & Mines (DGSM), the unit in the ministry of Energy in charge of minerals based in Entebbe, where it was agreed that before the company exports copper, seven conditions had to be fulfilled.

Some of the conditions, it was agreed, that the company provides a full feasibility study for mining, providing the total ore reserves at Kilembe, estimated span of the ore and amount of the ore required to produce the 30,000 tonnes of copper concentrates; breakdown of the 30,000 tonnes figure for the concentrates in the testing facility, and the smelter project implementation plan, including preliminary economic assessment for the smelting plant.

Other conditions included the company providing a certified Memorandum of Understanding between THMCOL and the smelting plan where the bulk copper samples were being taken and that the company should provide valid evidence of investment partner commitments, project finance and other assurances.
The meeting ended on a good note, both sides offered handshakes, and went separate ways.
After six months, about two weeks ago on June 21, Mr Edward Katto, the DGSM’s director, wrote to THMCOL’s chairperson Li Wei Guo, indicating that “to-date, you have not provided the requested data.
“This is again to remind you to provide the same so as to enable the ministry move the process forward,” Mr Katto’s letter reads in part.

What followed, a week later, was a meeting at State House where President Museveni ordered for the cancellation of THMCOL’s concession, which was awarded just four years ago to extract at least five million tonnes of copper, on grounds that not only did the company lack the requisite capacity but also several top officials in the Attorney General’s Chambers and ministries of Finance and Energy, including a former minister who pocketed $1m (Shs3b), had taken bribes to influence the deal.
This newspaper reported on Monday that during the meeting, it was further revealed that the concession was awarded to a “motorcycle assembling firm,” something the former Chinese ambassador to Uganda, Mr Zhao Yali, warned about but was ignored.

The THMCOL contract
The Tibet Hima led consortium or THMCOL, was awarded the concession in September 2013, the Finance ministry said at the time after fending off competition from other companies, China’s Gingko Energy Investments Company, Sino-Steel Limited (China) Konkola Copper Mines (Zambia), Tibet-Hima Industries Consortium (China) and Shree Minerals of Australia.
The consortium was said to be comprised of Shanghai Baosteel Group, which is an iron and steel conglomerate with expertise in smelter technological supplies; Chinalco Luoyang Copper Company; Yunnan Copper Company with vast experiences in exploration expertise provision; and Dongfang Electric Corporation, whose expertise is in hydro-power technical and development equipment supplies.

Others included Tebian Electric Apparatus, who are manufacturers of cables, cords and transformers; Zijin mining Group (mining and downstream beneficiation) as well as Zongshen Industry Group (mining financial investments).
As part of terms for the concession, THMCOL was to pay a signature bonus amounting to $4.3m (about Shs15.2b at the time) to government and annual concession fees of $1m (Shs3.5b). This is on top of $175m (Shs620b) for rehabilitation of the mines and upgrading Mobuku hydropower plant to 12MW.

All the above terms are yet to be satisfied but all along, there seemed to be much more than meets the eye.
The Auditor General, Mr John Muwanga, for example in the audit as of December 2016, indicated that THMCOL had “defaulted on key operational terms of the concession agreement such as non-payment of annual concession fees of $1.76m (Shs6.2b), failure to invest the minimum capital expenditures totalling to $175m (Shs620b), non-provision of Unconditional Exploration bank guarantee and failure to submit acceptable Feasibility Study Reports on the Smelter and Tailings Pond Project.”

“Despite a default notice by government as provided in the agreement, no evidence of corrective action has been taken on the part of the concessionaire. In the circumstances, the concessionaire’s ability to comply with the commitments under the agreement are doubtful, implying that the intended objectives of boosting the mineral production, provision of local employment and revenues to the government may not be realised,” Mr Muwanga noted in the report.

However, more than a year ago, 10 months before the December meeting, THMCOL’s operations at Kilembe had been suspended by the National Environmental Management Authority (Nema) over non-compliance with environmental standards.
In February 2016, Nema stated that despite numerous reminders and notices advising the company to comply with environmental requirements applicable to the mine developments and operations, it had not addressed the issues, especially regarding waste management.

Operations at the mines were yet to resume fully but that notwithstanding, the government has already tendered a termination notice to the company and a committee to set into motion the wind-up process has been established after the company failed to provide a satisfactory written assurance that all the consortium members and shareholders shall participate in the project as promised under clause 2.3 of the concession agreement.

Gone are the good old days
According to several accounts, at least 90,000 tonnes of copper ore were mined from Kilembe 1960s and 1970s, which was also home to all nationalities, including expatriates who moved and settled to Kasese for employment. The current Seychelles president, Danny Faure, was born at Kilembe when his parents worked at the mines 55 years ago.

The first recorded copper discovery in Uganda was by the Duke of Abruzz, during an expedition to the Rwenzori Mountain in 1906. But the main commercial deposits were discovered in 1927 by D. Magee, who was working for Tanganyika Concessions Limited, which had been given a mineral prospecting license covering an area of 9,360 square miles. The company started trenching on the northern side of Nyarusingye stream, but had its license reduced to 200sq miles in 1933.

During this time, little work was done on the mines mainly because of the accessibility. The Mbarara-Kasese road was not built until 1939. This coupled with the low prices on the world market and the looming World War II had the company abandon the mines.
Government fenced off 155sq miles around Kilembe to keep the deposits as it looked for another company to operate them.
In 1942, rescue came in the form of Alderson, a Canadian who had developed the Macalder copper and gold mines in Kenya, who interested Frobisher Ltd, a Canadian mining company, which formed a joint venture with Rio Tinto, a British mining giant. The two carried out preliminary investigations and started drilling in 1948 until 1951 with 10.5 million tonnes of ore discovered and another probable four million tonnes more.

With ore of that magnitude discovered, it recommended in 1951 that a railway line be extended from Mityana to Kasese, where it reached in 1953. After the railway line, a power line from Jinja to Kasese was recommended; this brought the projected costs of the copper development to £8m, forcing Rio Tinto to pull out, leaving it to Frobisher.
A cheaper alternative of smelting copper in Jinja was devised, and production started in 1956 with a target of 7,500 tonnes of copper per year. Along the way, Frobisher’s interests were bought by Falconbridge Nickel Mines Limited, another Canadian company, which owned 75 per cent of the mines until its closure.

By 1965, mineral exports accounted for 14 per cent of Uganda’s export earnings, with copper coming third to coffee and cotton in terms of income generation, though its exports started in 1959. Between 1956 and 1977, it is believed that Kilembe mines produced at least 16 million tonnes of ore of both copper and cobalt.
During the 1970s, production at Kilembe peaked at around 18,000 tonnes of copper cathode a year; however, Amin’s nationalisation policy was witness to things falling apart, which also saw most expatriate workers, especially Asian, many of whom were Ugandan citizens, flee.

But in effect, the mines ceased operations in 1978 as a result of the armed anti-Amin struggle coupled with a steep fall in prices of the copper ore. From 1978 to 1982, the mines were placed under the care and maintenance of KML, which was now State-owned.
In 1992, Kasese Cobalt Company Ltd was established to recover cobalt metals from an unstable stockpile of a cobalt-rich sulphide concentrate, and see if one of the units could be converted to smelt copper and other metals.
According to the Department of Geological Survey and Mines, the mines had an estimated four million tonnes of copper and 5.5-million tonnes of cobalt reserves when it ceased production, the ore which could be mined within 6-7 years.
The latest development, however, implies that Kilembe will have go back to sleep for some time.

The ruins still stand

For the not-so strong hearted, the mere sight of the entrance to Kilembe copper mines at the foothills of the Rwenzori Mountains, is enough to induce dizziness. The mines are punctured inside the base, approximately 4,500 feet below sea level, from the mountain summit.

The entrance is made up of two tunnels, a horizontal passage, about 1.5 metres high and two metres wide, gouged into the base and connects the partially sealed portal, and the outside world, to the quartz vein that extends vertically 500 metres inside, where the copper-cobalt deposits are located. The mine’s entrance is seemingly impenetrable.
The ore is drilled, loaded and then wheeled out on trams that are pulled and pushed in and outside of the mines, then loaded onto trucks and delivered to the processing plant located a stone throw away.

Burrowing underground, moreover underneath the mountain, even if it’s for money, cannot be said to be one of those fun occupations given the geological precariousness of mines but they are designed in a way that there is enough oxygen, walls ceiled to support rocks from disintegrating, properly lit so that personnel can see their way around, and with desilted water ducts to channel out underground work from the rocks but above all, maximum caution is exercised for everyone’s safety.

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