Uganda: Court Decides On Chinese Fight Over Sukulu Project

Court is set tomorrow to deliver a judgment in the legal battle between two Chinese investors over ownership of $620 million (Shs2.2 trillion) minerals mining project on Osukuru Hills in Tororo District.

Justice David Wangutusi of the Commercial Division of the High Court will deliver the verdict in a case that pits Ms Fang Min, the proprietor of Fang Fang Hotel & Restaurant in Kampala against Mr Lv Weidong and other directors at Guangzhou Dong Song Energy Group Ltd.

Ms Min sued the parties in June 2016 accusing them of fraudulent acquisition of the multimillion dollar phosphate mining project in Osukuru where a factory has been established to, among other things, make fertilisers.

Guangzhou Dong Song Energy Group Ltd is jointly sued with Uganda Hui Neng Mining Ltd, Mao Jie and Yang Junjia, over alleged fraudulent and unlawful expropriation of 26 Sq Kilometre mineral site.

Guangzhou Dong Song Energy Group Ltd was launched in October last year to implement the $620 million (Shs2.2 trillion) Sukulu Phosphate Comprehensive Project.

Seeking compensation

Through her lawyers led by Mr Ebert Byenkya, Ms Min is seeking $25m (Shs94.4b) as compensation for loss of her business interest in terms of general and exemplary damages to cater for her shares in the assets of Uganda Hui Neng Mining Ltd which, she claimed, were illegally transferred to Guangzhou Dong Song Energy Group Ltd, the Uganda franchise of Guangschou Dong Song company based in China.

She claims that the amount sought is based on June 15, 2018, by Deloitte experts; Jeffrey Harder and Munyar Chirisa, who estimated that the average fair market value of the mineral deposit by April, last year, was 14.1m, up from an average of $10.7m in 2013, when the joint venture company snapped up the deal.

In court, Ms Min only filed a witness statement while Mr Weidong testified in person. The former has been represented in the case by Mr Ebert Byenkya.

The gist of the contention is that Ms Min, on the urging of Mr Weidong, founded Uganda Hui Neng Mining Ltd as a joint venture, which they used to acquire mineral exploration licence for Sukulu. The former was to own 20 per cent stake while the latter 80 per cent.

Ms Min alleges that she spent in excess of $5m (about Shs18.5b) to obtain mining licences and in administrative costs, which Mr Weidong, the director of Guangzhou Dong Song Energy Group Company Ltd, was to reimburse to the limit of her 20 per cent shareholding.

Along the way, she claims, Mr Weidong and two others, conspired to found Guangzhou Dongsong Energy Group Ltd, and transferred the joint venture's mineral licence through fraudulent board resolution, before blocking her signature to the account.

The cash she invested was not refunded. She told court that Ms Min also said she has been irregularly expropriated of her stake in the Sukulu phosphate deal.

"The meeting that made the resolution for the transfer of the assets and mineral exploration licences at Osukuru was illegal. The asset was substantial but no approval was granted and Mr Weidong owns and controls 100 per cent of the entire business as per evidence," the businesswoman's lawyer, Mr Byenkya, submitted in court.

He asked court to award the Fang Fang Hotel owner such compensation commensurate with the fair market value of the mineral deposit as estimated by audit firm, Deloitte.

He also invited the court to look at Mr Weidong's conduct in the transaction, which involved filing of alleged forged documents and irregularly making Mao Jie, Yang and Junjia to sign as directors yet they were not subscribers nor paid up directors as required by law.

Court documents indicate that the resolution that formed a basis for transfer of the shares were made without the knowledge and consent of Ms Min, who owned 35 per cent shares in the initial company.


Ms Min alleges that government granted their joint venture company, Uganda Hui Neng Mining Ltd, six mineral exploration licences in respect of the Osukulu phosphate reserves, measuring 26 Sq kilometres.

According to the complaint, the exploration area is of immence economic value and contains many valuable minerals including large deposits whose value is estimated at $5.2b but in December 2013, Mr Weidong in collusion with Mao Jie and Yang, dishonestly passed a board resolution of Uganda Hui Neng Mining Ltd to transfer its exploration licence to Guangzhou Dong Song Energy Group Ltd.

It is alleged that the purported board resolution was passed without the knowledge and consent of Ms Min and without following the due process of convening a board meeting.

"It is also manifest from the impugned resolution that the purported transfer of the first defendant (Uganda Hui Neng Mining Ltd)'s exploration licence was intended to enable the second defendant (Guangzhou Dong Song Energy Group Ltd) to obtain a loan funding under the pretext of financing a project in Uganda. Indeed the plaintiff subsequently learnt from media reports that the second defendant subsequently procured a $240m loan from the Industrial and Commercial Bank of China purportedly to develop Sukulu phosphate deposits," Ms Min, states.

In defence

In defence, Mr Weidong, denies any wrong doing stating that he refunded Ms Min's money by depositing cash on her bank account in China and that her claim of continued interest in Osukuru has no basis.

He accuses Ms Min of failing to honour a notice for a 2013 general meeting held in Kampala in which a resolution was passed to transfer the mineral licences.

Mr Weidong admitted that he has not paid $9.7 million to Ms Min, which arises from both investment and interest, from her investment in the Tororo-based Sukuru phosphate project because the businesswoman had failed to account for the $5m (about 18.5b) used while setting up the joint venture company, Uganda Hui Neng Mining Ltd, and processing of the six mineral exploration licences.

About Ms Min's claim for 35 per cent shares due to the additional $750,000 that she claims to have injected, Mr Weidong said he never received the said money despite the presence of a signed agreement between the two parties.

Alleged forgery

Ms Sylvia Chelangat, a document examiner of the police, testified that Ms Min's signatures comprised on the resolutions that transferred the mineral exploration licence from Uganda Hui Neng Mining Ltd to Guangzhou Dong Song Energy Group Ltd were forged.

The judgment comes amid ongoing discontent from the community in Tororo where it is alleged that two weeks after the commissioning by President Museveni, there is nothing on ground in terms of industrial activity and the promised jobs.

In a July 30 stakeholders' consultative meeting held at Osukuru Sub-county Hall, the community leaders resolved to petition the President over failure of the phosphate company to implement activities and employ them as planned.


December 2012: Mr Weidong, the director of Guangshou Dong Song Energy Group Ltd, fails to secure Sukulu phosphate exploration licence from Madhvan Group, which reportedly demanded $700m and 20 per cent stake in the company.

Mr Weidong and Mr Solomon Rutega, then Uganda's Consul General in Gang Shou, China, approach Ms Min to use her business links to secure the Madhvani-led Sukulu mining exploration licence, which was due to expire on June 23, 2013.

Feb 2013: Mr Weidong, Ms Min incorporate Uganda Hui Neng Mining Ltd as a joint venture in which the former would hold 80 per cent stake and the latter 20 per cent.

Ms Min invests $5m for related expences, but Mr Weidong fails to refund her money. In return, Ms Min offered 15 per cent additional stake.

August 1, 2013: Joint venture company granted the right to prospect for base metals, phosphates, ree and uranium on the 26.5 kilometre land in Sukulu, Tororo.

December 12, 2013: Mr Weidong, Mao Jie and Yang Junjia sign a board resolution to transfer the mining exploration licence from Uganda Hui Neng Mining Ltd, the joint venture, to Guangzhou Dong Song Energy Group Ltd.

December 2013: Guangzhou Dong Song Energy Group Ltd files case against Ms Min in China, her bank account there is blocked.

June 9, 2016: Ms Min sues Guangzhou Dong Song Energy Group Ltd and others, demands repossession of 35 per cent shares in Sukulu phosphate project and $9.7m.

April 24: Ms Sylvia Chelangat, a document examiner of the Uganda Police, tells court Ms Min's signature was forged.

March 12: Canada-based mineral and valuation expert Chirisa Munyaradzi testified.

April 24: Mr Weidong testifies in court, denies any wrong doing.

July 23, 2019: Court sets tomorrow as judgment day.

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