Government moves to cancel Shs600bn Kilembe Mines deal

A committee established to advise the government on how to proceed on the Kilembe mines previously leased to Tibet Hima Mining Company has recommended terminating the concession with the Chinese consortium and advised that a search for new investors be set in motion.

The Winding-up Commission, one of the terms in the concession signed between government and Tibet Hima in 2013, was tapped by the state minister of Finance for Investments and Privatization Evelyn Anite in July, one month after government had issued a termination notice to the company for failing to revive the once vibrant copper and cobalt mines in Kasese district.

Among the key contractual obligations, THMCOL was to invest at least $175m (Shs600bn) for rehabilitation of the mines and upgrading Mobuku hydropower plant to a 12 megawatts facility. Mobuku generates power used at the plant, while the rest is added to the national grid for consumption in the Kasese area.

Tibet Hima, according to senior finance ministry officials, was selected ahead of China’s Gingko Energy Investments Company, Shree Minerals of Australia, Konkola Copper Mines (Zambia), Sino- Steel Limited (China), and Tibet-Hima Industries Consortium (China).

The consortium comprised of seven companies, and would later disintegrate. Some government officials believe its disintegration led to its failure to meet its contractual obligations. These include failing to pay a signature bonus amounting to $4.3m, annual concession fees of $1m, among others.

In its report submitted to the finance ministry on Tuesday, the winding-up commission recommended that the concession with the consortium be terminated and the government takes over the Kilembe mines assets or leases them to another investor.

The mines were established in 1956 by a Canadian consortium, before reverting to the government during the nationalisation of the 1970s. They eventually collapsed in the early 1980’s.

The failure of Tibet Hima to invest is “a very big blow at a time when cobalt prices are high,” Matia Kasaija, the minister of finance, said. One tonne of cobalt is estimated to cost $60,000. He, however, didn’t say how much the government has lost in the deal.

The Department of Geological Survey and Mines at the energy ministry estimates Kilembe’s cobalt reserves at about 4.5 million tonnes.