Chinese firm wants $33m for termination of Kilembe mines deal

Tibet Hima Mining Company, the embattled Chinese company whose 25-year to operate the cobalt and copper Kilembe mines in Kasese district was cancelled last October, is seeking at least $33m in damages.

In a suit filed at the High Court’s Commercial Division in Kampala on February 21, Tibet Hima also applied for an interim injunction to stop the government from interfering with the concession until the main application has been disposed of.

Tibet Hima also accuses the government of breaching the terms of the concession in the suit. It says the government failed to renew the company’s mining lease, approve draft insurance policies, and also failed to “deliver permits and licenses required to commence” it’s activities.

The finance ministry cancelled Tibet Hima’s concession last October on the recommendation of the Winding Up Commission, which was established by the state minister of finance for investment and privatisation, Evelyn Anite. The commission recommended that government takes over the copper/cobalt mines and related assets or lease them to another investor.

Prior to the termination of the concession, Tibet Hima had been routinely faulted for defaulting on key operational terms of the concession agreement, failure to pay the annual concession fee of $1.76m (Shs6bn), and failure to invest the minimum capital expenditures totalling $175m (Shs618bn).

The government had hoped that the concessionaire would revive the mines and also explore and develop other minerals in the are. Copper production at Kilembe peaked in the 1970s at around 18,000 tonnes of copper cathode a year. It declined with Idi Amin’s nationalisation policy.

The mines ceased operations in 1978, a result of political instability and a steep fall in global prices of copper ore. From 1978 to 1982, they were placed under the care and maintenance of Kilembe Mines Limited (KML), a state-owned company.

In 1992, Kasese Cobalt Company Ltd, was also 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.

The case will be heard next week.