Published on 30/11/2024
Parliament has approved a call for fresh negotiations between the Ugandan government and Tibet Hima Mining Company Limited (THMCOL) over the contested termination of their Kilembe Mines concession.
The Committee on Environment and Natural Resources, chaired by Herbert Ariko, presented a report on 27 November 2024, highlighting procedural flaws and mismanagement by government institutions. These failures, the committee argued, unfairly led to the termination of THMCOL’s agreement.
The concession agreement, signed in 2013, granted THMCOL the rights to revive and operate Kilembe Mines for 25 years. However, the government terminated the agreement in 2017, alleging the company had failed to meet key obligations, including providing an exploration guarantee, paying annual concession fees, and ensuring participation by all consortium members.
THMCOL disputed these claims, arguing that delays and inefficiencies on the government’s part had significantly hindered its ability to meet the terms of the agreement.
According to the committee’s findings, THMCOL invested over $56 million in revamping the mines, including building infrastructure, paying employee wages, settling debts of Kilembe Mines Limited, and covering operational costs.
Additionally, the company claimed to have paid the government a total of $6.69 million during the concession period. Despite this, the termination reportedly caused the company to incur financial losses totalling approximately $980 million, which included projected revenue from the mines.
The committee faulted the government’s handling of the concession, calling the termination “hasty and unjustified.”
Ariko noted that alternative remedies, such as mediation or financial penalties, should have been pursued instead of termination.
“The government failed to exercise due diligence in managing this concession. The premature decision has prejudiced the petitioner despite their significant investments and willingness to comply with the agreement,” Ariko said.
The report further revealed that the government had failed to fulfil its obligations under the agreement, including the timely handover of the mining site and the issuance of necessary licences.
The government also unilaterally reduced the concession period from 25 years to 15 years, a decision the committee described as unfair and destabilising to the company’s operations.
“This abrupt change undermined the concessionaire’s ability to plan and secure long-term investments,” the report stated.
One of the more contentious issues involved the government’s refusal to allow THMCOL to export mineral samples for testing.
The company argued that the testing was essential for designing a smelter plant, but the government failed to provide clear guidance on acceptable quantities, effectively stalling the company’s efforts to develop the necessary infrastructure.
The committee recommended that the government halt the ongoing procurement process for a new concessionaire until all outstanding issues with THMCOL are resolved. It also called for compensation to be paid to the company for its investments and losses.
“Equity demands that the petitioner be adequately compensated for their investments or allowed to continue operations under a renegotiated agreement,” the committee said.
The report also faulted the role of Hon. Evelyn Anite, Minister of State for Finance in charge of Privatisation, who oversaw the termination.
Additionally, it called for an audit by the Auditor General to scrutinise all payments made under the concession.
Ariko emphasised the need for improved governance in handling public-private partnerships, particularly in the extractive sector.
In her defence, however, Hon. Anite differed with the committee report on the allegations that she didn’t consult the Attorney General.
“I did consult the Attorney General and if you allow me, I will table the procedures that I followed,” she said.
Anite stated that the government’s point of departure with the company was that they wanted 30,000 tonnes of concentrate minerals for testing.
“I am very proud that I did my job and terminated the concession of Kilembe mines,” she said.
The Leader of the Opposition, Hon. Joel Ssenyonyi, stated that the court dismissed a petition by the company and referred the matter for arbitration, wondering how far the arbitration went.
“Court paved a way that should have been followed. Was that followed? If not, why?” Ssenyonyi pointed out.
The Deputy Attorney General, Jackson Kafuuzi, said the ideal thing to do is to look at the prayers of the petitioners and determine what they qualify for and what they do not.
“We have come to know that the concession was null and void, but they had acted upon it, invested, paid money. Do we simply say you paid for something that does not exist?” he said.
Anite stated that the company also benefitted from the country through the sale of electricity.
Members also proposed reimbursing the company some of the money they invested, an idea the Minister supported.
The House also amended the report for the recommendation on political responsibility to read “collective responsibility,” thereby removing blame from the Minister.
