How JPM order hits the World Bank, UK

Dar es Salaam. The World Bank is a shareholder in the company whose licence to mine Nickel in Tanzania was ordered cancelled by President John Magufuli on Wednesday.

The International Finance Corporation –the World Bank’s Private investment arm, holds a 10 per cent equity stake in African Eagle Resources’ Dutwa Nickel fields in Busega and Bariadi districts in Simiyu region.

African Eagle Resources is a UK-incorporated company traded on London AIM and Johannesburg AltX. AIM and AltX are stock markets for small companies that seek to raise capital.

The company has been prospecting for Nickel for nearly a decade on Ngasamo Hill and was now in the process to establish an open pit mine to extract the discovered mineral, estimated to be 110 million tonnes. 

President Magufuli, however, directed the minister for Energy and Minerals, Prof Sospeter Muhongo to withdraw the Dutwa mining licence in favour of a water supply infrastructure in the area.

He issued the order while addressing a public rally at Somanda Secondary School shortly after inaugurating the 70km Bariadi-Lamadi tarmac road. “There is no way over one million people should be suffering just because one investor is extracting minerals…..that does not make sense,” said the President, arousing cheers from the rally. Dr Magufuli was told that water problems in the area could be easily solved if a tank was built atop the hill but for the fear of interfering with the mining area.   

Yesterday, it emerged that the company in question has been worked in the area since 2008 as prospectors. Plans to construct the mine started in 2004 and had been expected to start last year. It was not immediately clear if the final green light for mining had been issued.

The Dutwa project was one of the three main Nikel mining prospects for Tanzania, with a production capacity of 27,000 tonnes of Nickel every year. The mine, according to the firms’ website would have a 20 year lifespan and some 1 million tonnes of the precious mineral used widely for various industrial purposes.

Reports show that IFC advanced the company $5 million (Sh10.5 billion) for a feasibility study on the establishment of the mine in exchange of the equity at more than 45 million ordinary shares in the company.

 Information on its website indicate the firm has sunk more than $26 million in the exploratory stages, with the company’s project director, Mr Aidan Schoonbee, then quoted  as saying they had been expected to acquire the mining licence by 2014. 

Tom Butler, the IFC head of mining during the deal, aid the Dutwa project would put Tanzania in the league of major African nickel producers.

Tanzania Commissioner for Minerals Ali Samaje during a conference in Arusha noted that the Dutwa Nickel Project and Ntaka Hill project in Nachingwea District and Kabanga project in the Kagera Region would pioneer the mining in the country. Dutwa deposits are classified as the sixth largest in Africa. 

 As a mineral development firm that performed the geology services and mine planning assessments, African Eagle Resources has since 2013 sold controlling interest in the project to Blackdown Resources, also a UK registered private company.

President Magufuli’s order is similar to an earlier one he issued for the revocation of a mining licence in Shinyanga to pave the way for small scale miners. The Head of State repeated the message yesterday during his public rally in Shinyanga town, adding that the mining licence earlier issued to a private company should be cancelled altogether.  

“It is not possible that 15,000 people are issued a notice to vacate the site in 10 days yet they found the minerals. That is why I ordered them to stay put and today I am directing that the said licence be cancelled for good,” said the President.

The Citizen has gathered from impeccable sources that the Shinyanga licence is operated by Acacia Mining, formerly Africa Barrick Gold (ABG).

Yesterday, commentators were quick to raise the alarm over the developments, cautioning that the long-term effect on the economy could be dire.

“It was shocking to hear that the President ordered a cancellation of the mineral licence in Dutwa area Bariadi to pave the way for a water tank,” said Mr Zitto Kabwe, the Kigoma Urban MP and ACT-Wazalendo Party Leader.

He told The Citizen in an interview that the Dutwa mine was capable of earning money to fund the water project and earn the government billions in royalty alone. Mr Kabwe said nikel currently fetched $10,440 a tonne, meaning a yearly income would be $282m.

“The government is sending all negative messages to investors. These statements will cost the nation dearly in future,” said Mr Kabwe.

The Tanzania Chamber of Minerals and Energy executive secretary, Mr George Mturi, said while the decrees being issued by the President targeting their members were alarming, the agency believed in the rule of law.

“What I know is that this is the second decree the President was making against mining investors. What I know is that the first decree did not lead to cancellation of the mining licence. It is likely that some of these orders are political but let us wait and see what happens,” he said.

According to him, the Tanzania Chamber of Minerals and Energy has been advising mining investors not to be alarmed. “In case they are denied their rights we will assist them to get legal redress,” he said.

A High Court advocate specialising in handling business and investment disputes, Dr Eve-Hawa Sinare said that to avert unnecessary investment disputes, there is a great need to initiate consultative dialogue with investors.

“I remember Former President Benjamin Mkapa did that and the result was positive economic growth rate. It can be done in this regime to attain higher economic growth,” Dr Sinare said.

The Vice Chairman of Policy Forum Mr Hebron Mwakagenda said the Presidential decrees against investors would be seen as an extension of violation of the law.

Efforts to get the leaders from responsible ministry for clarification on the issue were futile yesterday.