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NewsInvestigation: Shadow fight for Ethiopia's lithium bonanza

Investigation: Shadow fight for Ethiopia’s lithium bonanza

The contentious Kenticha lithium project in Oromia remains mired in uncertainty as legal wrangles and political jockeying persist over who will control the deposit’s lucrative mining rights.

Kenticha Mining Plc (KMP) claims to hold exploration and mining licenses at Kenticha kebele, Oromia, to mine and explore for the key battery metal lithium, but has failed to make meaningful progress developing the project, prompting warnings from new Mining Minister Habtamu Tegegn.

Habtamu, who was appointed mining minister by Prime Minister Abiy Ahmed (PhD) seven months ago, has issued KMP a notice over its stalled extraction project.

Habtamu appears to be grappling with a backlog of dysfunctional mining projects left over from his predecessor Takele Uma’s tenure. This includes the troublesome Kenticha lithium venture which KMP’s mining license is set to expire for next month, in October 2023, without any production.

Ministry officials confirmed taking action against KMP for failing to begin production as required by its license agreements. CEO of the ministry’s License and Mineral Administration Sofia Abdulkadir told The Reporter that KMP did not uphold its obligation to start mining lithium by the agreed upon deadline.

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She noted the licenses require KMP to commence production before they expire. But with the expiration coming next month in October, the company remains stalled with no output. Sofia said this inaction means “the lithium resource there is being wasted.”

There are other firms able to immediately begin lithium mining but they have been unable to access the permits due to KMP’s non-operation, according to the CEO. She made clear that if KMP cannot start production as mandated, “it must leave” the mining rights. However, as long as KMP begins by the deadline, the ministry has no objections, she affirmed, adding “security issues will not excuse failure to perform.”

KMP had initially agreed with the Ministry of Mines to begin production by the end of 2022 or early 2023, but that plan has not materialized.

Alarmed by the prolonged delay and looming deadline for their license, KMP officials recently held a press conference at the Sheraton Hotel in Addis Ababa last month. “Our lithium production machinery has arrived at the port in Djibouti and will arrive by October 2023,” declared Deputy General Manager of KMP Sammy Million. However, industry sources tell The Reporter that KMP has not made such progress.

Like many mega mining ventures in Ethiopia, KMP lacks capital and expertise in lithium mining.

KMP’s other license at nearby Kenticha to explore lithium is also facing scrutiny.

The license was approved by then-Minister of Mines Takele Uma on January 10, 2023, just days before he resigned from his position and left the country. Takele circumvented a court ruling to re-award the license to KMP, according to documents examined by The Reporter.

The Kenticha deposit in Oromia Regional State, about 500km south of Addis Ababa, holds commercially viable lithium reserves. Within the exploration license area currently held by KMP, lithium had already been discovered in the 1980s. During exploration, KMP is expected to undertake quantification and feasibility study.

Kenticha lithium deposits are contained within hard rock formations, unlike the Bryan lithium deposits. Technology for extracting lithium from the hard rock mineral spodumene has only been commercially viable since 2017. This relatively new capability to effectively mine hard rock lithium resulted in a surge in demand for mining licenses in Kenticha.

A team of Russian and Ethiopian geologists first discovered lithium at Kenticha alongside other rare earth metals like tantalum, niobium and cesium during exploration in the 1980s. For decades after, only the tantalum was mined by the Ethiopian Minerals, Petroleum and Biofuel Corporation (MPBC). However, interest in extracting the lithium has grown significantly with increasing demand for electric vehicle batteries. Developing the lithium deposit was previously considered uneconomical.

KMP now maintains they must prove mining the lithium can be economically feasible. But sources note the discovery was made long before KMP received their license, suggesting much of the exploration work is already complete.

KMP’s emergence in the mining sector has been aided by shifting political winds in the region. In the aftermath of political reforms in Ethiopia and growing assertions of control over mineral resources by regional states, the license of state-owned corporation was revoked in 2018. Kenticha was then transferred to Oromia Region’s Oromia Mining SC.

Oromia Mining SC is a subsidiary of conglomerate Tumsa Development Group, which is modeled after the endowment fund EFFORT and serves as an investment vehicle for the Oromia regional government. Oromia Mining SC took over several projects formerly under federal authority, including the Adola gold and Yayu coal mines as well as the Kenticha tantalum deposit.

The nearby Legedembi gold deposit, located just 45 kilometers from Kenticha, was also transferred to Oromia control but later returned to Midroc Gold. Legedembi was explored concurrently with Kenticha in the 1980s by Soviet and Ethiopian geologists. With MPBC’s license being in dispute, numerous international and domestic mining companies have been vying for rights to develop the lucrative Kenticha deposit, including KMP.

Seizing the opportunity presented by gaining control over the mining rights to Kenticha, Oromia Mining SC entered into a partnership with Abyssinia Metals Limited (AML). Under the terms of the venture, AML received 51 percent ownership of the mining operations. This partnership resulted in the creation of the KMP, which is 49 percent owned by Oromia Mining SC.

While the Australian firm AML legally controls the Kenticha mining license, it is itself owned by African Mining and Energy (AME). Both AML and AME publicly promote Kenticha as their flagship project on their respective websites. AME also asserts ownership of the nearby Okote Gold deposit located just south of Midroc Gold’s Legedembi mine. The leadership of AML and AME are closely aligned. The three directors of AML – Stephen Miller, Bruce Tinney, and Neil Warburton – make up AME’s senior management team. Bruce Tinney is officially registered as the license holder for KMP’s mining activities at Kenticha.

Investigation: Shadow fight for Ethiopia's lithium bonanza | The Reporter | #1 Latest Ethiopian News Today

In July 2021, Oromia Mining SC transferred exploration rights for the prospective Kenticha deposit to KMP. The license granted KMP permission to explore for lithium, tantalum, niobium and other rare earths. KMP had secured the license after pledging USD 40 million in promised investments. However, just one year later in July 2022, the Ministry of Mines terminated KMP’s license. According to the letter, KMP failed to begin exploration activities within the mandated one-year timeframe outlined in its work program.

KMP challenged the license termination in court. The company’s legal representatives primarily sought an injunction to prevent the license being transferred to other foreign mining firms. However, in an August 2022 ruling, the Lideta High Court sided with the ministry’s decision. The court denied KMP’s request for an injunction and upheld termination of the exploration rights, according to legal documents obtained by The Reporter.

At the time KMP’s license was terminated in July 2022, international mining corporations were eagerly lobbying Ethiopian officials for the opportunity to develop what could become a major lithium development project at Kenticha. This was amid skyrocketing global demand for the strategic battery metal lithium. Mining firms saw potential for a significant project to help meet market needs. However, politics and legal battles continue clouding investment potential.

On January 10, 2023, just days before resigning as Minister of Mines, Takele Uma re-awarded the Kenticha exploration license to KMP. This new three-year license runs from 2023 through 2026. Minister Takele’s decision to grant KMP the license again came despite the earlier court ruling that had upheld cancellation.

Some sources suggested Takele faced intense behind-the-scenes pressure to hand the license back to KMP. Others claimed the move was one factor in his resignation. However, Sofia, a ministry insider, disagreed with that narrative. “KMP’s license was first revoked when their initial one-year term expired,” she told The Reporter. “They went to court but ultimately came to an agreement with Takele after negotiations.”

According to the license agreement signed by Takele Uma and KMP’s general manager Bruce Tinney, the company had 30 days from issuance to deposit 50 percent of their promised 390 million birr in capital investments into an Ethiopian bank. However, The Reporter’s sources stated this requirement was not actually met by KMP, despite claims to the contrary by the company. The terms of their mining license also stipulate it will expire separately from the new exploration permit.

In a statement last month at a Sheraton hotel event, KMP management claimed machinery had already arrived in Djibouti and they would begin lithium production within two months – despite only possessing an exploration license. KMP’s management has projected that lithium exports could generate five billion dollars in revenue over the next five years, according to their estimates. Sources told The Reporter that KMP had requested permission to mine lithium from tantalum waste stockpiles left by the previous operator, the state-owned MPBC.

“The ministry granted them a separate mining license for this purpose. However, it expired before they could start operations, and they never did,” revealed Sofia.

Regarding the exploration license, Sofia acknowledged KMP could theoretically begin mining activities after completing their prospecting work. However, government sources have indicated the new administration, without Takele Uma, is considering revoking both KMP’s license and their partnership with Oromia Mining SC.

Adding further uncertainty, the websites of parent firms AML and AME state Kenticha was awarded to Abyssinia Metals in 2020 following a formal bidding process – contradicting the official timeline of permits issued to KMP by the Oromia regional government.

International mining companies and industry insiders The Reporter spoke to question how AML and AME secured the Kenticha license. “KMP, AML, and AME have no experience in lithium exploration or mining,” said one insider, requesting anonymity. “The truly leading global players in lithium technology and extraction were trying to get the license. How AML and AME beat them out is very confusing.”

While the situation on the ground at Kenticha grows increasingly tense due to security issues, disagreements with local communities, artisanal mining encroachments, and contraband trade, major miners from around the world continue fighting fiercely over access.

The Biofuel Corporation also aims to regain control after having explored and developed Kenticha originally. Frustrated managers wrote to PM Abiy requesting reinstatement but say responses have been sparse. They argue oversight was improperly transferred to Oromia Mining SC.

KMP Deputy Head Sammy claims the company rightfully owns Kenticha, but acknowledges numerous foreign firms are circling, seeking to take control.

An insider at the Corporation, which explored Kenticha originally using public funds over 30 years ago, begs to differ. “No entity has the right to privately seize publicly owned national assets like this without proper evaluation or sale,” they asserted anonymously.

The source argues oversight of Kenticha was illegally stripped from the Corporation and improperly handed to Oromia Mining following 2018 political shifts, forcing officials to surrender core samples and mining data. Corporation headquarters in Addis Ababa were even looted, they allege.

“The Corporation was intentionally crippled to pave the way for others to pillage its projects. As a national enterprise, its deposits belong to Ethiopia, not certain officials aligned with inexperienced mining outfits,” the informed insider contended.

Now largely dormant, the hobbled Corporation’s depleted staff can only hope for revival. “There are currently no active workers,” acknowledged Bacha Faji, its HR head.

Companies eagerly pursuing the strategic lithium license include Goldleaf (Canada), Sinomine (China), ROEL (Russia) and POSCO (South Korea), along with others from Israel, Australia, and South Korea.

China’s Sinomine proposed a USD 200 million investment to initiate lithium mining at Kenticha, according to proposals viewed by The Reporter. Russia’s ROEL estimated costs between USD 170-200 million annually to produce 150,000-200,000 tons of lithium. South Korea’s POSCO sought lithium to develop batteries for LG appliances.

Investigation: Shadow fight for Ethiopia's lithium bonanza | The Reporter | #1 Latest Ethiopian News Today

However, bids from top global miners have borne no fruit as jostling over Kenticha intensifies. Previously, sources said the government contemplated selling Kenticha, Allana Potash and gas projects for USD 1.5 billion when forex dwindled amid northern conflicts.

Insiders say KMP lacks capability for exploration and mining but secured support among ruling party and military officials. KMP Deputy CEO Sammy Million, also an AME board member, claims securing licenses, though officials declined commenting. Some warned The Reporter from investigating.

While Sammy stated 4,000-meter drilling, assessment indicates otherwise. The sole machinery remains equipment formerly used by the corporation. Locals say KMP visits accompanied solely by security.

Around 7,000 artisanal miners now occupy Kenticha from across Ethiopia. Parts are controlled respectively by forces and miners. Miners supply lithium rocks to Chinese ceramics firms in Amhara region and Addis, shipped via Modjo dry port to China. A second contraband line to Kenya and ultimately the US is confirmed by sources in government, miners, international firms. Smugglers currently pay miners less than 10 birr kilo, selling for around 45 birr kilo in Modjo.

Global lithium carbonate prices range USD 34,000-40,000/ton in China.

Sophia acknowledged that minerals, including lithium, are being smuggled out of the country through various means, including across borders. But she did not explain why the government has not made nearby lithium sites available to other companies besides KMP. The lithium-rich area of Guji lies beyond the 5 square kilometers granted to KMP.

“KMP, MoM and government officials excuse OLF-shene for genuine mining companies to go there and work legally. When genuine companies ask to go to Kenticha, they always say it is dangerous to go there due to security reasons. But the artisanal miners are mining significant quantity of lithium? The reason is, corrupt officials are using OLF-shene as excuse to smuggle out minerals,” said one source, who is well involved in the case.

According to document released by AML August 2023, 65 ENDF troops moved to Kenticha in November 2022 and KMP provides food, transport and accommodation to the troops. “Civil work is completed for new military camp to be constructed very soon,” states the document.

According to the document, KMP will start large scale production of lithium will commence in the second quarter of 2024, with fast track revenue generation from the lithium export from Kenticha.

During the 21st annual Africa Down Under (ADU) conference held in western Australia between September 6-8, 2023, KMP’s Sammy and Ethiopia’s State Minister of Mines Million Matiwos both delivered presentations.

The ADU conference organizes annually in Australia and draws African miners affiliated with Australian companies and investors.

In his presentation, Sammy introduced himself as the director of KMP and foreign direct investment advisor to Ethiopia’s Prime Minister. However, when contacted by The Reporter, Sammy said his actual role is deputy general manager of KMP.

Sammy also described Kenticha as one of the largest pegmatite lithium reserves in the world, though an independent assessment has not been conducted.

He claimed 88 million metric tons of lithium ore exists within just three square kilometers of KMP’s license area. An additional 50 million tons is also allegedly nearby but outside KMP’s license boundary, according to Sammy. The deposits reportedly contain tantalum, niobium, cesium, uranium and more rare earth elements.

Sammy asserted drilling 40,000 meters deeper would reveal 130 million more tons of lithium ore. “Civil works are finalized and KMP will soon start lithium production,” he told the Australian audience last week.

However, on September 15, AML voted to remove Stephen Miller and Bruce Tinney from its board due to alleged fund mismanagement. Concurrently, AML is pursuing a reverse takeover to be dual-listed on the Canadian stock exchange through Medcaw Investment Plc.

Sammy also denied any KMP connection to AML, despite presenting in a way that sought to portray KMP as controlling Ethiopia’s potential to dominate the global lithium market. Sources say the aim was to keep AML afloat on the Australian stock exchange.

In contrast to Sammy, State Minister Million did not mention KMP. He said “Ethiopia is yet to get world class miners. Ethiopia possesses large reserves of lithium, tantalum, niobium and other rare earth metals that are highly sought after for clean energy and electronic industry. Ethiopia will be the major supplier of these rare earth metals.”

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