Tuesday, May 21, 2024
NewsOromia terminates Kenticha mining partnership

Oromia terminates Kenticha mining partnership

Tensions rise over access to Ethiopia’s untapped lithium deposits

Oromia Mining Share Company has terminated its partnership agreement with African Mining and Energy (AME), putting the continuity of Kenticha Mining Plc into question.

The partnership, according to a letter signed by Chala Dida, general manager of Oromia Mining SC, has ended as AME failed in its responsibilities, which included transferring USD 30 million to Oromia Mining’s account at Sinqe Bank.

Confirming the termination to The Reporter, Chala stated the fate of Kenticha Mining Plc will be decided through legal processes.

Oromia Mining SC is a state-owned enterprise owned by the Oromia regional government. It is among subsidiaries of mining enterprises under the wing of O Mining Group, which is chaired by Shimelis Abdisa, president of the Oromia regional state.

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Oromia Mining SC was given the Kenticha lithium, tantalum and gold mining project after it was taken from its former developer, the Minerals, Petroleum and Biofuel Corporation.

The project was formerly developed by the Corporation, which lost its entitlement to the project following the 2018 political changes in the country. Oromia Mining was also handed other projects in the Oromia regional state, including Adola Gold and Yayu coal mining projects.

However, as Oromia Mining SC lacks the technical skills to conduct the mining operations at Kenticha, it entered a partnership with AME.

This partnership birthed Kenticha Mining Plc, which was formed in June 2021 with a 10 million birr capital. As per the agreement document, AME holds 51 percent of Kenticha, while Oromia mining SC holds the remaining 49 percent. The site, found in Kenticha kebele, Saba Boru woreda in Guji zone of southern Oromia regional state, is endowed with substantial lithium, tantalum reserves, among other precious minerals.

As per the Kenticha mining Plc memorandum of agreement signed between AME and Oromia mining SC, AME agreed to avail USD 38.1 million. Out of this, USD 18.6 million (49 percent) shall be “fully owned and all the times belongs to Oromia Mining SC.”

“Taking into consideration the possession right of mining resources in Oromia by Oromia mining SC on behalf of the regional government of Oromia, and the good will of Oromia SC in Oromia, from the USD 38.1 million to be availed by AME, 49 percent will be registered as the capital of Oromia mining SC”, reads the agreement signed in 2021.

AME agreed to transfer the amount to Oromia’s account at Oromia bank at the time.

But according to the termination letter now issued to AME by Oromia, AME has failed to honor the USD 38.1 million.

The letter states AME failed to deliver additional finances requested by Shimelis Abdisa, president of Oromia regional state and board chair of Oromia mining SC.

During a meeting in December 2022, the regional president ordered AME three main responsibilities. 

These three responsibilities included AME’s duty to deposit USD 30 million into a bank account at Sinke Bank. The other task was to commence mining lithium and tantalum and start exporting. The third was for AME to open an office nearby the Kenticha project site, at Shakiso town, Guji, in southern Oromia.

The termination letter reads: “however, you still failed to keep your promises and none of these responsibilities have been operationalized. This situation can also be taken as disregard and non-respecting of regional higher officials.”

“Therefore, because of the fact that you failed to discharge your responsibility as promised to undertake and your repeatedly rejection of notifications and advises of the regional higher officials, we found that it is difficult to continue with you as business partners and kindly notify you that our business partnership has been broken up from the date of the issuance of this notification letter,” the letter reads.

This means AME is no longer a partner of Oromia mining SC. But this does not mean Kenticha Mining Plc is dissolved and its license to mine lithium and tantalum from Kenticha, is revoked. There are legal processes ahead to that process, according to officials at Oromia.

“We cannot say that Kenticha mining Plc is liquidated, just because of the letter. Company liquidation has its own legal process. If the responsibilities listed on the letter are not met, and the shareholders (AME and Oromia Mining SC) fail to reach agreement, then the liquidation process of Kenticha Mining Plc will continue. The liquidation will be done through court process,” Chala told The Reporter.

“Time will answer, whether AME and Oromia Minign SC will resolve the disagreements and reach agreement, or go apart,” Chala said.

The liquidation of Kenticha mining Plc will be as per the terms listed in the memorandum and articles of association and commercial code of Ethiopia, says Chala. Arbitration options are also mentioned in the memorandum and articles of association.

“If the partnership fails and Kenticha is dissolved, then the government will make the decision on how the project will continue. The minerals at Kenticha belong to the government. So the government will make the decision. If it says AME could not make this resource productive, then it can give it to other mining developers,” added Chala.

The mandate of cancelling the mining license of Kenticha mining Plc, is vested in the Ministry of Mining. Last month, MoM also waved a warning letter at Kenticha Mining Plc, stating the Ministry will not renew its license if the company fails to resume production until November 2023.

However, officials at AME and Kenticha Mining Plc, have differing opinions regarding the termination letter written by Oromia.

“They [Oromia] wrote us a letter that indicated Oromia mining has terminated its partnership with us. There is a misunderstanding. The letter states AME failed to pay finances. We have invested a lot of capital on the project so far. We believe we have already discharged our financial responsibility,” Ali Hussein, shareholder of AME and general manager of Kenticha mining plc, told The Reporter.

He says the agreement states ‘AME will avail financing’.

“We have availed finance for the project activity,” Ali told The Reporter, adding, “There are several foreign companies trying to seize Kenticha from us. That is why the government is trying to dissolve the agreement with us, and give it to others.” 

Ali claims his foreign partners, mainly from Australia and South Africa, have invested in Kenticha and they are uneasy about Oromia’s termination letter.

“Our foreign partners and shareholders in AME are threatening to take us to international court. That will make things difficult for Ethiopia. Our foreign partners believe the government is taking the project from us unfairly. We are trying to calm them down, hoping we will resolve the disagreement with Oromia based on negotiation,” Ali said.

“Otherwise our foreign partners might sue Ethiopia in international arbitration venues, which will cost Ethiopia. We shall sit down and discuss the way forward. If they want us to leave, they can tell us to sell our share and leave. We are ready to do anything for the benefit of the country,” Ali explained.

However, sources disclosed to The Reporter that Kenticha did not start operational activities on the project site, apart from machineries planted and activities undertaken by the Ethiopian Minerals, Petroleum and Biofuel Corporation, the former developer of Kenticha.

The Corporation’s officials also blame Oromia for overtaking the Kenticha project from the corporation unfairly. The Reporter’s sources also disclosed machineries and minerals are being smuggled out from Kenticha project site. 

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