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Thursday, July 2, 2020

UPND Demands Clarity From ZCCH-IH Over the Gold Deal With Sundanese Firm

Columns UPND Demands Clarity From ZCCH-IH Over the Gold Deal With Sundanese Firm

By Hakainde Hichilema

The United Party for National Development ( UPND) has taken keen interest in the recent Joint Ventures announced by ZCCM pertaining to gold processing in Zambia, being a Public Interest Entity majority-owned by the people of Zambia.

We have taken note of the statement issued by Barnaby Mulenga, the Permanent Secretary of the Ministry of Mines and Minerals Development, and ZCCM Non-Executive Director on 24 May 2020 clarifying matters related to the joint ventures, the parties involved, and how Zambia stands to benefit. We also note the statement issued on 25 May 2020 by ZCCM Management. Whilst we appreciate clarifications issued to address public concerns, it is unfortunate that the letters leave the public with more questions than answers.

The UPND has therefore taken the liberty to collate the concerns of the general public, as well as conduct some basic due diligence on the key partners ZCCM has engaged as part of its drive to formalise the gold mining industry in Zambia. Effective due diligence when entering into Joint Ventures is critical, particularly so in this scenario as ZCCM represents the hopes of many Zambians in ensuring Zambia does not lose out on its Gold resource, as it has with most others.

In the interest of public transparency we ask that ZCCM – Investment Holdings share the Joint Venture agreements between; ZCCM and Karma Mining and Rural Development Limited (KMRD) in relation to the establishment of the Consolidated Gold Company of Zambia (CCGZ); and between CCGZ and Array Metals and Natural Resources Limited (AMNR) for the formation of the yet to be publicly named entity.

ZCCM should also help clarify the following pertinent questions:

(A) DUE DILLIGENCE ON KARMA MINING AND RURAL DEVELOPMENT LIMITED;

  1. Which expert conducted the due diligence over the Joint Venture partner and what was the outcome of this exercise?
  2. Is ZCCM aware that Sudan appears on the United States of America List of Countries engaging in State-Sponsored Terrorism and subject to US sanctions?
  3. Is ZCCM aware that gold mining in Sudan is often used to fund militia and terrorism? What due diligence was performed to ascertain that the new partners were not engaged in these activities?
  4. Is ZCCM aware that financial transactions conducted directly between the Government through ZCCM and Bank of Zambia (BoZ) transacted in USD would move through the US financial system into Sudan and could be a breach of US sanctions as this could result in the financing of militia and terrorism? What measures have been taken to prevent this?
  5. . Is ZCCM aware that one of the shareholders in Karma Mining is a government Minister in Sudan, and is, therefore, a Politically Exposed Person? Were there any concerns, if so, how were these concerns addressed?
  6. Can details of the 20 years of experience by Karma in Gold processing be shared?

(B) DUE DILIGENCE ON ARRAY METALS AND NATURAL RESOURCES LIMITED;

  1. Which expert conducted the due diligence over the Joint Venture partner and what was the outcome of this exercise?
  2. Is ZCCM aware that one of the Ultimate Beneficial Owners of Array Metals, the Dott Services Group in Uganda, has been publicly implicated in alleged financial scandals and allegations of shoddy work on large Government contracts? This resulted in the group being banned from public contracts in Uganda, before a settlement was eventually reached.
  3. Is ZCCM aware that a Senior Executive from Array Metals Group has had business dealings with a UN sanctioned individual and has been an official advisor to the Ugandan Government, therefore being Politically Exposed? Further alleged links to Zambian government officials are noted. What comfort was obtained before engaging?
  4. ZCCM states that Array Metals is a Global Mining firm. Can ZCCM share details of their global experience in mining Gold and processing Gold.
  5. It is noted that Array Metals and Natural Resources LLC, the parent of the Zambian entity, was only registered in August 2018, in Delaware (USA), a known Tax Haven, offering a veil over some of the Ultimate Beneficial Owners. Can the Ministry of Mines confirm who the beneficial owners of this entity are as this would have certainly formed part of the due diligence exercise.

( C) TENDER PROCESS

  1. What tender procedures were performed, and what opportunities were given to the public before engaging the two Joint Venture partners? Was the public made aware that ZCCM was seeking partners?
  2. It is clear from the government statement that KMRD had not yet set up it’s gold processing facilities in Zambia before the Joint Venture. As per the above question, what alternative partners / applications were sought to evaluate and compare the best experienced and technologically advanced partner for ZCCM?
  3. Did ZCCM consider accessing the local capital markets if Investment Capital was a challenge? The Zambian Public have shown willingness to invest in a gold mining and processing operation, which could have ensured revenues remain in the country. Expertise and technology could have been brought in to educate local miners over the project period.
  4. ZCCM had over K750m ($62m equivalent) in cash / deposits as at 31 March 2019. Did management consider a larger equity holding or going alone with an expert implementation partner?
  5. It is noted in the government statement that the Ministry of Mines and Ministry of Commerce provided guidance to KMRD to engage ZCCM for this Joint Venture due to gold being recognised as a strategic asset for Zambia, as pronounced in October 2019. Only then would mineral processing licenses be issued. Was there undue pressure from the Ministries for ZCCM to engage KMRD considering the speed within which this Joint Venture was concluded (announced December 2019), and the fact that KMRD’s investment since 2016 would be lost if ZCCM rejected their approach? Did the Ministries override the independence of the ZCCM Board to require this Joint Venture arrangement?
  6. We also note that the Permanent Secretary Ministry of Mines and Mineral Development Barnaby Mulenga acts as guardian for the approval of the Mineral Processing License, and at the same time sits on the Board of ZCCM. This is the same Ministry that advised KMRD that they work with ZCCM if they wanted the license. Is this not a conflict of interest, and can the Ministry of Mines confirm that the PS did declare this conflict and exclude himself from any decisions by the Board of ZCCM Investment Holdings?

(D) OTHER QUESTIONS

  1. 1. Can the Ministry of Mines confirm the financial and non-financial investment by ZCCM into the Joint Ventures, as well as the equivalent investment by the Joint Venture partners.
  2. Can the Ministry of Mines confirm how the ownership structure was arrived at for the two Joint Ventures.
  3. It is stated that ZCCM can either increase or take 100% ownership of CGCZ after 5 years. Is this contingent on anything? What are the profitability forecasts for this company that allow the Sudanese investors to completely earn back their investment plus profit in only 5 years, an extraordinary return. Or is ZCCM expected to pay for this increased holding? If so, what is the cost?

(E) ECONOMIC MODEL

  1. What expertise are the Sudanese and Ugandan investors bringing that ZCCM did not have access to, or were unable to bring in from globally renowned and trusted gold mining jurisdictions such as South Africa, Canada, USA and Australia? What is the real value addition of these partners?
  2. How does the BoZ buying gold from companies that are effectively majority foreign owned help build reserves effectively? If the BoZ buys gold locally from a foreign owned entity, the profits will be used to buy foreign currency for transferring abroad, which defeats the whole purpose. The current effective shareholding structure leaves a third of Gold processing revenues attributable to ZCCM, but this only forms a fraction of the total production value chain, i.e. the foreign owned Array Metals will sell Gold ore to the Joint Venture entity.
  3. Zambians have already shown the ability to mine gold themselves in many parts of Zambia. What was needed was formalisation of this industry to ensure that operations are performed safely and legally, with majority owned Zambian entities throughout the value chain, benefitting government through tax revenues, and not indirectly funding illegal crime.

We take the view that Zambia’s Gold resources must be exploited entirely for the benefit of the Zambian people, whose interest we collectively profess to serve. We demand that the gold deal between Zambia and Sudan should be cancelled. It is meant to loot Zambia’s resources in order to benefit foreigners.

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21 COMMENTS

  1. Excellent analysis!
    Any sane government would have done a basic due diligence which would have revealed the fact that this is a company that is as filthy as a sewer.
    But we will see the cader calibre bloggers coming to insult hh and call him all kinds of names, despite the factual nature of the questions that have asked.
    How can a sensible leadership engage a company linked to terrorism?
    And how can you give then 35% shares when they bring 2.5million usd? That money can easily be mobilised locally. And the so called “20 years experience” is rubbish. If you wanted a credible foreign partner, you would have engaged FQM who have been mining gold at Kansanshi for years!
    But as we have said, the aim of this deal is to fund pf and enrich pf caders who are busy externalising millions of…

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  2. You gave a kachasu drunk president who has lived his entire life In a compound This is too complicated for him.., he thinks it’s like selling maize

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  3. The Engineer.. God use the foolish things to confront the wise. David was looking after sheep but God made him King.God looks at the heart not the outward appearance. HH must be the last person to speak on matters of the nation because he fully took part in the destroying of the manufacturing industries ask him to explain to you in details how he made his money.

  4. God no longer make countries. This is the only Zambia i have, my true inheritance for my children and their generations to come. Where have we lost it please. Ba mwisa should not be a priority over me!!!!!!!! .

  5. ZCCM-IH is run by corrupt PF cadres and there is no way you can allow a questionable Sudanese company ti mine our gold.

    PF must tell us the background of this Karma firm and its track record..

    These are the same Sudanese who were training PF militia men and today they come in form of investors just to come loot our gold resources.

    We don’t want that, let this matter go to parliament committee to scrutinize this Karma firm.

    PF must go!

  6. It’s high time Zambians began asking such critical questions. We have the right to be informed about these moves. It’s our gold, our country and our children’s future

  7. 5. It is noted that Array Metals and Natural Resources LLC, the parent of the Zambian entity, was only registered in August 2018, in Delaware (USA), a known Tax Haven,

    You of all people should be the last one to talk about Tax Havens.
    You hid stolen Zambian money in Panama. The Paradise Papers revealed that you stole Privatization money and hid it in a Tax Haven in Panama. You hip’po crete

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    • You always hallucinate HH stole this and that, why don’t you prosecute him since you have the evidence?

      I thought you PF government have the resources to spearhead the investigation on HH and its almost 10 years still talking about HH.

      Don’t blame him for nothing. The man is a smart investor and you thieves are worried.

      PF must go (note that this is my signature)

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  8. (E) ECONOMIC MODEL
    1. What expertise are the Sudanese and Ugandan investors bringing that ZCCM did not have access to, or were unable to bring in from globally renowned and trusted gold mining jurisdictions such as South Africa, Canada, USA and Australia? What is the real value addition of these partners?

    Those countries (HH) mentions are his trading partners and they caused the Anglo American Corporation mess on the Copperbelt. He stole Privatization money. Now he wants to give these “trusted” jurisdictions our gold. PRlCK!

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  9. Mr Kudos,
    I was expecting you to answer HH’s questions and not just continue with your usual ‘hallucinations’. HH has raised valid questions to which we as the Citizens need answers, this is our future ECL is messing up. I know this is beyond you and your ECL’s understanding.

  10. I read ZCCM-IHs statement and Mines Ministry response. It was thorough and straight forward. If hh and upnd are not clear on this, they can make an appointment with both parties and get clarity. Media gymnastics to appease diasporan donkeys and fanatical supporters is a waste of time. Like I said, bally you are an oval headed twit, exsay….

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  11. Typical pf response. Do not answer questions raised. Accuse those who ask questions of committing similar offences. Its like someone who has been accused of a crime and he is in court. The charges against him are read to him and he is asked to take plea, and his answer is “but that person has been accused of similar crimes”.
    No, caders! Just answer the question. Can we be surprised that the country is going down the drain when this is the calibre of the members of its ruling party?

  12. I have said before, money that is earned through dishonesty is worthless. Many in pf who are busy accumilating wealth through deciept will remember these words. Some will die without actually enjoying the wealth. Some will suffer terminal sicknesses that will consume all the stolen money. All will never have peace of mind because their consciences will always be reminding them that they are thieves. Some will go to jail. Most will have useless children who will wear their hearts out with sorrow because of irresponsible and destructive behavior. And lastly, all that will not repent will end up in hell.
    In short, stolen wealth does not profit anyone. Its like a bitter pill coated in candy. Sweet in the mouth, but it will make you sick in the stomach.

  13. SO YOU WANT TO SELL THE GOLD TOO ? I WONDER WHY YOU ARE STILL WALKING FREE , YOU HAVE STOLEN MORE THAN YOU CAN CHEW SO BETTER SHUT THAT BIG MOUTH OF YOURS ATI BARRY , BARRY MY FOOT

  14. This coming from a privatization thief himself. He has not answered a lot of questions yet he wants others to answer his questions.

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  15. So who is suppose to mine this gold? I believe the one who finds it is the owner. The foolish person is the one who finds it and report that he has found golf foolishness. You find gold you start mining it. It’s yours it’s not for the govt or Zambian people .it belongs to the one who discovers it. The gold has been there years and years from the begining of the earth. Where were they

  16. People of Zambia why don’t we speak the truth? This kind of hurts is not helping us let us get what is correct whether the person brought the idea u hurt him or not. HH have told you to take him to court for that accusations of privatisation of the mine
    No one dd that up to now.He offered you people with evidence a 3 bedroomed house but every accusing him failed to come up. Don’t worry HH will fix it.

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