Chinese take over kilembe Copper mines in Western Uganda

A consortium of Chinese companies has been awarded the concession to manage and operate the copper company - Kilembe Mines Limited, a finance ministry official said on thursday.

The consortium is to pay a signature fee of $4.3m (about sh11b) and an annual concession fee of $1m (about sh2.5b) to the Government
A consortium of Chinese companies has been awarded the concession to manage and operate Kilembe Mines Limited (KML).

For acquiring the concession, the consortium is to pay a signature fee amounting to $4.3m (about sh11b) to the Government. It will pay a concession fee of $1m (sh2.5b) annually. It is estimated that the mine still has 4.5 million tonnes of copper.

The Government will also benefit from statutory payments, including income tax and mining royalties, according to a statement issued by Jim Mugunga, the finance ministry and Privatisation Unit spokesman.

Mugunga said the Tibet Hima Industry Company Limited-led consortium emerged winner of an international open tender process to find an investor in KML.

The consortium is to commit over $135m towards the rehabilitation of the mine and upgrading Mobuku power plant to 12MW.

This decision brings an end to a long on and off privatisation process which started two decades ago. Mugunga said the Divestiture Reform Implementation Committee (DRIC), which is responsible for the privatisation process, had on Wednesday declared the Tibet Hima Industry Company Limited-led consortium winner after it emerged the best evaluated bidder.

Initially five companies which had sufficient technical and financial capacity were pre-qualified. They included Gingko Energy Investments Company of China, Sino- Steel Limited (China) Konkola Copper Mines (Zambia), Tibet-Hima Industries Consortium (China) and Shree Minerals of Australia.

Recently, another Chinese company was awarded the tender to construct the $1.6b Karuma power dam project.

KML was incorporated in Uganda in July 1950 by two private Canadian mining companies, Frosbisher Ltd and Ventures to mine copper, which is associated with cobalt in Kasese.

In 1962, the company was taken over by Falconbridge of Africa, which sold its shares to the state in 1975. But in 1982, mining stopped because inflation was eating up the profits in addition to insecurity.

The consortium is composed of Shanghai Baosteel Group, which is an iron and steel conglomerate with expertise in smelter technological supplies; Chinalco Luoyang Copper Company; Yunnan Copper Company with vast experiences in exploration expertise provision; and Dongfang Electric Corporation, whose expertise is in hydro-power technical and development equipment supplies.

It also includes Tebian Electric Apparatus, who are manufacturers of cables, cords and transformers; Zijin mining Group (mining and downstream beneficiation) as well as Zongshen Industry Group (mining financial investments).

What is driving copper prices up?

The KML deal comes amidst soaring prices of copper in the international market.

The prices have been driven largely by the high demand in Asia, that accounts for about 60% of the consumption. Asians like modern houses with western-style wiring and plumbing. They also like cars and electronic gadgets, thus needing copper. In 2005, China accounted for 22% of global copper consumption. In 2009, the figure was 39% and it is continuing to rise.

By Ibrahim Kasita
The New Vision Newspaper
7 July 2013