Running discussion on SP, page-80252

A rush for Lithium in Africa risks fuelling corruption and failing citizens

https://www.globalwitness.org/en/campaigns/natural-resource-governance/lithium-rush-africa/

Efforts to address the global climate emergency are leading to an increased demand for renewable energy technology, particularly in the Global North, including electric vehicles and the batteries required to power them. Africa is one of the new frontiers in a race for battery metals, and lithium – sometimes referred to as ‘white gold’ – is one of the most sought-after commodities. Global Witness investigated three emerging lithium mines in Zimbabwe, Namibia and Democratic Republic of Congo (DRC). What we found shows that the rush for lithium on the continent – far from delivering a ‘just energy transition’ – risks fuelling corruption, and a range of other environmental, social and governance (ESG) problems. For generations African nations have been exploited for their minerals, and as the demand for ‘transition minerals’ increase, there is a danger of history repeating itself.A WORKER HOLDS A LUMP OF LITHIUM ORE IN MANONO, DRC. CREDIT: JACK WOLFE, NEW LINES MAGAZINEOur investigation looked at two of the first African mines to export lithium ore internationally – Zimbabwe’s Sandawana mine and Xinfeng Investments’ lithium mine in Uis, Namibia. We also looked into DRC’s Manono project, believed to be Africa’s largest lithium deposit.We found that:In Zimbabwe, the Sandawana mine saw a lithium rush involving thousands of artisanal diggers working in unsafe conditions, with reports of child labour and miners being buried by a mine collapse. In early 2023 it was reported that the diggers had been evicted, their minerals reportedly confiscated and the mine taken over by companies with close links to Zimbabwe’s ruling ZANU-PF party and military, including firms subject to US or EU sanctions. Despite an official ban on unprocessed lithium exports, the politically-connected Sandawana mine appears to have been exempted, trucking thousands of tonnes of ore out of the country during 2023.In Namibia, Chinese-owned firm Xinfeng Investments has been accused of acquiring its Uis lithium mine through bribery. There is also evidence that Xinfeng developed the industrial mine using permits intended for local small-scale miners. This seems to have allowed Xinfeng to start mining a major lithium deposit for as little as US$140, while dodging the need for an environmental impact assessment. Local communities and Namibian parliamentarians have accused Xinfeng of housing workers in ‘apartheid conditions’, buying off local chiefs and scaring away the wildlife that brings tourist dollars into the area. Xinfeng has shipped thousands of tonnes of raw lithium ore to China, failing to deliver on promises to build processing facilities within Namibia. In DRC, the development of the Manono lithium deposit – stalled by a dispute involving Australian and Chinese mining companies – has raised numerous corruption red flags. The project appears to have generated as much as US$28 million for shell companies held by middlemen implicated in previous corruption scandals involving ex-President Joseph Kabila. Furthermore, a senior official in current President Felix Tshisekedi’s party reportedly received $1.6 million in ‘commission’ from Zijin Mining when it acquired shares in the project. The state-owned mining company that signed the Manono deals has been accused by DRC’s anti-corruption agency of selling lithium rights at a “cut price” and “squandering” the proceeds. These cases show that as the lithium rush ramps up, some of the risks facing mineral-rich countries are all too real. The mineral supply chains for the batteries that will power the green energy revolution should benefit producer nations. Instead, they could embed corruption, fail to develop local economies, and harm citizens and the environment. Battery makers, car firms and policy-makers in consumer countries must ensure that battery mineral supply chains are rigorously screened for corruption and other ESG risks.DOWNLOADSDownload a PDF version of the report(4.0 MB), pdfThe lithium landscape in AfricaThe world's lithium supply is currently dominated by Australia, Chile and China, which together accounted for over 90% of the 130,000 tonnes produced globally in 2022. However, with demand for lithium projected to increase sixfold between 2022 and 2035 if existing climate targets are to be reached, the landscape is set to change rapidly. Exploration stage projects are gathering pace across the globe, and Africa is no exception. Lithium resources have been identified in Zimbabwe, Namibia, Ghana, the Democratic Republic of Congo (DRC), Mali and Ethiopia. Several projects on the continent have been backed by major players in the battery and commodity industry such as CATL, Ganfeng Lithium and Glencore. Nevertheless, the vast majority of African lithium projects remain at an exploration or development stage. DRC’s stalled Manono project: shell companies profit while Congolese citizens wait for changeDRC is home to what some believe to be the world’s biggest lithium deposit. The estimated 6.6 million tons of lithium in the earth around the remote town of Manono could transform its economic fortunes and place it at the forefront of the green energy revolution.People here hope lithium mining will make things like they were [back when Manono had tin mining], when we had running water and electricity 24 hours a day. But people are getting discouraged. Our hopes are sinking.- Abbot Moise Kiluba, a Catholic priest and civil society leader from ManonoEfforts to develop the Manono-Kitotolo mine have been bogged down in an ownership dispute over the mining license between Australian-listed AVZ Minerals and the Chinese conglomerate Zijin Mining. The project has been the subject of numerous legal proceedings, accusations of foul play and an investigation by DRC’s state anti-corruption agency. Five years after lithium deposits were confirmed at Manono the project seems to be far from producing the lithium needed to help power the EV revolution, nor much closer to paying mining royalties to DRC’s cash-strapped government. Meanwhile AVZ Minerals has seen its stock tumble because of troubles over the Manono project. Its share price plummeted by 40% in little over a month before the company voluntarily suspended trading in May 2022. The suspension remains in place. AVZ first acquired a stake in the Manono project in 2017, striking a deal to acquire a controlling 60% of the Manono joint venture. The Congolese state-owned company COMINIERE meanwhile retained 30% of the project, with the remainder owned by a mysterious company called Dathomir Mining Resources. AVZ also signed deals with some of the biggest players in the Chinese battery metals sector. It entered a “strategic relationship” with Zhejiang Huayou Cobalt, one of the world's top battery materials producers. AVZ also made an agreement with CATH, a subsidiary of the Chinese battery giant Contemporary Amperex Technology Co (CATL) – the world’s biggest EV battery producer – to supply them with 50% of the mine’s lithium. The deal involved CATH buying a 24% stake in the joint venture from AVZ. But in 2021 COMINIERE agreed to sell a chunk of its shares in the venture to Chinese mining giant Zijin. AVZ says that it had the ‘rights of first refusal’ in the event that COMINIERE decided to sell any of its shares in the project. With AVZ having already agreed to sell 24% of the project to CATH, and an agreement with Dathomir to buy its remaining joint venture shares being challenged in a DRC court, the Australian firm’s majority control over the project was now in question. Zijin meanwhile says it is the legitimate owner of 15% of the project. The controversy over the stalled project has thrown up several corruption red flags. An investigation in 2022 by DRC’s state anti-corruption body, the Inspection Générale des Finances (IGF), found that Zijin had paid substantially under market value for its shares in the Manono project. It also found that Zijin had paid $1.6 million to a consultancy firm called Focus Plaidoirie in ‘commission’ as part of the deal. Focus Plaidoirie is reportedly owned by Lisette Kabanga, previously deputy secretary in charge of external relations for President Felix Tshisekedi’s political party, and an aide to the president’s security advisor. Paying such a large ‘commission’ to a politically connected aide as part of a mining deal would appear to be a classic corruption red flag.The IGF report into COMINIERE was also highly critical of the state-owned mining company. It found that the $33 million received from Zijin Mining was “squandered”, noting that COMINIERE’s coffers were “almost empty”. COMINIERE was engaged in a “veritable cut-price sell-off of the mineral heritage of the state” the report concluded.AVZ meanwhile made headlines in 2022 following media reports that its CEO was reportedly proposing to pay $6m in cash and shares to a politically well-connected Congolese middleman who it hired as a consultant to help secure a positive outcome in its struggle to secure the Manono mining licence. The payment was eventually vetoed by AVZ’s board amid concerns over potential corruption. When contacted by Global Witness AVZ said that before appointing the consultant it “carried out appropriate independent due diligence […] which disclosed no material probity issues or red flags,” adding that the consultant was required to abide by AVZ’s anti-bribery policy. Perhaps most alarmingly of all, the deals through which AVZ acquired control of the mining permit appear to have generated as much as $28 million for Dathomir Mining Resources, a mysterious shell company seemingly named after a planet in a Star Wars movie. Dathomir had acquired control of the Manono project in 2016, striking a deal with COMINIERE in which it agreed to make a US$6 million initial payment to the state-owned mining firm in instalments. But before it had to make this payment Dathomir, within two months, struck a deal with AVZ in which the Australian firm acquired 60% of the Manono project, agreeing to take on responsibility for paying the US$6m that was owed to COMINIERE. As part of the deal AVZ also paid Dathomir US$750,000 in cash and gave it shares in AVZ that – when Dathomir sold them in April 2019 – were worth approximately US$6.8 million dollars. AVZ also subsequently reported to shareholders that it had acquired a further 15% stake in the project from Dathomir in exchange for US$20.5m. So it seems that Dathomir Resources – a company without a well-known track record of running any actual mining projects – had acquired the Manono project for next to nothing. Although it promised to finance the development of the project, instead within two months it sold on most of its stake in the joint venture generating millions of dollars in cash and AVZ shares, seemingly for doing almost nothing to develop the mine. But who were Dathomir’s owners? Dathomir Resources – a DRC registered company – is managed by Cong Maohuai, well-known in DRC mining circles as Simon Cong. Sometimes referred to in media reports as the “godfather” of Chinese mining deals, Cong was also the owner of firms involved in managing DRC’s lucrative toll roads. These companies were accused in 2021 of having transferred millions of dollars to Congo Construction Company (CCC). According to a Bloomberg investigation, “Over a five-year period, tens of millions of dollars flowed through CCC’s accounts to people and companies closely associated with Congo’s then-president, Joseph Kabila.” A report by Boatman Capital Research indicates that Dathomir Mining Resources was 80% owned by Dathomir International Corporation, a company incorporated in the Seychelles. Cong told Global Witness in 2021 “I am the ultimate beneficial owner of Dathomir International Corporation”. Cong is also named on documents as the manager of Dathomir Resources.