Curse of Africa's precious metal haunts miners

Curse of Africa's precious metal haunts miners

By David White, Financial Times

1st June 2005

The Kilo-Moto mines are the stuff of legend, a fabled store of wealth deep in the heart of Africa. Gold was first discovered in these hills in 1903 by two Australians on a Belgian expedition in what was then the Congo Free State, run as a personal domain of King Leopold II.

By Congo's independence in 1960, the area was reckoned to have produced 10m ounces of gold - or more than 300 tonnes - worth $4bn (€3.2bn, £2.2bn) at today's prices. After nationalisation output declined and since war broke out in 1996 the big mines have been virtually paralysed.

However, AngloGold Ashanti has a vast 10,000 sq km exploration concession surrounding the original Kilo mine, historically the most productive of the gold-bearing zones, with a mining licence covering 2,000 sq km of the area. Howard Fall, exploration manager, describes it as "one of the last greenstone belts unexplored by modern methods".

But even without today's political and security concerns it would be tough terrain. Much of it is dense rainforest, where downpours produce great clouds of vapour from the tree cover. Colonial-era roads have fallen into disrepair. The 100km drive from Bunia, main town of Ituri district, to the mining centre of Mongbwalu can take days.

Ituri, just 3 per cent of the total area of the Democratic Republic of Congo but twice the size of Belgium, has been the scene of continued violence and tension since the country's civil war officially ended two years ago and a transitional government was established in Kinshasa.

AngloGold Ashanti's camp in Mongbwalu is isolated behind a razorwire fence. A guard force headed by a team of former Gurkha soldiers from the British army, has dogs but no firearms. With no formal police, security depends on a 150-strong company of Pakistani UN peacekeepers, who moved into the town in April.

Before that, the law was laid down by the tribal militia of the town's majority Lendu population, the Nationalist and Integrationist Front (FNI).

AngloGold Ashanti still cannot reach all of the area over which it has rights. since a southern part is controlled by a rival armed group, the hardline Union of Congolese Patriots (UPC).

AngloGold Ashanti began its search for a large new mining prospect last year, confining itself to a 150 sq km patch around Mongbwalu. From the outset it faced demands from the FNI for goods and services. For several months last year the company complied with a levy of 6 US cents per kilogramme on freight arriving at Mongbwalu's airstrip. The company says its officials in Kinshasa found out about the practice in September. "It was immediately stopped."

The FNI's president Floribert Njabu, now in detention, took over an unoccupied house belonging to the company, just outside the camp, and used it for meetings. In December the FNI asked for $8,000 to fly a delegation to Kinshasa. The company says that it refused, but that the FNI returned in January with an ultimatum to pay up. The company paid after consulting Ituri's district commissioner. It says she advised them to do so. She says she did not.

In a response to a UN panel monitoring the arms embargo on the region's militias, the company acknowledged that "payments of this kind are not consistent with AngloGold Ashanti's business principles".

In late February, Mr Fall says, the FNI indicated it wanted more money. "There was no way that we were going to put ourselves in that position again." AngloGold Ashanti's team of about 20 staff flew out, not returning for a month.

The incidents highlight the dilemmas facing companies in unstable regions, and the thin dividing line between support for local communities and support for particular factions.

The company has funded health and school facilities and now has very few dealings with the FNI, he says. But in its report, The Curse of Gold, published today, Human Rights Watch argues that the FNI gained legitimacy locally and nationally by being associated with the mining multinational.

"I think God has an inherent sense of justice and humour so that he puts gold in interesting places," Bobby Godsell, AngloGold Ashanti's chief executive told a recent conference.

With South African high grade mines running out of ore and becoming unprofitable, the company has been seeking new reserves in high-risk countries such as Congo and Colombia. A spokesman said one of the risks involved in Congo was that of "offending human rights sensibilities".

The Kilo venture, which is at least four years away from production, has raised objections in the region. Petronille Vaweka, the district commissioner, a leading and respected figure in pacification efforts, says the company should not have been given the whole area, but that part should have been kept "for the future". She favours renegotiating the licence.

Floribert Kanda, a representative of the Office des Mines d'Or de Kilo-Moto (Okimo), the state company nominally in charge of concession areas, complains it had no say in the deal, which gave it just a 13 per cent share. AngloGold, which pays Okimo fees, is "both landlord and tenant", he says. He describes the deal, decided under the previous government headed by Laurent Kabila, assassinated father of the current president Joseph Kabila, as a diktat.

Okimo is trying to recover its role in regulating the small-scale mining concessions that dot the territory. Miners are supposed to send Okimo 30 per cent of their production and sell the rest through an official trading house. But this system has broken down, with gold-diggers having to pay fees to the militia. "The FNI has supplanted Okimo in the control of artisanal miners," says Mr Kanda. As a result, he says, 70 per cent, if not more, of all the gold currently being mined in the area has been going out through illegal channels.