01May2017

The Privatisation Unit (PU) expects to announce the winning firm to take over the almost $1b valued Kilembe Copper Mines by late April.

Privatisation Unit spokesperson Jim Mugunga said over the weekend that the evaluation of the bids will immediately follow after due diligence is done.

“We are issuing the request for proposal and doing the due diligence concurrently in February and March,” said Mugunga, adding that by early May, the process should be complete.

A notice from PU, which is mandated to undertake divestiture of public enterprises, indicates that a formal opening of the responses to the “Request for Confirmation of Interest Notice” was conducted in December last year.

He dismissed reports that appeared in the local media that there is already a winner, describing it as a “concoction.”

Reports indicate that a Cabinet subcommittee on privatisation, the Divestiture Reform and Implementation Committee, has approved a list of five shortlisted bidders for Kilembe Mines and recommended them to proceed to the final stage of the divestiture process.

The firms are Sino-Steel (China), Tibet-Hima Group (China), Konkola Copper Mines PLC (Zambia), Shree Minerals (Australia) and Gingko Energy Investments Co. (China). Initially there were close to 40 firms interested in Kilembe.

The divestiture timetable also comes on the back of a court dismissal of a case by the commercial division of the High Court in which a Canadian group, Uganda Gold Mining Ltd, had sought to block the on-going sale of the mines.

Uganda Gold Mining had sought to take over the copper mines after it had abandoned it seven years ago and had also presented a claim of $15m (about sh40b) as out of court settlement to drop interest in mines.

Justice Christopher Madrama Izama, however, dismissed the case with costs.

Reviving the once vibrant copper mines has faced several hurdles in the last few years.

If the court decision is upheld and the divestiture process is complete without further delay, it will be a big boon for one of the most lucrative minerals today, whose price has rocketed thousands of times in the last 20 years.

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After lying dormant for close to three decades, the future of Kilembe Mines Ltd, a once vibrant manufacturer and smelter of copper in western Uganda, still remains shrouded in uncertainty as attempts to revive it get mired in red tape and political interests.

The status of the mines came to the fore last week during the NRM Day celebrations in Kasese, when President Museveni broached the subject, saying “red tape” and “bureaucracy” in government was frustrating revival of the mines.

He pointed out that a group of Chinese investors had expressed interest in revamping the Mines but were being frustrated by technocrats.
The Daily Monitor has seen a letter the President wrote on October 14 last year introducing Gingko Energy Investment Company, a Chinese firm, to the ministries of Finance and Energy, saying the company “sounds genuine”.

Talking deals
The President said [his] “supporters” in Kasese had introduced a group of Chinese investors to him and as such, asked the line ministries to confirm the “capacity” and “engage” the company with a view to conclude the deal. The letter was copied to the Vice President and Prime Minister among others.

Sources close to the deal said a presidential assistant introduced the Chinese company to the President and that even if he had asked Finance to follow the law, technocrats are under pressure from “State House people” who are pushing the company to get the deal.
In his letter, the President says he had been told that other groups (investors) had made inquiries about the mines and asked Finance officials to check the “capability” of all other applicants, make a shortlist and engage them.

The President also directed the officials handling the deal to involve the Public Procurement and Disposal of Public Assents Authority (PPDA) and the Attorney General.
Over three months later, the President, while addressing the just-concluded NRM Caucus in Kyankwanzi, again raised the Kilembe matter, this time blaming “timid political elements and indifferent, if not compromised civil servants” for the delays to revamp the mines.
He added: “Investment promotion means attracting people with money, entrepreneur skills and technical know-how. This is not a job of PPDA but Uganda Investment Authority working with privatisation Unit of Ministry of Finance.”

The President’s concern, however, runs in the face of other roadblocks. In October 2012, a Canadian company, CANAF Group, had sought a court order to block the privatisation of the mines.

The company, formerly known as Uganda Gold Mining Ltd, had also asked court to order the Attorney General and Kilembe Mines to enforce an order which necessitated Uganda Gold Mining to re-enter Kilembe Mines, seven years after abandoning the site. Uganda Gold Mining had also presented a claim of $15million (about Shs40b) as out-of-court settlement to drop interest.

In a ruling last Friday, the Commercial Division of the High Court dismissed the case with costs, offering the green light to the deal.
Justice Christopher Madrama Izama said: “The order sought would interfere with the privatisation process prescribed by Parliament on the basis of an agreement to which the government is not party. The state is entitled to carry out the privatisation process under the Public Enterprises Reform and divestiture Act cap 98 laws of Uganda.”

Stumbling blocks
It was because of the court injunction that the technocrats at Finance on November 29, 2012, wrote to the President informing him of the court case and their inability to proceed with the procurement process.

But other sources in the Energy ministry told the Daily Monitor that State House officials, who had apparently introduced the Chinese company to the President, travelled to China to carry out the due diligence.
The Privatisation Unit, however, reportedly rejected the due diligence report.
Last year, Energy Minister Irene Muloni wrote to the President backing the company, saying it would invest $100 million (about Shs266.1b) to revive production at Kilembe.

When contacted yesterday, the Finance spokesperson, Mr Jim Mugunga, said: “We are not under pressure to favour anybody, we are under pressure to ensure that we attract investment. The President has been clear on the need to revamp the mines and asked us to ensure this is done without further delay.”

The Daily Monitor also understands that after the “single-sourcing” idea was rejected, a Cabinet sub-committee on privatisation approved five shortlisted bidders for Kilembe Mines Ltd, including Gingko Energy Investment Co. and recommended them to proceed to the final stage of the divestiture process.

The bidders who will now be required to submit detailed technical and financial proposals are; Sino-Steel (China), Tibet-Hima Group(China), Konkola Copper Mines PLC (Zambia), Shree Minerals (Australia) and Gingko Energy Investments Co. (China). The shortlist is expected to be publically announced today.

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The Government is to re-open the Tororo-Pakwach railway line at the end of July after the completion of rehabilitation works.

Darlan De David, the Rift Valley Railways (RVR) group chief executive officer, in a letter to works minister Eng. Abraham Byandala, said the rehabilitated line will be completed on July 31.

In the June 20 letter, David said the rehabilitation works to Gulu would be completed by June 30. The letter was copied to the Uganda Railways Corporation and the Privatisation Unit in the Ministry of Finance.

“However, without the five level crossings between Lolim and Pakwach, we will complete works on July 15. In the event that the crossings are addressed in time with the full cooperation of the Uganda National Roads Authority (UNRA), we are confident that we shall be able to begin trial runs on the line from July 31,” David added.

He said notwithstanding the challenges of the crossings, the line should be operational up to Gulu by the end of this month.

The Tororo-Pakwach line, which has been out of service for decades, will be pivotal as an economic artery linking eastern Uganda to northern Uganda, as well as the neighbouring countries of South Sudan and DR Congo.

David said the completion of the rehabilitation and reopening the line will be a major milestone in opening the northern corridor.

The Rift Valley Railways (RVR) hired Kato Contractors, a Ugandan engineering company, to repair the line in a phased approach at an estimated cost of $2m.

The works included clearing bushes, weeding, removal of anthills, restoration of washed out areas due to flooding and installation of culverts.

Under the recently launched National Transport Master Plan, the Government is to improve railway infrastructure with a standard gauge railway line, to addresses growth in demand for transport, along with general increase in property in the country.

The rail network will be vital in developing the country’s oilfields which lie in western and northern Uganda, with a new railway line from Gulu to Nimule and South Sudan.

In his State of the Nation address this month, President Yoweri Museveni said the country’s railways infrastructure will be built as part of the Vision 2040, and Uganda has received good offers from reliable financiers, while the UPDF Engineering Brigade has been trained to undertake the railway construction work.

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A Ugandan firm is among nine companies that have expressed interest in the rehabilitation of the Kilembe mines in Kasese. The other eight that submitted bids which were opened on Friday at the Privatisation Unit offices are from the UK, China, Canada, Australia and Zambia.

The opening of the bids marks an end to the first phase of the project, in which the Privatisation Unit invited the expression of interest in the one-time shining mine. At the start of last month, companies were invited to re-confirm their interest; the deadline was then extended to the period of November 21 to December 15.

Jim Mugunga, the public relations officer of the Privatisation Unit, which is under the Ministry of Finance, Planning and Economic Development, said Kilembe Mines was being offered as a whole.

“We are going to go through an evaluation in January, and then we will come up with a Request for Proposal in the same month,” he said of the next phase of the project.

A detailed document, the Request for Proposal, will require the nine bidders to give their detailed business, investment and operation plans for the re-development of the mines.

Thereafter, the Government will carry out due-diligence on the credentials of each bidder to make sure that they have the technical, financial ability and the reputation to successfully execute the rehabilitation.

“Our target is to conclude the whole procurement process by the end of next year,” Mugunga said.

Privatisating Unit’s Moses Mwase says the re-development of Kilembe mines is timely as the copper prices are on the rise.hereafter, the Government will carry out due-diligence on the credentials of each bidder to make sure that they have the technical, financial ability and the reputation to successfully execute the rehabilitation.

“Our target is to conclude the whole procurement process by the end of next year,” Mugunga said.

Privatisating Unit’s Moses Mwase says the re-development of Kilembe mines is timely as the copper prices are on the rise.

“International demand for copper has been picking up for the last four to five years. A kilo of copper is now between sh7,000 and sh8,000,” he said.

Mwase revealed that the known mineral deposits in the mines can be extracted for up to seven years. The re-development of the mines also includes the mining of the unrevealed deposits.

Currently, Kilembe mines, which was established and incorporated in Uganda as a mining company in 1950, only carries out care and maintenance works at the mines.

A one-time cash cow for the Ugandan economy, political upheaval and a drastic fall of global prices in the early 1980s masterminded the end of mining activity in Kasese.

The firms include:

Shumuk Investment Ltd (Uganda), Springwood Capital/Worley Parsons (UK), Kombat Copper (Canada), Konkola Copper Mines plc (Zambia), Shree Minerals Ltd ((Australia), Tibet Hima Group (China), Wharton (UK), Gingko Energy Investment Co. Ltd (China), Sinosteel (China)

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