Mining the Congo: Golden opportunity [Banro Corp.] – by Jennifer Wells (Toronto Star – July 10, 2011)

Jennifer Wells is a feature writer with the Toronto Star, which has the largest circulation in Canada. The paper has an enormous impact on Canada’s federal and provincial politics as well as shaping public opinion. No stranger to the mining industry, Ms. Wells won the 1999 National Business Book Award for Fever: The Dark Mystery of the Bre-X Gold Rush as well as covering many other major mining stories.

TWANGIZA, DEMOCRATIC REPUBLIC OF CONGO

Baraka Zihindula appears small for 13, sitting on his bum on the ground, in his royal blue school shorts and short-sleeved shirt. He’s worrying the earth with a stick in the distracted manner of adolescent boys everywhere as he tells his life story, a task that might seem inflated for a mere 13-year-old, until you learn Baraka’s life thus far has included six years of hard labour.

Baraka was 8 when he started panning for gold, working artisanally as a miner alongside his two brothers and his father, just one more family, invisible amid the million-plus informal miners who scrabble for a subsistence living in the Democratic Republic of the Congo.

Baraka’s family lives in the village of Luchiga and every day, seven out of seven, the boys would accompany their father to the river. A little gold was found just about every day, Baraka says, and that little gold was converted to a little money and with that little money his mother was able to feed the family.

Sometimes the father would keep the boys working overnight.

Seated in the shade of a tree, a stone’s throw from the school he now attends, Baraka has kicked off his plastic sandals. There’s a light breeze, the air is fresh and Baraka looks handsome in his schoolboy uniform.

He loves soccer. He loves reading and writing. Anything the teacher gives him, he says.

Baraka would also love to get to his lunch of beans and cassava, which awaits, as do his school chums who have been seated at wooden desks all morning in a cool cement school room, the sun slanting in through blue shutters and across the dirt floor as the children prep for the country’s Grade 6 national exam, which will advance Baraka to. . .

Well, to where exactly?
Baraka is one of 200 child miners who have been removed from the area’s rivers and pits and introduced to what by all appearances is a welcoming educational environment supported in large part by a junior exploration company still largely unknown outside of the investment community, Toronto-based Banro Corp.

Those who make a habit of perusing the publicly traded equity holdings of the Canada Pension Plan will find Banro’s name there. As of March 31, the CPP held 1.1 million Banro shares with a market value of $3 million.

In October, or possibly November, Banro will pour its first gold bar at its Twangiza mine, located on the Namoya-Twangiza gold belt, a 210-kilometre trend that stretches southwest from DRC’s province of South Kivu into the adjacent province of Maniema. The Kivus — North and South — along with Maniema, have been a notorious and lucrative base of operations for armed groups financing regional conflict through the extortion and illegal taxation of informal miners. When the world decries the use of “conflict minerals” in fancy electronic gadgets, its focus turns here.

There are a million horror stories. A week ago, the United Nations Joint Human Rights Office released its final report into last summer’s mass rapes in Walikale Territory, home to the country’s infamous Bisie “mine,” where men young and old burrow deep into pits and along 100-metre tunnels to retrieve tin ore — by hand.

UNJHRO concludes in its report that 387 civilians in 13 villages — women, men, girls and boys — were raped across a three-day period by a coalition of armed groups, including the Democratic Forces for the Liberation of Rwanda (FDLR) and the Mai-Mai Cheka.

Often the rapes were carried out in the presence of relatives and children. “It is better to die than being raped by FDLR and their allies,” one victim told investigators, “because such rape is the worst humiliation against a human being.”

In light of the systematic, well-planned and targeted nature of the attacks, the report concluded, “the exactions committed could constitute crimes against humanity and war crimes.”

Stanching the flow of conflict minerals from the Congo is the intent of Section 1502 of the Dodd-Frank act, signed into law last summer by U.S. President Barack Obama. By the end of this year, the U.S. Securities and Exchange Commission will adopt rules compelling all exchange-listed companies to disclose the source and traceability of 3TG minerals from the region — that is, tin, tungsten, tantalum and gold. To date, the Canadian government has no similar legislation.

Canada’s Banro plays a singular role in the unfolding drama. When it celebrates that inaugural gold pour, the company will be the first to bring an industrialized gold mine on line in the Congo in more than half a century. The gold bars will be flown directly to the Rand refinery in South Africa.

For those who believe the quickest way for the Congo to right itself economically is through the development of extractive industries, Banro’s accomplishments in the region, set against this cataclysmic back drop, will be a test case.

The boosterism of company insiders comes as no surprise, yet even they have set the bar stratospherically high. “I believe industrial mining holds the key to peace,” says Peter Kersi, a Congolese and Banro’s chief geologist.

Kersi has another prediction: “We see a gold boom coming very soon.”

From the highest vantage point above the Twangiza mine, it appears as though someone has taken a sabre and sheared off the top of a hill as cleanly as clipping the crown off a soft-boiled egg.

The altered landscape is the work of seven excavators, two graders, two dozers, two drum rollers: the list is long. Banro puts its equipment cost at $13 million and its exploration and development costs to date at $450 million (U.S.). Ninety kilometres of road have been built in a country renowned for its absence of infrastructure.

In mining terms, this is not a megaproject. Gold production from the first of two open pits at Twangiza is designed to extract easy-access, high-grade ore first. Production is expected to reach 130,000 ounces a year during the first five years of the mine’s life, at a cash cost of $345 (U.S.) an ounce. Placed against the production of Barrick Gold Corp., at 7.8 million ounces last year, Banro in the near term will be a baby player on the global stage.

Longer term, the company plans to bring three mines in addition to the two at Twangiza into production, aiming to move quickly past 600,000 ounces of gold per annum. In anticipation of that, the company has chosen to pre-emptively brand itself as the “premier central African gold producer.”

The far more dramatic narrative of Banro’s presence in the Congo dates to 1996, when the company purchased 64 per cent of the assets of Sominki, an amalgam of colonial and post-colonial mining interests. For just $3.5 million Banro picked up 47 mining concessions spread throughout more than 1 million hectares of land.

Little more than a year later, Ugandan- and Rwandan-backed rebels marched across the eastern region of what was then Zaire, leading to the fall of Mobutu Sese Seko in 1997 and the installation of Laurent Kabila as president. In August 1998, uprisings in the eastern provinces launched a prolonged war that would claim more than 5 million lives, a tragedy that failed to catch the world’s attention in the same way that, say, the Rwandan genocide did, but then, the Congo has long been the forgotten country.

In July 1998, a month before the launch of hostilities, Banro’s Congolese assets were expropriated by the government of Laurent Kabila. The company launched what would be a four-year legal battle before reaching an out-of-court settlement with the DRC in April 2002. Banro was granted a 100-per-cent interest in Twangiza, as well as full ownership of three other known gold properties: Kamituga, Lugushwa and Namoya. The new arrangement granted the company ownership for 30 years.

Martin Jones runs the Banro Foundation, which drives the company’s corporate social responsibility initiatives. He credits the new government of Joseph Kabila with helping Banro to the happy place in which it finds itself today. The younger Kabila, in one of the more unlikely twists in Congolese history, was placed in power after the assassination of his father and remains president to this day.

“When Joseph came into power the interim government that was in place wanted to begin developing resources and realized they could only do that by attracting foreign capital,” Jones recounts. “So they approached us. . . and we worked out a new arrangement with them whereby we got our old mining conventions back again, but they were negotiated under new terms.”

A near decade has passed, yet questions about Banro’s arrival and early deal-making remain. The Supreme Court of Canada has yet to rule on a jurisdictional battle waged between Banro and Quebec author Alain Deneault, whose Noir Canada: Pillage, corruption et criminalité en Afrique levels allegations against Banro of tax fraud, misappropriation of assets and the illicit export of minerals in those early days. Banro sued Deneault and his two co-authors for defamation in Ontario Superior Court in June 2008, seeking $5 million in damages. No statement of defence has been filed as the defendants continue to assert the action should be tried in Quebec.

For the rest of this article, please go to the Toronto Star website: http://www.thestar.com/news/insight/article/1022546–mining-the-congo-golden-opportunity

Comments are closed.