The Lueshe Mine

NEW YORK | | kongo-kinshasa

NEW YORK In early 2006, the UN Security Council strongly criticised the German government and German enterprises for their role in North Kivu (East Congo). A Security Council expertise describes the developments concerning the Lueshe Mine. german-foreign-policy.com is documenting excerpts. (Signature: S/2006/53)

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C. Lueshe pyrochlor mine



96. Pyrochlor is a powder-like ore from which niobium (also called columbium) is extracted. The combination of niobium and iron creates the highly valued ferronobium super-alloy that is used for jet-engines, rocket subassemblies or any other application where heat-resistant and super-hardened machinery parts are needed. Lueshe mine in North Kivu has the only known significant deposits of high-content pyrochlor. The mine has been operated during most of the past 20 years - although under questionable circumstances - by the Société Minière du Kivu (SOMIKIVU). This partnership was formed in 1982 between the majority shareholder Gesellschaft für Elektrometallurgie, the Ministry of Portfolio of the Democratic Republic of the Congo, and minority investors and employees.

97. During peak production times, it employed up to 3,500 workers, provided schooling to local children, medical care to local people in its own hospital, and a variety of other social services. As a result of hostilities in the early 1990s, Gesellschaft für Elektrometallurgie withdrew, declared force majeure, and because of a risk insurance settlement of approximately 8 million euros, the Ministry of Trade became a co-owner of SOMIKIVU. During an extended period of inactivity, an Austrian mining company established in Kinshasa the enterprise Edith Krall Consulting, which gained exclusive rights to the Lueshe pyrochlor deposits from President Laurent Désiré Kabila. Although Gesellschaft für Elektrometallurgie, the original owner, has ignored its responsibilities since it cashed in the insurance settlements, it has tolerated its manager Karl Heinz Albers' pretence be the owner of the Lueshe mine, while the new property owners Edith Krall Consulting have attempted to take over the operations.

98. On 14 July 2000, Albers restarted the operations at Lueshe based on a pact he had made with the rebel group RCD, later RCD-Goma. The incentive to restart was his illegal claim to ownership and an alleged lifelong exemption of any duty to pay taxes or customs duties.

99. Very quickly, RCD started to object to the alleged tax privileges, and administrative "failures" occurred, e.g., the Goma office of the customs authority OFIDA blocked for the entire month of March 2001 the importation of citric acid. Without this substance Lueshe cannot produce pyrochlor and it incurs financial losses because of inactivity. On 21 June 2001, RCD informed SOMIKIVU that the general tax waivers no longer applied, and that $200 per ton of exported pyrochlor was due. On 19 December 2002, Eugène Serufuli Ngayabaseka, the Governor of the North Kivu Province, declared SOMIKIVU to have a past due balance of $86,400 resulting from unpaid export duties. He would instruct his Chef de Division Provinciale des Mines et Géologie of North Kivu and other border control authorities of Goma to stop preparing export documentation until the company had settled its debts. On 15 January 2004 the Provincial Director North-Kivu of DGRAD, another border control authority, requested from SOMIKIVU within seven days payment of $102,643.20 for unpaid export taxes, late fees and fines.

100. Owing to frequent interruptions of the mining process or calamities with the exportation of pyrochlor caused by the obstructive provincial government, poor management and escalating consequences from the property rights dispute with Edith Krall Consulting, SOMIKIVU, which had been a profitable enterprise, became a heavy liability to Albers. Julien Boillot, the Chief Financial Officer of the company, resigned abruptly. The provincial authorities put the technical director of SOMIKIVU under house arrest, allegedly because of unpaid bills. When Albers returned from Europe, he, too, was arrested, imprisoned and confronted with the mounting bills of local suppliers.

101. The systematic degradation of Albers' management came to a head when Makabuza Ngoga took the lead in prosecuting claims against SOMIKIVU. Mr. Makabuza, better known as Mode Makabuza, is a powerful Goma-based businessman allied with Governor Eugène Serufuli, and closely affiliated with the sanctioned civil society group TPD. On 29 March 2004, Albers was left with no choice but to sign a power of attorney giving Mr. Boillot, his former chief financial officer, complete control over SOMIKIVU. A few days later, on 3 April 2004, Mr. Boillot signed his rights with another power of attorney over to Mr. Makabuza.

102. Ever since, Mode Makabuza has been serving as President of the Board of SOMIKIVU, and Celestin Vunabandi Kanyamihigo, the Minister of Portfolio in Kinshasa, appointed him as the President of a "Comité de crise". By the same letter, another associate of Mr. Makabuza, Dunia Safari, was named Directeur de l'Usine. Although the pyrochlor production stopped even before the violent takeover owing to unresolved supply and sales issues, Mr. Makabuza confirmed to the Group that he had been able to produce, sell and export approximately 20 tons of pyrochlor - with a market value of roughly $100,000.

103. The Group of Experts is concerned about the inability of the authorities of the Democratic Republic of the Congo to settle the property dispute and all its related legal actions that have been raging since 1999 between Edith Krall Consulting, the original owners, and Karl Heinz Albers. It is also concerned about the dismal exercise of ownership responsibility by Gesellschaft für Elektrometallurgie and the Ministry of Trade of Germany. The combination of these factors has rendered the entire mining operation at Lueshe inactive over long stretches of time instead of benefiting the economy of the Democratic Republic of the Congo or providing good jobs to Rutshuru's population.

104. There is also concern that the modern facilities and convenient residences of Lueshe are frequently abused by rebels and renegades as a retreat. There are numerous reports by former employees, MONUC and Edith Krall Consulting that at various times during the summer of 2004 Jules Mutebutsi and Laurent Nkunda stayed at the mine. On 12 December 2005, Colonel Kasikila, the commander of FARDC's 5th brigade, swept 33 men from General Laurent Nkunda's group from the Lueshe mine. According to the Colonel, Nkunda's people, all of them armed, had been based at the Lueshe mine.

105. Finally, Governor Serufuli's assumption of control in questions related to Lueshe demonstrates his disregard for the Transitional Government's authority. Towards the end of his campaign to oust Albers, Mr. Serufuli was repeatedly informed by Kinshasa's authorities that SOMIKIVU does enjoy tax exemptions and that his provincial administration should not interfere with responsibilities of the central Government. At the time this report was finalized in early December, Krall informed the Group that Governor Serufuli through the border authorities of North Kivu is blocking the entrance to the Democratic Republic of the Congo at the Bunagana border post of trucks that the Austrian firm, Edith Krall Consulting, sent to Lueshe. Krall intends to open and operate Lueshe, but apparently the Governor is now insisting on additional documentation.

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