ARTICLE | NOV. 14, 2023
A rush for Lithium in Africa risks fuelling corruption and failing citizens
Lithium resources in Africa
DRC’s stalled Manono project: shell companies profit while Congolese citizens wait for change
DRC 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 Manono
Efforts 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.
ARTISIANAL MINERS WORKING IN MANONO DRC CREDIT: JACK WOLFE, NEW LINES MAGAZINE.
According to Boatman Capital, the other 20% of Dathomir Resources was held by Guy Loando and his family. Loando also represented Dathomir Resources on the board of AVZ from 2017 to 2019. A Kinshasa lawyer who has described Simon Cong as his ”mentor”, Loando became a DRC senator in 2019 and currently serves as a minister in DRC’s government. In 2012 Loando helped set up Congo Construction Company (CCC), a firm that reportedly funnelled millions of dollars from a major Chinese mining project to the family and associates of then President Kabila. Loando held a 20% stake in CCC until 2017. According to anti-corruption NGO The Sentry, “CCC’s role [had] all the hallmarks of a massive bribery scheme.”
So the Manono project’s giant lithium deposit may have generated as much as $28 million dollars for mysterious shell companies controlled by controversial dealmakers. But it has so far produced relatively little for DRC’s treasury. According to the most recent EITI report for DRC, which covers 2021 and 2022, the Manono joint venture company paid less than US$260,000 to DRC’s treasury in taxes over the two years. Until the Manono mine starts to produce lithium and therefore pay mining royalties, the taxes it generates for DRC are likely to remain negligible.
Global Witness contacted AVZ, Cong Mao Huai and Guy Loando prior to publication. Mr Mao Huai and Mr Loando did not respond. AVZ’s response can be read in full
here. In earlier correspondence with Global Witness in 2021, available in full
here, AVZ said “prior to investing in the Manono Project, AVZ engaged in due diligence of relevant corporations and individuals […] Our due diligence did not reveal any inappropriate links between individuals involved in the Manono Project and [President] Joseph Kabila Kabange nor any members of his family.”
The future of the Manono lithium project – potentially Africa’s biggest – remains shrouded in uncertainty. In January 2023 DRC’s mines minister refused to convert the AVZ project’s exploration license to an operating licence that would allow mining to begin. The minister noted “persistent conflicts, recurring disagreements between shareholders and the project being held hostage” as the reason for not granting the license. The Manono mining permit was reattributed back to COMINIERE and in October 2023 the permit was cut in two and the north-eastern section granted to a new joint venture company controlled by Zijin Mining and COMINIERE. AVZ has publicly criticized this move as lacking “any legal foundation.” When contacted by Global Witness prior to publication, AVZ said it “believes Jin Cheng [Zijin’s subsidiary], Dathomir and Cominière are acting in concert to crystalise disputes with AVZ and disrupt and delay the development of the Manono Project with the aim of seizing control.” AVZ also stressed that it is multiple arbitration processes with these three companies. AVZ’s response can be read in full
here.
DRC’s mammoth lithium deposit is still at least two years away from producing lithium. Poor governance, corruption and investors’ willingness to turn a blind eye to red flags have all seemingly played a role in the stalling of the project. Meanwhile the population of Manono – and DRC’s treasury – are still waiting for lithium to bring them some tangible benefits.
DOWNLOADS
Contact
- Colin Robertson
Senior Investigator - Natural Resource Governance
