Ministry Orders Kenticha Mining To Surrender License In Increasingly Tangled Investment Saga

Shareholder update applauds progress despite Ministry order, pressure from Oromia admin

The protracted saga of intrigue over a lucrative lithium and tantalum mining project involving the Ministry of Mines, the Oromia regional government, Kenticha Mining Plc, foreign investors, and an American venture capital firm has taken yet another unexpected turn.

On May 9, 2024, Minister of Mines Habtamu Tegegn (Eng.) wrote a ‘Notice of License Surrender’ to the heads of Kenticha Mining Plc (KMP), instructing the firm it had no more than five days to initiate the surrender process for its lithium, tantalum, and niobium mining project in the Oromia region’s Guji Zone.

“The Ministry issued several reminders urging your company to resume mining activities. On December 20, 2022, a formal letter was sent emphasizing the need to complete the mining development program and commence production within one month. Further discussions took place on June 9, 2023, during which the Minister of Mines reiterated the urgency of starting mining production within two months. Unfortunately, during this meeting the company came up with a new idea, stressing that the tailing dam mining would not be feasible, which was odd to the Ministry,” reads the notice.

KMP, a joint venture between the Oromia Mining Share Company (OMSC) and Abyssinian Metals Limited (AML), first gained a concession to mine in southern Oromia in December 2021. AML is itself a subsidiary of African Mining and Energy Limited (AME) group, which has more than 185 shareholders from the US, UK, and Australia, among others.

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In October 2023, the Oromia regional administration and OMSC moved to terminate the partnership with AME, claiming the latter had failed to fulfill financial obligations and meet project progress expectations. However, courts have yet to rule on the termination and although the Ministry of Mines has also moved to cancel the licenses and concessions granted to KMP, the handover of projects under the joint venture remains in limbo.

The letter from Minister Habtamu on May 9 was accompanied, on the same day, by another letter to KMP. The second was a ‘Notification to Enter upon Exploration Activities’ for the same minerals in the same locality.

“The Ministry would like to notify you to fulfill your exploration obligations and submit an activity report within 60 days,” reads the second notice.

Another letter from Million Mathewos, a state minister for Mines, dated May 15, 2024, affirms the granting of an exploration license and warns KMP to “correct and for the last time” internal discrepancies with the joint venture and an unsatisfactory financial status.

To add to the confusion and obscurity, on June 5, 2024, AML disseminated a “shareholders’ update” in which it made no mention of the notice to surrender its license and instead focused on claims that the company had been ordered to resume production within 60 days.

“KMP received a letter from the Ministry dated May 9,2024, titled: “Notification to Enter Upon Exploration Activities.” This was a clear instruction to KMP to return to exploration activities at the Kenticha site, and to report on activities within 60 days. We were delighted with the receipt of this letter as it represents the start of the process towards resolution of the disputes,” reads the update.

Officials and insiders who spoke to The Reporter claim that despite knowing the license has been revoked, the heads of AML are painting a rosy picture in a bid to raise additional funding from foreign investors and stock exchanges.

The shareholder update assures that “the mineral licenses are in good standing and Kenticha Mining Plc is in good standing” and provides details on a “10-year mine production plan” devised by a mining consultancy named ERM.

“Upon completion of the 10-year mine plan, the ERM team will work with the AML mine planning team to generate a 20-year mine plan,” it reads.

The document also states AML is looking to secure USD 130 million in credit and a further USD 20 million from a separate financing scheme to kick off the Kenticha project, almost three years since it first gained licensure from the Ministry.

“AML (through its corporate advisory team) has commenced a formal process seeking partners for a long-term spodumene product off-take arrangement with AML, which will also include a significant prepayment upfront,” it reads.

The heads of AML claim their technical personnel are “now back in Addis Ababa and planning to be back at the Kenticha Lithium Project site soon.”

AML is also trying to list the Kenticha project on the London stock exchange.

“The listing process of AML on the London Stock Exchange continues. A listing is aimed for Q4 2024 as we get closer to first production. Hannam & Partners and Canaccord Genuity have been appointed joint brokers. All key reports are nearly finalized including the competent persons report who advises on the technical aspects of the project and the legal due diligence report. Work continues on the long form accountants report and the working capital model. Commenced process with London Stock Exchange and Financial Conduct Authority in the UK. Preparation of Prospectus is ongoing. Acquisition of London ShellCo MCI ongoing,” it reads.

AML envisions being a net-zero lithium producer delivering upwards of 800,000 tonnes of battery lithium annually by 2028 using hydroelectric power from GERD, according to the shareholder update.

“Critically, Kenticha is a global-scale cornerstone business for the Ethiopian economy, which has recently legislated to only use electric vehicles and will underpin carbon neutral industry development in both Oromia and more widely in Ethiopia,” it reads.

The update assures shareholders that AML is “forging a solid partnership with our joint venture partner” and alludes to disputes between AML, its parent company AME, the Ministry, the Oromia regional administration, OMSC, and the O Mining Group chaired by Girma Birru (Amb.) The O Mining Group was CC’d on all three letters written to KMP by the Ministry.

The shareholder update and other correspondence seem to indicate that while the federal government (represented by the Ministry) and the Oromia regional administration are seeking the full withdrawal of AML and the handover of the Kenticha project, AML is trying to hang on to its licensing and raise more funding from foreign investors.

A letter obtained by The Reporter reveals that Australian Ambassador Julia Niblett, Girma Birru, and representatives of AME, O Mining Group and Oromia Mining Share Company sat down for a meeting on July 3, 2024.

Addressed to Girma, the letter indicates that AME shareholders are surprised and gravely concerned about what they say are the “factually incorrect” and “flawed” findings of a due diligence assessment conducted on AME.

“As a preliminary point, AME group understands that the ‘due diligence’ exercise you have conducted has no legal effect, including because it was not carried out pursuant to any provision of Ethiopian law. In this context, AME group understands that this exercise, and its findings, are not capable of affecting the rights of AME group, KMP, or their affiliates under Ethiopian law,” it reads. “We are disappointed in the comments and findings of your team, and we can only deduce that the responsible team members lacked the requisite skills to properly comprehend the many hundreds of pages of documents including legal, financial, and technical documents that we have provided pursuant to your requests.”

The letter also mentions that AME had secured a USD 100 million line of credit from Arena Investors LP of New York, an American venture capital firm, for its Kenticha project.

An official at the Ministry of Mines who spoke to The Reporter on condition of anonymity was able to shed some more light on the convoluted and confusing situation.

“There are Ethiopian and Australian investors behind KMP. AML is run by some Ethiopians but the investment finance comes from the Australian investors. The Ethiopian management of AML abused the investment money while claiming it was spent on the project. But in reality, there has been no actual investment from AML on Kenticha. When the federal government attempts to take back the project because of its failures, AML’s Australian investors accuse AML’s Ethiopian management and demand their money back. In order to persuade the investors, the Ethiopian AML management is pretending as if the project is on track. At the same time, AML management is negotiating with the Oromia regional government to secure a letter that would indicate that AML has invested in Kenticha. With such a letter, AML management can persuade its Australian investors. But if Oromia writes this letter, it means the federal government will be unable to revoke the license, since an investment will have been made. AML’s Ethiopian managers have never been mining investors. They are clearly opportunistic. The only reason they have managed to keep going this long is because of the conflict of interest within the Ministry of Mines. Former Minister Takele Uma provided the license illegally. Some current Ministry officials have also taken bribes and are cooperating for this license. It is not going to work out,” said the official.

AME, an Australian company registered in Ethiopia by Bruce Tinney, also acquired license from the ministry in 2019 to explore potash in Berhale and Afdera woredas of Afar regional state. The ministry terminated AME’s potash license as the deadline expired in 2022, without progress.