Banro calls again for force majeure

Unlike the recurring attacks by armed jihadists in Burkina Faso, the rebel groups that are making mining impossible for Banro in the Democratic Republic of the Congo (DRC) are motivated more by commercial than religious reasons, CEO Brett Richards says.

“They run artisanal mining activities in the country and they can generate substantial revenue,” Richards says of the well-organized and heavily armed groups. “They want to control the region, and they do not want western mines being there — they want to operate in our pits, and they want to take back what we have.”

Attacks against the company began in 2015 at its Namoya mine in the southern province of Maniema, and have continued each year since then.

Last year, there were five serious attacks with casualties in the double digits.

The perilous security situation between 2015 and 2018 meant that Namoya operated only 20–30% of the time during that period.

Banro declared bankruptcy in November 2017 and emerged in May 2018 with two principle shareholders — Gramercy Funds Management and Baiyin International Investments, a Chinese state-owned enterprise.

Workers at Banro’s Twangiza gold mine in the Democratic Republic of the Congo. Credit: Banro.

Gramercy hired Richards to stabilize and rehabilitate the company and attempt to put Namoya back into production.

Richards has more than 33 years of experience in the sector, the last 12 of which have focused on Africa, and has held positions for private equity shareholders, including as CEO of Midnight Sun Mining, African Thunder Platinum, Renew Resources and Octea. He also served as the transition CEO of Roxgold, Avocet Mining, and was part of the five-person startup of Katanga Mining.

Within 23 days of Richards arriving in the DRC for Banro, however, Namoya was attacked yet again.

Banro decided to proceed with a restart of Namoya in March 2019. At the time, Richards says, the security level was “green” with risk at a low level. “Although the threat was still there — we felt it was safe enough to deploy capital, people and equipment to restart the mine.”

Namoya was ramping up production in June and July and about to turn cash-flow positive, he says, when employees were abducted on July 26 and held for 41 days.

The workers were “tortured and their basic human rights violated daily beyond comprehension,” Richards says. “One of the employees is still under constant medical care.”

After the release of the last hostage on Sept. 5, Banro continued to receive death threats from Sheik Hassan, the leader of the Mai Mai Malika, including over the radio. Hasan warned of further terror and attacks should Banro reopen the mine, Richards says. The situation became untenable and on Sept. 15, the mine was evacuated and put on care and maintenance.

On Sept. 24, Richards met the president of the DRC, Felix Tshisekedi, in New York, where he was attending the United Nations Summit. The president “graciously gave me two hours of his time whereby we heard his strategy and vision for Congo, and then we discussed Banro in great detail,” Richards says. “We went over the situation. He was well briefed, and he agreed that he would speak to all of his advisors and ministers, and put together a high-level ministerial group to deal with the issues before Banro.”

During his meeting with the president, Richards says the company made a request for force majeure, and later that day, sent a letter to the DRC’s ministers of labour and mines about its application.

Banro didn’t get a reply for three weeks and the application was denied on a technicality on Nov. 4. The Labour Minister, Nene Ilunga Nkulu, rejected the application because she said Banro didn’t have jurisdiction — that right is preserved for Congolese companies. Richards argues Banro does have jurisdiction because he has power of attorney to act on behalf of Banro’s subsidiaries in the country, and that he is the general manager for two of them. Nkulu also said Namoya was still in production, which Richards says is untrue.

The company did ship inventory of in-situ material that was in the elution circuit because there was a small team deployed to the site on Oct. 15 to extract and pour the gold, he says, but the material was shipped for export the same day.

“Her Excellency was confused and doesn’t understand our process, and she interpreted a small gold shipment of existing inventory as ‘commercial production,’ when in fact the mine is on care and maintenance,” Richards says.

Banro has resubmitted its application for force majeure and hopes it will be granted.

“Banro needs to push the pause button for two months, and being granted force majeure does just that,” he says. “We need time to restructure the business while the government is resolving the business and security environment. We collectively need to prepare for success, as it is not in that space, and, frankly, Namoya has never been positioned for sustainable success.”

In the meantime, Banro is putting the finishing touches on a deal to sell its Twangiza mine in South Kivu province, 350 km from Boungou, to China’s Baiyin International — one of Banro’s two key shareholders.

“The reason we’re selling the Twangiza mine is because the business can’t support constant recapitalization of both of the mines due to circumstances we do not have control over — regional and provincial security.”

Over the last two and a half years, Banro shareholders have lost $90 million — $30 million in each restart in 2017, 2018 and 2019. “That’s their give and take, and they’re not prepared to do it again,” Richards says. “The shareholders of their funds can only speculate how irrational it is to put money into a situation three times, only to see it evaporate because the government can’t provide a safe and secure environment to exploit the resources under the requirements of the mining code.

Processing facilities at Banro’s Twangiza gold mine in the Democratic Republic of the Congo. Credit: Banro.

“If the government lives up to its commitments of completely and permanently fixing the security situation, which means the complete eradication of these rebel groups, then yes, we can coexist with our host communities, and we can run this mine to the benefit of all stakeholders. But I can’t do that while we’re under attack all the time. And that’s the point I’m making to the government.”

In his meeting with the DRC president, Richards also noted that Banro is owed US$38.3 million for value-added tax refunds and fuel tax surcharge rebates due from 2003 to 2019, and the company needs that capital to restart the mine. In addition, he told him that Banro continued to suffer from extortion.

Since Namoya started operating earlier this year, Banro has been under significant attack of extortion and misguided and fake tax audits and penalties that in no way relate to the business, and they are well-documented, Richards says.

“The company continues to get extorted from a multitude of government agencies, from negotiating fictitious million-dollar payments down to several tens or hundreds of thousands of dollars to be made directly to individual, non-government bank accounts,” he noted. “Banro refuses to behave in this way, and it has worked to their detriment with several local and provincial government and security agencies.”

Richards also told the president that the fiscal regime in the country needs to change. The company reserves its rights under the Mining Convention, which was granted in 2003. But Banro lost its Mining Convention during changes to the DRC’s mining code in June 2018.

The Mining Convention gave Banro a number of financial and economic incentives, as it operates in two regions — Maniema and South Kivu — where there is no power, no water, no roads, no rail and no skilled labour. The incentives were meant to offset the economic impact of the company having to provide this infrastructure, and to maintain 350 km of national highway, just to secure access to Namoya. It also had to build 180 km of road from Bukavu to its Twangiza mine, again to secure access to the site. Under the DRC’s revised mining code, these incentives were removed, and Banro is demanding to have them returned.

The president “said he understood our difficulties and situation and would work to assist Banro back to a proper and safe working environment,” Richards says.

“Our mines in the eastern Congo are extremely important to the government of the Congo, so they don’t want to see them fail, and we don’t want to fail, obviously,” he says. “But it’s going to take some give and take from the government, our employees, from all of our stakeholders.”

Twangiza became Banro’s first producing open-pit gold mine in October 2011, and commenced commercial production in September 2012. Namoya started commercial production in 2015.

Banro has spent over US$900 million in the DRC over 20 years. In 2012, it had a $1.2-billion market capitalization.