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Eritrea: NEVSUN’s Multi-million Class Action Lawsuit Settlement

Recently, Nevsun, the Canadian mining company operating in Eritrea, approved a multi-million class action lawsuit settlement brought by a New York-based law firm representing shareholders and investors.  The firm had accused Nevsun of US securities fraud.

Nevsun owns 60% of the Bisha Mining Share Company in western Eritrea while the remaining 40% is owned by the Eritrean National Mining Corporation (ENAMCO), which is owned by the ruling party.

The lawsuit alleged that Nevsun was engaged in deceptive practices to mislead investors and shareholders by inflating the value of mineral deposits at the Bisha mine it operates in Eritrea.

After the exhaustion of gold production, which did not require much logistical support and infrastructure to export, and moving to copper production phase, Nevsun started to rely on the Eritrean ministry of defense to provide it with security and transportation services to move the copper from Bisha to the port of Massawa.

One of the many pending lawsuits against Nevsun was filed in US and Canadian courts; it alleges that Nevsun has used forced labor in Bisha, a fact that Nevsun admits but claims was practiced by Segen, its subcontractor. Segen is a construction firm owned by PFDJ, the Eritrean ruling party.

The allegation was also confirmed by Human Rights Watch in 2013 and reported that “Former conscripts described working long hours for minimal food rations, primitive lodging, and wages too low to sustain themselves, much less their families. They were not allowed to leave the work site.”

It is very likely that the lawsuit will be settled out of court for fear of disclosing sensitive financial information and records of transactions, between Nevsun and ENAMCO, during the public trial or discovery process.

In Eritrea, often times, there is a no distinction between the interests of the state and the ruling party. The current minister of finance, Berhane Habtemariam, is also the manager of ENAMCO, as well as the general auditor of Eritrea.

In its website, Nevsun states that taxes, customs, and concession fees due to the Eritrean government are being used and will continue to be used in the future to offset payments that ENAMCO was required to make to Nevsun to increase its stake from 10% to 30%.

According to Nevsun’s financial statement, the Eritrean government and ENAMCO were paid $144, $317, and $86 million USD, in 2011 and 2012, and 2013 respectively.

nevsun-table The total executive compensations of the four top executive for 2013 are reported as follows:

Mr. Clifford T. Davis,
Chief Exec. Officer, Pres and Director
$1,780,000
Mr. Frazer W. Bourchier BASc, MASc, P.Eng.
Chief Operating Officer and Member of Social Environment, Health & Safety Committee
$965,000
Mr. Scott A. Trebilcock
VP of Bus. Developmnet. & Investor Relations
$712,000
Mr. Joseph P. Giuffre B.A, L.L.B.
Chief Legal Officer and Corp. Sec.

$919,000

Zara Mining Share Company (ZMSC)

Citing UN sanctions on Eritrea for its failure to secure capital to go to production, the Australian Chalice Gold Mines was forced to sell its Zara mine property at a discount for $80 million to China’s SFECO Group, which now has a 60% controlling interest in Zara Mining Share Company (ZMSC). The remaining 40% is owned by ENAMCO.

The only activity reported at its website shows that on December 2012 SFECO held its second board meeting in which its chairman, Mr. Tong Jisheng, and “Mr. Hargos [sic] (Vice-chairman of the board and Secretary General of the Central Economic Committee of People’s Front for Democracy and Justice), Mr.Bohani [sic] (director of the board and Eritrea Minister of Finance)” attended.

The report added, “They also ask ZMSC to operate more effectively and simply, better control costs and budgets and establish an operation system with the objectives, rules and achievements.” However, Gedab sources indicate, “Even though SFECO seem to be demanding more due diligence and oversight control of the operation, it is hesitant to invest the required capital expenditure to go to production phase due to the political and  general investment environment and risk in Eritrea.”

Colluli Mining Share Company

A group of Eritreans from the Afar region accused the regime of systematically targeting the Afar people in order to remove them from potash and other precious metals rich area to make room for a Colluli Potash Project.

South Boulder Mines Ltd owns 50% of the Colluli Mining Share Company (CMSC) while the remaining shares are owned by ENAMCO.

So far South Boulder Mines Ltd drilled some 97 holes and is conducting feasibility studies of the project.

Eritrea’s Mining Prospect

The arrest of the minster of mining, Ahmed Hajji Ali, on February 2013, who was allegedly implicated in the Forto coup attempt, underscored the precarious investment climate in Eritrea in general and the mining sector in particular. Mr. Ahmed Hajji, whose whereabouts is unknown to his family, had been the face and voice of the mining activities in Eritrea for the last 23 years.

The noticeable absence of Ahmed Haj Ali during the opening ceremony of the 4th Asmara Mining Conference, held on October 2013, and the equally noticeable absence of major international mining companies did little to alleviate that concern.

The Forto incident gave major mining companies a pause to evaluate the possibility of being shut out from future mining concessions in the event of a success of similar attempts in removing Isaias from power.

Concession agreements signed by unpopular regimes in developing countries are often rescinded after their overthrow.

At the same time, the political situation in Eritrea has become worse due the growing rifts among the top officials of the government. The situation has encouraged speculations and spurred fears concerning the safety and security of foreign investments in the mining sector under the repressive regime of Isaias Afwerki.

The shortage of fuel and other supplies has also affected the mining companies: Nevsun depends on contraband fuel to run its operations in Bisha. Nevsun’s contraband fuel oil supplier is a company owned by a partner of Major General Tekle Manjus.

Related links:

Human Rights Watch (world report 2014)
Stop Displacement of Indigenous Afar: Petitioning South Boulder Mines Ltd. of Australia
South Boulder Mines (PDF)

//END
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  • AAA

    …..Mr. Ahmed Hajji, … had been
    the face and voice of the mining activities in Eritrea for the last 23
    years.???? ……What that guy is shit corrupt. I worked with him and he is top islamist recruiter who recruited guys like Amir Hassan who is now working for Hagos Kisha. Ahmed knows nothing about mining he is a mining killer. Mr Alem Kibreab and Minister Tesfay Gebresilassie are the geniuses behind all the positive mining activities. Haji just prevented everyone from doing his/her job. During his reign all top Geologists and Mining engineers feld the country or ministry….Just ask any mining or exploration company. That guy is as idiot as Isayas and I still wonder how he went against him.

  • haileTG

    Selamat Awatista,

    Wikileaks: 2009 January 8, 14:19 (Thursday)

    “In early December [2009] a western diplomat traveling near Barentu photographed a large number of armed men marching along the road. The diplomat’s driver said these were not from the Eritrean Defense Forces (EDF), but rather TPDM soldiers. The photograph was taken while driving between the ranks of approximately 200 men in plain olive uniforms marching in good order along both sides of the road. Most of the soldiers carried wooden stock rifles and typical
    soldiers’ kit (canteens, ammo belts, and ruck sacks). Emboff will send the photo via email to INR and AF/E.”

    https://www.wikileaks.org/plusd/cables/09ASMARA11_a.html

    https://www.youtube.com/watch?v=RPfDTXhM5oU

    • Rahwa T

      Haile The Great,

      The journalist do not seem as one of them. He didn’t say “mewesawesi/metaweqia”.
      So these freedom fighters are coming from the north to liberate me and my people. Funny!

      • haileTG

        Hi Rahwa,

        I thought the same too. This is really interesting whichever way we look at it! The most self contradicted act of all. Imagine that to even be a propaganda ploy, wouldn’t this be enough to renew the sanctions for eternity? Or that the regime doesn’t understand the meaning of “destabilizing” the region, as framed by the UN! (its capacity to do so notwithstanding). y’germ eyu belu adna 🙂

  • Aren’t the Eritreans created with eyes to see and with ears to hear and with minds to think like the rest of human being? What if we devoid these gifts by our own will?
    Whom should be blame? Of course, non other than ourselves!

  • AWET

    MA QUESTION IS
    Was there enmity between Tigra and Eritrean people even before the war
    as many Tigras are telling us bitterly and angrily. Isayas
    knows he is lying and doing it for a purpose but why do the Tigras
    do it ? Does saying let’s us be free from corrupt regimes ruling Ethiopia
    with colonial legacy and demarcation merit categorizing freedom loving
    heroic kebessan Eritreans as enemy in Tigra’s eyes. What a pathetic
    woyane thinking.
    All the truth and core of the issue is that woyanes were working against
    unity but for separation out of desire of monopolizing political and economic
    power in the country and out of defensive mechanism for their baseless fear
    that Eritreans will colonize them by some system they learned from Europeans.
    All delusional thinking and inculcated into their minds and way of thinking by
    the Absolutist and totalitarian regimes of king HSI and colonel Mengistu and
    Tplf/woyanes who did it deliberately as power consolidating mechanism thru
    indoctrination and propaganda campaign thru their corrupt medias for decades.
    What is the reason for the Tigras to come against freedom of people and against
    their own benefit and against all the peoples of the country ?

  • ChinChan

    Hello Hargos’s and Bohanis. I am a Chinese investor and I want to open a beaker factory in your neighboring Sudan that employs 5 million people and some one told me that the cheapest labor in the area is in Eritrea. In fact, they told me that Eritreans like working for free even for decades. I have a company in China that employs more than 6 million people. You are 4 million people. What is 4 million to my company? So simple!! In addition, not all of you 4 million consists of manpower. May be just 1 million of you are fit for manpower. The rest either children or old or disabled e.t.c. Note: I am not too selfish not to pay you when you work at my company even though I know that you will . I will discuss with Mr. AssAss about how much your reward should be.

  • Yosief Kesete

    There is abundant potential(human and mining) in our beloved nation that can go a long way in solving many of our problems. The biggest obstacle is lack of good governance. Implementing the constitution and resuscitating the national bayto(mejlis) should be Eritreans’ minimum demand from the current leaders. God bless Eritrea

  • Goytom

    these pfdj are just robbing the country blind under the guise of enamco or segen or 09 or whatever while enslaving the population. is this why they fought, to get rich. you get more information from the foreign companies then this so called “government”. no budget for 23 years. hello its not your money, its the countries money. oh i get it, you think the country belongs to you. bin ali and partners robbed tunisia for 30 years and when the people rose up against them, they took their billions and went to canada, USA, Saudi Arabia….is that what will happen in eritrea??????

  • Peace!

    Thank you awate and keep up the good work!!!

    It indicates how bad the over 300 opposition parties have failed to even put pressure on these corporations. Hiding behind a nick name and calling for weeding the PFDJ out is unrealistic.

    • Amanuel Hidrat

      It is an irony that one who uses a nickname “peace” but yet has the audacity to accuse others of using nicknames. Yegermal !!!!!!

      • Peace!

        Emma,
        ….but I never called for weeding the PFDJ out although I believe gradual and persistent institutional changes and policy reforms paves way for democratic Eritrea.

        • Amanuel Hidrat

          Merhaba Peace,

          One more advice: In order to be who you are, develop “a courage” to hold the integrity of your personalty, and that is, the integrity of “your real name and the idea you espoused” which exactly defines you who you are. If we don’t do that, we are not real fighters. The Eritrean People want to see real fighters for them.

          Hawka,
          Amanuel Hidrat

          • Peace!

            Dear emma

            Agreed. I hope Haile The Great, Pappilion, Serray, and others whom you agree with understand and become real fighters.

            Regards

  • Semere Gaim

    Interesting to say the least. wana zi seanet adi.

    • guest

      Wanatatas hizoma lewu! obviously you are a bistander. which is what you will be no matter the situation in Eritrea.

      • Translate

        Ugliness comes in many forms my friend. I hope you know what I mean.