Uranium Mining: Whose Interest?

Malawi Case

Investigating Extractive Industry Regional Conference Lusaka Zambia

By Rex Chikoko13-15 August 2012

Background

Kayelekera Uranium Mine (KM) is located in northern Malawi, 575km north of the capital city, Lilongwe.

Uranium was first discovered in the 1980s Central Electricity Generating Board of Great Britain (CEGB)

The study then indicated the project was uneconomical and was abandoned in 1992.

In February 2007 Paladin Africa Limited (PAL) ,a subsidiary of Paladin Energy, took over and offered 15% of equity to the Government of Malawi under the terms of the Development Agreement.

‘Malawi losing out in Kayerekera Mine deal’

The story was published in May, 2011 in Malawi News, one of the weekly newspapers in Malawi

During the course of investigating the story a lot of information was uncovered albeit some of the information was sourced unofficially

Some of the discoveries included:

Weak Law and Poor Governance

No legal and policy framework regulating the uranium mining industry in Malawi

Mines and Minerals Act, the Uranium mining legislationthe Atomic Energy Bill and Explosives Act

Malawi, Paladin deal

Paladin agreed to invest MWK60 billion (US$400 million)

Paladin agreed to spend MWK2.25 billion (US$15 million) on community development projects including improving water system.

Paladin agreed to build or upgrade schools and teacher housing in Karonga and improvements to the Karonga District Hospital.

The company has also committed to spend MWK240 million (US$1.6 million) upgrading Karonga Airport.

Malawi promises

Malawi offered tax exemption as an incentive

Paladin to pay 27.5 percent instead of 30 percent corporate tax

A 10 percent exemption on rent tax.

Royalties — ordinarily 5 percent — were dropped to 1.5 percent for the first three years and 3 percent thereafter.

The company will also be exempted from paying value added tax for up to 10 years.

Status as in 2011

More than 2 million lbs of uranium oxide (U3O8) has been exported since the commencement of production.

In a full operating year, Kayelekera will produce 3.3 million lbs of uranium oxide (U3O8) per year

In a full operating year, Paladin will pay more than MWK1.4 billion (US$9.5 million) in royalties and various taxes (payroll, non-residents tax and withholding tax) to the Government of Malawi.

Status as in 2011 (cont’d)

This means Malawi, despite gaining expected US$45 million in taxes and royalties from the mine per year, will lose about more than US$120 million in various taxes, due to the terms agreed with Paladin.

The Malawi government traded a 15 percent stake in the project in exchange for favourable tax rates for the company.

Way forward

• Next course of action for the Kayelekera Uranium Mine: There is a growing call for Economic impact assessment to

ascertain whether the mine is benefiting local communities as the cost of living has increased ten-fold in the area;

A thorough study indicates somehow that the mine is impacting on general health of the people surrounding the area

Formulation of Independent monitoring of the uranium mining project and its effects on the community and the environment—training of local cadres to take part in the monitoring;

Way forward (cont’d)

Tax justice campaign to curb capital flight and transfer pricing;

Continued community awareness of the impact of the uranium project;

Lobbying for stringent mining policy and legal frameworks or the industry to export best practical technology from Australia and Canada

What newspapers said on August 9, 2012

Role of journalists

Government and Paladin insist: “The terms of the Development Agreement signed between Government and Paladin are confidential”

Officials are unwilling to provide information on record. Inconsistent information available from sources Journalists have to take a strong stand to investigate

the Kayerekera deal

Conclusion

Malawi’s poor handling of the deal is putting the country at a very awkward position financially

Risk the lives of many Malawians who are directly or indirectly exposed to radiation of the uranium

ZIKOMO!!!

BY Rex Chikoko