Clarke: Message to MRC shareholders. Xolobeni mining: Blood titanium.

Two months have passed since Amadiba anti-mining activist Sikosiphe ‘Bazooka’ Rhadebe was assassinated, allegedly for his principled opposition to the Xolobeni mining scheme. And although the Hawks took over the investigation no arrests have been made. Hardly reassuring to shareholders in the Australian mining company MRC Ltd, whose long term return on investment largely pivots around getting the mining rights for the “company making” Xolobeni mineral sands. Social worker John Clarke who has worked with the Amadiba coastal residents for a decade to assert their constitutional rights, has a message for shareholders. – Stuart Lowman

By John GI Clarke*

“It is common to resist a truth. But impossible to resist a story”

– Anthony de Mello SJ

John Clarke at Mtentu Hutted Camp, Wild Coast October 2006
John Clarke at Mtentu Hutted Camp, Wild Coast October 2006

Shareholders who attend the Annual General Meeting of the ASX listed mining exploration company MRC Ltd on 25th May 2016 in Perth, will formally cast their votes to accept the Annual Report and Financial Statement and vote on a number of resolutions that will presumably enable Executive Chair Mark Caruso to tick all the boxes required of an ASX listed company. He has been doing it for years, and knows how to play the game. After routine housekeeping matters have been done shareholders will be afforded the opportunity to ask questions.

Nine years ago he faced questions that were tougher than usual. Institutional investors as well as minor shareholders were becoming impatient. At the time neither of the two main mining ventures in Africa – the Kariba Kono diamond mining operation in Sierra Leone and the Xolobeni Mineral Sands – were delivering on their promises.

They were getting jittery too.

In Sierra Leone, MRC’s investment in a retreatment of a diamond tailings dump in the Kono area had been dealt a serious blow after the release of the Hollywood blockbuster Blood Diamond. It brought world attention to the problem of conflict diamonds.

Read also: Mining Minister Zwane argues Rhadebe murder shouldn’t stop titanium mine

The plot turns around a violent competition between mercenaries and rebels to force an enslaved father Solomon to show them where he had buried a rare ‘big pink’ diamond that he had sneaked from the alluvial diamond operation where he had been forced to work. “The kind of stone that can transform a life, or end it” as the production notes explain.

Although the film carried the obligatory legal disclaimer that said any similarities between characters in the film and actual persons living or dead were “purely coincidental”, Caruso, unaware that the film was on its way, had described the project in his 2006 third quarter report in terms that left one wondering if the Blood Diamond script writers had been reading them too.

“The No 111 tailings dump resulted from alluvial diamond operations in the 1960’s by the Sierra Leone Diamond Trust. Although the plant was advanced for its time, investigation into the operating history of the plant after the fortuitous discovery of the 969.8 carat “Star of Sierra Leone” diamond indicated that the initial plant design was flawed and it is believed the operating efficiency would have been reduced with time, leading to the loss of diamonds to tailings.”

Another ‘big pink’ perhaps.

File photo: Bazooka Rhadebe scolds Zeka Mnyamana, who was then director of Xolco after the public participation meeting where Xolco was asked to leave. Pic credit - Cheryl Alexander..
File photo: Bazooka Rhadebe (R) scolds Zeka Mnyamana (L), who was then director of Xolco after the public participation meeting where Xolco was asked to leave. Pic credit – Cheryl Alexander..

Even though investors knew Mr Caruso would never condone anything like the savage violence shown in the film, it was deliberately aimed at shocking the public into awareness about the reality of ‘blood diamonds’. Director Ed Zwick said as much.

“It seems that almost every time a valuable natural resource is discovered in the world—whether it be diamonds, rubber, gold, oil, whatever—often what results is a tragedy for the country in which they are found. Making matters worse, the resulting riches from these rarely benefit the people of the country from which they come.”

One fund manager I spoke to said they had seen a 40% drop in the value of their investment following the release of Blood Diamond. A diamond tailings operation in Kono Sierra Leone no longer seemed like a good investment idea anymore. They were looking to sell their 12% stake, but were hoping something would happen in the markets to pump up the price before so doing.

That was bad enough, but my informant said he was losing confidence in Mark Caruso’s management of the even larger promise, the Xolobeni Mineral Sands on the Pondoland Wild Coast.

Caruso had been incubating the vision of turning what he believes is the “tenth largest heavy mineral deposit in the world” into a profitable mining operation ever since senior government officials had taken him to see the area in 1996. For good measure the Department of Trade and Industry arranged for a R18 million loan from the South African Export Development Fund, controlled by ABSA to enable Caruso to register MRC on the Australian Stock Exchange and to float a prospectus to attract venture capital investors.

It started well, but with the adoption of the Mining Charter and enactment of the Mineral Petroleum Resources Development Act (MPRDA) in 2002 the regulatory framework was changing, causing Caruso much frustration in having to jump through more hoops to secure the promised mining rights. He was obliged to partner with a Black Economic Empowerment compliant entity by sharing at least 26% of the profits.

In 2003 the Xolobeni Community Empowerment Company (Xolco) was formed with three founding directors. Maxwell Boqwana (a Port Elizabeth attorney), Patrick Caruso (Mark Caruso’s younger brother who had been deployed on the ground to do oversee prospecting operations) and Zamile ‘Madiba’ Qunya, the only person with real local roots. However, he was influential, politically well connected, articulate and charmingly plausible. Mark Caruso and his global investors might have been taken in by Qunya but in South Africa environmentalists were mobilizing. Don Guy, producer for the SABC Environmental Program 50/50 filmed Jonathan Rands interviewing Qunya.

Judge for yourself.

In April 2006 Caruso managed to stiffen shareholder confidence by announcing that a deal had been reached to secure a R45 million investment from a South African mining company Ehlobo Heavy Minerals (Pty) Ltd, in return for a controlling 50.1% share in MRC Resources (Pty) Ltd the South African subsidiary of MRC LTD. Caruso did not advertise the fact that the two main directors were Dr Alistair Ruiters who had resigned in 2005 as Director General of the Department of Trade and Industry and Mr Rafiq Bagus, who had served as the advisor to the Minister of DTI.

Xolco was to receive a 10% share of the equity to “ensure local residents directly benefit” – except that deal was never discussed with the affected residents at large.

Journalists were suspicious that top government officials should go into a business venture so soon after leaving government service. They were even more suspicious about Zamile Qunya’s role.

In October 50/50 camera’s returned and Zamile Qunya’s credibility was shot to ribbons when this film completely exploded the narrative he had spun to Jonathan Rands three years earlier. Qunya and his younger brother where shown to have all but sabotaged the promising eco-tourism venture that he had waxed lyrical about three years earlier.

The effect of the expose was to sow seeds of doubt in Ruiters and Bagus. A month after the release of Blood Diamond the deal between MRC and EHM was off, plunging MRC into crisis. They were planning to finally apply for the mining rights, and had to have a BEE partner. Xolco was hurriedly bumped up from the 10% stake it had, to the minimum 26% required by the Mining Charter. A share-holders agreement was hastily drafted. Again the Amadiba coastal residents were the last to know about it. Come the Shareholders AGM in May 2007, in response to a question from another shareholder who had become wary of what was happening on the ground Mark Caruso astoundingly said MRC still had an “unbeatable formula” to ensure that the needs and interests of local residents would be well catered for, and that the mining project would be just the catalyst needed to transform the impoverished, suffering local residents into a prosperous and happy community.

The sense of bad karma around MRC and Xolco was not only because MRC happened to be spinning diamond mining in Sierra Leone as a promising investment but because…wait for it…the Amadiba community had in fact HOSTED the film makers and many had been employed as extras. The Mzamba river gorge (the northern boundary of the Xolobeni Mining tenement) had been dressed up to look like an alluvial diamond mining operation in Kono, Sierra Leone. Hundreds of Amadiba coastal residents had worked as extras. They were impressed at Leonardo di Caprio’s mastery of the South African accent, but some thought he should have been more accurately cast as an Australian.

When life imitates art in such extraordinary synchronicity suspicion (if not superstition), dictates prudence when it comes to investment decisions.

I was not aware that Blood Diamond had been filmed on the Wild Coast when I facilitated 50/50’s investigation in October 2006. When Mzamo Dlamini, Nonhle Mbuthuma and Zeka Mnyamana from the Sigidi community ascended the steep gorge above the Mzamba estuary to be interviewed, I did not know they were in fact following the route that Ed Zwick had directed the three heroes of Blood Diamon, Danny Archer (Leonardo DiCaprio), Solomon Vandy (Djimon Hounsou) and his son Dia (Kagiso Kuypers), to clamber up the same gorge with mercenary soldiers in hot pursuit.

On the 20th March 2016 I accompanied a group of teenage boys from Michaelhouse College on the first leg of a Wild Coast hike with a guide and their deputy principal. After crossing the Mzamba gorge we arrived at Nonhle Mbutumas homestead for our first night around the campfire. I asked them if they had seen Blood Diamond.

Most had.

“Did you recognise any of the scenery we walked through today?”

They were astounded when I told them.

Around the flickering fire, Nonhle, Mzamo and I shared our stories, geared to inspiring them as the next generation to cherish this beautiful coastline and protect it from the ravages of what Ed Zwick had said was the all too commonplace scenario when valuable mineral resources are discovered.

We wished that Zeka Mnyamana had also been with us. Alas, soon after appearing in 50/50’s documentary he switched allegiances to the mining cause, and became a director of Xolco and Zamile Qunya’s lieutenant.

Having served my purpose, the next morning we parted company. The boys continued their hike. I was looking forward to spending Human Rights Day in contemplative solitariness while walking back to my car parked at the Wild Coast Sun resort.

Nonhle and Mzamo insisted that I had someone from their village to accompany me.

“But why? I know where I am going. I have been visiting you for ten years. Surely I don’t need a guide anymore.”

They did not labour any explanation. “John it is better that you take my brother with you.”

I acquiesced. The walk was pleasant. My guide helped me film myself practising this narrative.

The following evening, on 22nd March eight bullets ripped Bazooka Radebe’s body apart.

Coming soon to a theatre near you “Blood Titanium”.

Media Release: Mineral Commodities Ltd AGM in Perth, Australia on 25 May 2016: Why South African and Australian organisations are calling for shareholder and regulatory action

Centre for Environmental Rights

Cape Town, South Africa. Next week, a broad coalition of community and civil society organisations in South Africa and Australia will stage protests against Mineral Commodities Ltd (MRC) to coincide with the company’s annual general meeting in Perth on 25 May 2016. The protests will focus attention on the social, environmental and governance record of MRC’s subsidiaries operating in South Africa, and will call on shareholders and regulators in both countries to hold MRC management to account and to put an end to the devastating social and environmental impacts of the company’s local activities.

MRC is an Australian listed mining company with various subsidiaries in South Africa. MRC subsidiary Mineral Sands Resources (Pty) Ltd operates the Tormin mineral sand mining operation on South Africa’s West Coast, which it intends to expand substantially along further pristine stretches of the coastline and along the sensitive and legally protected Olifants River Estuary. In the Wild Coast in the Eastern Cape Province of South Africa, MRC subsidiary Transworld Energy and Mineral Resources (SA) (Pty) Ltd has applied for a mining right to mine titanium from the sand dunes of Xolobeni. This endeavour has already resulted in over a decade of well-documented violent social upheaval in the area, and has been the subject of ongoing legal challenges.

There is a great deal of controversy surrounding the operations and planned operations of MRC and its subsidiaries, as well as their associated black economic empowerment companies Blue Bantry Investments 255 (Pty) Ltd and Xolobeni Empowerment Company (Xolco). In particular, employees, affected communities and NGOs have alleged bribery, harassment, threats, violence and breaches of environmental, mining and labour laws.

The vast majority of residents in the Xolobeni area have for many years opposed the proposed mine. The Amadiba Crisis Committee (ACC) was formed to represent their interests. There have been a number of acts of violence against ACC members and supporters, culminating in the assassination of the chairman of the ACC, Sikhosiphi ”Bazooka” Rhadebe on 22 March 2016. Shortly before the killing, Rhadebe had been told that his name and the names of the other leaders of the ACC were on a “hit list”. Rhadebe was shot in the head in front of his young son. Two months later, no arrests have been made for his murder. In an interview on South African talk radio on 7 April 2016,[4] MRC chief executive officer Mark Caruso suggested that the killing was an incidence of South Africa’s high crime rate. However, the intention of the killing was clearly assassination, not robbery or any other crime, and is far more likely to be related to Rhadebe’s very vocal opposition to mining in the area.

The South African government has thus far taken no meaningful steps to ensure the safety of anti-mining activists at Xolobeni, or to investigate complaints submitted to authorities about breaches of environmental, mining and labour laws at the very profitable Tormin mine. It is only in the past week that the Minister of Environmental Affairs has confirmed that the national Department of Environmental Affairs, in consultation with the Department of Mineral Resources, would investigate allegations of adverse impacts on the coastal environment being caused by Mineral Sand Resources (Pty) Ltd at the Tormin mine.

MRC’s biggest shareholders either manage the company themselves, and are therefore implicated in the allegations against its subsidiaries, or appear impervious to pleas from around the world to intervene to put a stop to the devastation being wrought by MRC’s subsidiaries in South Africa. In the hope, however, that there are shareholders of this company who do consider that repeated breaches of human rights are to be condemned and further breaches avoided, here are some of the hard questions MRC’s management should be answering at the AGM to be held in Perth on 25 May 2016:

  1. Why was Chief Lunga Baleni, Chief of the Amadiba tribe resident in the area, made a director of Transworld Energy and Mineral Resources, the company applying for a mining right at Xolobeni, in September 2015? What remuneration has he received, and will he receive in future, for this appointment? What expertise or experience, if any, is he bringing to the proposed mining operation?
  1. Why is Guy Redvers Walker a “Senior Independent Non-Executive Director” of MRC, when he is also the Company Secretary for AU Mining Limited, MRC’s biggest shareholder, and accordingly not independent at all?
  1. Why has the South African Minister of Environmental Affairs instructed her Department to institute an investigation into adverse impacts on the coastal environment being caused by Mineral Sand Resources (Pty) Ltd at the Tormin mine? What are the legal consequences if violations are confirmed?
  1. BEE company Blue Bantry Investments 255 owns 50% of Mineral Sands Resources (Pty) Ltd, which operates the Tormin mine. MRC has made substantial loans to Blue Bantry since Blue Bantry’s incorporation. What were the funds used for? And why is Blue Bantry’s status on the South African Companies and Intellectual Property Commission’s database listed as being in the process of deregistration due to annual return non-compliance?
  1. What is management’s response to allegations that management at the Tormin mine has made salary increases contingent on workers’ agreement that they will not join a trade union, when the right to do so is protected in South Africa’s Constitution?
  1. On what basis does management consider it ethically defensible to pursue its application for a mining right at Xolobeni, given the local disputes, violence and human rights violations caused directly and indirectly by this application?

The social and environmental upheaval caused by MRC’s operations in South Africa illustrate the devastating conflict that is the inevitable outcome when the regulatory system that governs natural resource extraction refuses to recognise the rights of affected communities.

South Africa’s regulators have undoubtedly failed these communities, and there are many efforts underway to compel them to take action. Such regulatory failure is not, however, an excuse for companies operating or trying to operate within South African borders to flout the law and to violate human rights. It is now time for the company’s shareholders, and the Australian regulators, to play their part.