Mountain of Tin Draws Investors to World's Biggest Untapped Site
As a chartered helicopter lifts off from the edge of Lake Kivu in Democratic Republic of Congo, villages and farmland quickly turn to verdant hills that stretch out as far as the eye can see. An hour of flying over dense jungle ends at a small tented camp perched on a hillside. “Welcome home,” reads a hand-painted sign.
It’s one of the few indications of the $119 million tin mine that Alphamin Resources Corp. plans to build at this site, called Bisie, on what the company says is the largest untapped deposit in the world.
“We will be the first industrial tin mine in Congo,” said Richard Robinson, managing director of Alphamin Congo, over the hum of helicopter blades. “We will double national output and can be a catalyst for economic development and stability in the whole region.”
But the site is incredibly remote: 32 kilometers (19 miles) from the nearest road and 50 kilometers from the closest "airstrip" -- a long section of road where vehicles are stopped when planes land. For the past decade the area has been mined by restive local diggers controlled by armed groups. And in order to sell the tin, the company must prove its supply chain is untainted by the pockets of conflict that continue to destabilize eastern Congo.
As Alphamin seeks to raise the $130 million needed to cover the mine-build and operating costs, it’s finding some investors are willing to take on those risks.
“Going into the project we definitely saw more risk than we would normally take, but we could also see this was a world-class resource,” said Caroline Donally, a director at Denham Capital Management LP, which owns 43 percent of Alphamin. “We saw great returns on the investment side and we saw the chance to do positive things, to change the face of the region by putting in a commercial enterprise.”
South Africa’s Industrial Development Corp. agreed and in January bought 10.5 percent of Alphamin's Congo unit for $7 million. This project “reflects the true spirit of being developmental,” said Mazwi Tunyiswa, head of basic metals and mining at the IDC.
Shares in Canada-traded Alphamin have risen slightly this year, to C$0.195 ($0.155).
Congo, Africa’s biggest tin producer, exported 8,827 metric tons in 2015, all mined by informal diggers. The country’s tin industry is still recovering following its collapse in 2010, when the U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act included a requirement for listed companies to disclose their use of so-called “conflict minerals” -- tantalum, tin, tungsten and gold -- sourced from Congo and adjacent countries.
Mineral-tracing programs have slowly encouraged buyers to return. Alphamin, which says it will be able to demonstrate a clear line from its industrial mine to the buyer, says the conflict minerals legislation has reassured its investors.
“If it wasn’t for Dodd Frank, we wouldn’t be on the hill” where the mine is situated, Chief Operating Officer Trevor Faber said over dinner in Goma, the capital of North Kivu province.
Prices for the raw material used as a solder in circuit boards have climbed 18 percent this year to $17,220 a ton on the London Metal Exchange. At prices of $14,800 a ton, its first mine site, Mpoma North, will offer a rate of return of 36 percent after tax, Alphamin said in a February feasibility study.
At Bisie’s peak in 2008, as tin prices soared to over $25,000 a ton, more than 10,000 diggers came to the hillside and a clapboard town sprang up at its feet, complete with bars, money lenders and brothels. The armed groups and government troops that controlled Bisie and the nearby town of Manoire profited handsomely.
The mine became the focal point for advocacy groups including Global Witness, which said the trade in minerals from eastern Congo that found their way into consumer electronics such as Apple Inc. iPhones was driving war and violence.
When Alphamin completed its acquisition of the project in 2012, there were still as many as 3,500 informal diggers on the site, according to Sam Mwanga, the Alphamin camp manager, who was on the company’s first helicopter flight into Bisie. Since then the transformation has been swift as miners have left, faced with increasingly inaccessible shafts as well as the conflict-mineral legislation. The number of artisanal miners had fallen to as few as 40 by February, although it increased again in March, the company said.
Chief Executive Officer Boris Kamstra had to walk the entire 32 kilometers through the dense jungle with a GPS unit just to plot the route for the mine’s access road.
“We are completely isolated,” Marie-Claire Bangwene, the territorial administrator, said in her small office in Walikale town, 48 kilometers east of Bisie. “The situation is critical. We need investment.”
The mine will employ 700 people during construction and create approximately 450 permanent local jobs, but demand for employment is likely to be higher. The company has already employed more than 200 local people, some of whom are former diggers, to carve the access road through the dense jungle.
“Managing the influx of people once the road is open will be our next challenge,” Alphamin’s security manager, George Petterson, said in Goma.
Ben Mwangachuchu, the managing director of another mine hoping to industrialize North Kivu’s mineral sector, has taken a different approach: He shares his semi-industrial Rubaya coltan mine with 4,000 artisanal diggers from whom he buys the mineral. “It is challenging but I decided it was the most pragmatic way to deal with the diggers,” Mwangachuchu said in an office at his sorting warehouse in Goma.
The security situation in eastern Congo has improved since the 2013 defeat of a Rwandan-backed rebellion, but more than 60 armed groups continue to operate in North Kivu and South Kivu. As recently as July 2014, Alphamin’s exploration site was attacked by Mai Mai Sheka rebels and the camp overrun by artisanal miners. In March last year, informal diggers fired at the company’s mine police, but no one was injured.
Alphamin says its investment can further secure the region, where informal mining has rarely led to lasting development. "Artisanal mining took place but poverty remained," said Ramazani Kokoli, the chief of the Bangandula clan, which has historically owned the land surrounding the Bisie mine.
Kamstra and his team have the government’s support. “Alphamin is on the right track for the province,” said Emmanuel Ndimubanzi Ngoroba, head of the government’s mining division for North Kivu, in his office in Goma. “We are encouraged by what they are doing.”
That may not stop the company, as the biggest mining investor in the province, becoming a revenue target for Congo’s poorly funded government agencies. In October, the company’s headquarters were boarded up by the provincial tax authority after an agency linked to the Environment Ministry said Alphamin hadn’t paid a tax on cutting down trees along its access road. No sooner had Alphamin gotten the ruling overturned than the agency appealed the court’s decision.
Kamstra’s not concerned.
“We have a team that wants to make a positive difference in this region,” he said by phone from Johannesburg as he prepared for fundraising later in the year. “We are energized by the challenges rather than paralyzed by them.”