Pursuing fair resolution in Tanzania’s changing landscape

In this blog, Montero Mining and Exploration CEO Tony Harwood discusses the crucial role exploration companies like Montero play in Africa’s mining sector and the challenges they face, such as the expropriation of Montero’s Wigu Hill license. He also explains why major mining companies must support explorers in advocating fair, stable policies that protect investments and promote growth.

 

Q: In your September blog, you discussed how Montero Mining and Exploration incurred significant losses after the Wigu Hill mining license was expropriated without compensation by the former Tanzanian president. Why has this issue remained unresolved?

 

A: The protracted nature of international arbitration, particularly when dealing with state actors, has left Montero’s case unresolved so far. Under its previous leadership, the Tanzanian government expropriated Montero’s Wigu Hill license as part of a broader initiative to reclaim greater control over the country’s mining sector. This included revoking numerous licenses and imposing a 16% free carried interest on all mining ventures.

 

A key issue in the dispute is Tanzania’s refusal to acknowledge that it breached its Bilateral Investment Treaty (BIT) with Canada, which protects foreign investments. Montero’s claim is based on this violation, and the case has been brought to the International Centre for Settlement of Investment Disputes (ICSID) for arbitration.

 

The arbitration process is lengthy, involving extensive legal submissions, evidence gathering, and procedural steps. Although Tanzania’s new administration under President Samia Suluhu Hassan has taken a more favourable approach towards foreign investors and resolved similar disputes, Montero’s case remains entangled in legal proceedings. While the upcoming hearing in November 2024 marks progress, a quick resolution from Tanzania looks unlikely.

 

Q: Can you elaborate on the value Montero Mining and Exploration created at Wigu Hill in Tanzania, and how investors supported its development?

 

A: Montero created significant value at the Wigu Hill rare earth project through extensive exploration and resource development efforts aimed at eventual production. Wigu Hill, located in Tanzania, is rich in light rare earth elements (LREEs), which are critical for high-tech applications such as electric vehicles, renewable energy, and defence technologies.

 

From the start, Montero focused on delineating the project’s substantial resource potential, investing in geological surveys, drilling programmes, and technical studies required to take the project to a mining stage. The company carried out an Environmental Impact Assessment (EIA) which got government approval and conducted community studies, both essential steps for advancing to the mining stage. Montero’s exploration identified a high-grade resource, leading to an initial mineral resource estimate, extensive metallurgical testing, and the development of rare earth element (REE) chemical products for potential off-take partners, thus establishing the project’s economic viability.

 

Montero’s investor support was crucial, with over US$15 million invested in exploration and development in Tanzania, alongside significant intellectual property input in REEs from the focused management team and board. The funding allowed Montero to complete the necessary studies, attract industry interest, and advance Wigu Hill closer to production.

 

However, the expropriation of the project without compensation abruptly halted this progress, leading to the international arbitration case.

 

Q: What has happened to the Wigu Hill rare earth element project since Montero’s license was revoked? Is Tanzania utilising the geological mapping, resource estimation, and exploration data (including drilling results and 3D models) your team completed before the expropriation?

 

A: Since the revocation of Montero’s Wigu Hill license, there has been little public information about the Tanzanian government’s plans to develop the project. The Wigu Hill REE site remains undeveloped, and no significant progress has been reported by the government. This indicates that the expropriation was likely driven by political motives, as part of broader reforms aimed at increasing state control over the mining sector.

 

Q: Given that recent arbitration cases involving other junior miners, such as ASX-listed Indiana Resources, have resulted in settlements, does this bode well for Montero’s upcoming case at the ICSID venue in Paris in November?

 

A: Recent settlements in arbitration cases involving junior miners, such as Indiana, indicate a more favourable environment for resolving disputes with the Tanzanian government. These outcomes suggest a willingness on the government’s part to negotiate and settle such disputes.

 

If Montero’s arbitration follows a similar path, it could lead to a more expedited resolution, potentially resulting in a settlement that acknowledges the value created by the company’s investments and the impact of the expropriation. This positive trend may also boost investor confidence in Tanzania’s commitment to honouring international investment agreements, which could further strengthen Montero’s position.

 

However, the specifics of Montero’s case, including the legal arguments presented and the prevailing political climate, will be crucial in determining the outcome. A successful resolution could not only secure financial compensation for Montero but also provide a significant precedent for future claims by other foreign investors facing similar challenges in Tanzania.

 

Q: What roles do exploration companies like Montero play in contributing to Africa’s mining sector when they conduct early-stage exploration, geological surveying, and resource definition for new deposits? How do these activities lay the groundwork for future mining operations and national resource development?

 

Exploration companies such as Montero play a vital role in Africa’s mining sector by conducting early-stage exploration that leads to mineral discoveries, such as Wigu Hill, with the potential to become future mines. Even at an early, stage, these projects generate income and create jobs for local communities, and the people of Tanzania. Over the 10 years Montero worked on Wigu Hill, the company developed significant geological expertise and trained many Tanzanians, laying the groundwork for the development of a new mine. Montero also attracted high-risk Canadian investment capital, believing it to be secure. Such exploration and development activities are essential for several reasons:

 

1. 1. Identifying Resource Potential: Discovering future mines requires extensive geological expertise, followed by drilling, resource definition, metallurgy, and feasibility studies, all conducted in line with Environmental, Social and Governance (ESG) best practices. Junior exploration companies like Montero play a key role in this process. Their initial exploration work is crucial for determining the quantity and quality of resources, which helps attract further investment. Investors do not expect that, after a discovery is made, the company they invested in would face expropriation of its license, resulting in the loss of their investments.
   2. Creating Economic Opportunities: By identifying valuable mineral deposits, junior exploration companies stimulate local economies by employing and training local people, paying taxes, and purchasing goods and services. Successful exploration can lead to job creation, infrastructure development, and increased demand for local services, benefiting surrounding communities.
   3. Attracting Investment: Well-defined resources and comprehensive geological data enhance a project’s attractiveness to potential investors and larger mining companies. This investment is crucial for advancing a project from exploration to production, contributing to national economic growth.
   4. Laying the Groundwork for Development: The data gathered during exploration is essential for preparing for future mining operations. This includes feasibility studies, environmental assessments, and community engagement initiatives, all necessary for obtaining permits and ensuring sustainable development.
   5. Contributing to National Resource Management: Exploration companies provide valuable insights into a country’s mineral wealth, facilitating national strategies for resource management. By discovering and defining resources, they enable governments to make informed decisions regarding mining policies and resource allocation.

 

In summary, exploration companies such as Montero are essential to the mining sectors in Africa and Tanzania. Their efforts not only pave the way for future mining operations but also contribute to national resource development, economic growth, and community well-being.

 

Q: Why should major mining companies globally stand with explorers like Montero and support the fight for fair and stable mining policies?

 

A: Major mining companies worldwide should stand in solidarity with exploration companies like Montero and support it in advocating for fair and stable mining policies for several compelling reasons:

 

1. 1. Shared Interests: The success of major mining operations often stems from initial discoveries made by junior exploration companies. By supporting fair policies that safeguard the rights of these early-stage activities, larger companies can ensure a consistent pipeline of viable projects, reducing the risk of resource depletion.
   2. Sustainable Development: Fair and stable mining policies promote responsible practices that are beneficial to both local communities and the environment. By advocating for these policies, mining companies can help foster sustainable development that aligns with global standards, enhancing their reputations and social licenses to operate.
   3. Investment Stability: Clear, consistent, and unwavering mining regulations encourage investment by reducing uncertainty in the sector. Major companies benefit from a stable regulatory environment, which leads to lower costs, improved project planning, and higher returns on investment.
   4. Risk Mitigation: Supporting exploration companies in their fight for fair policies can help mitigate the risks of expropriation or unfavourable regulatory changes. When larger companies align with explorers, they collectively strengthen the industry’s bargaining power and influence over mining regulations, resulting in greater outcomes for all stakeholders.
   5. Industry Advocacy: By standing with exploration companies, major mining companies can play a more active role in shaping the future of the mining sector. When they collaborate on policy advocacy, they can assist in developing frameworks that promote innovation, research, and development, benefiting the entire industry.
   6. Building Partnerships: Supporting explorers fosters collaboration and partnership opportunities that can enhance exploration efforts. Major companies can leverage the expertise and local knowledge of exploration companies, leading to more successful projects and shared success in the industry.

 

In conclusion, by supporting exploration companies such as Montero in their pursuit of fair and stable mining policies, major mining companies can contribute to a more resilient and sustainable mining sector. This benefits all stakeholders, including investors, communities, and governments, particularly in countries with open investment policies and robust economies, which tend to experience the most success in the mining industry.

 

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