Kilembe Mines redevelopment begins with $230M investment

KASESE, Uganda — More than $230 million is slated for investment in the redevelopment of Kilembe Mines, a historic copper and cobalt operation in Uganda’s Kasese district. This marks a significant step in the country’s plan to boost its mineral sector and add value to its natural resources.

The Ministry of Energy and Mineral Development recently handed over the Kilembe Mines site to the Uganda National Mining Company (UNMC) and private investors to kickstart the redevelopment. Kilembe Mines was Uganda’s leading mining venture until the early 1980s.

Under the redevelopment plan, Kilembe Mines’ assets have been transferred to UNMC, a government company established under the Mining and Minerals Act, 2022, to oversee the state’s commercial interests. UNMC will hold a 15% ownership interest in the new project.

The government began searching for a partner for Kilembe Mines’ revival in 2018. A competitive bidding process led to the selection of Sarrai Group Limited and Nile Fibreboard Limited as the chosen investors. In March, the energy ministry signed a mineral production sharing agreement with the licensees, which include Sarrai Group, Nile Fibreboard, and UNMC.

“We hand over the full possession, access to and rights to the assets to the developers,” said Ruth Nankabirwa, the energy and mineral development minister, during the recent handover in Kasese. She noted that the handover followed a successful joint verification of the physical assets, consistent with the production sharing agreement.

Nankabirwa added that this production sharing agreement model, where the government partners with investors, is expected to become the benchmark for Uganda’s future mining projects, emphasizing value addition in the sector.

“The project will not only revive mining operations but also establish a value-added processing industry, strengthening Uganda’s position in the global minerals market and ensuring that Ugandans benefit directly from their country’s natural resources,” Nankabirwa said.

Unlike the previous arrangement where the government primarily earned royalties and taxes from mining ventures, the new mineral production sharing agreement is designed to yield greater returns for the state.

Irene Batebe, permanent secretary at the energy ministry, explained that under this agreement, the government, as the owner of the minerals, grants development rights to an investor and then shares in the production, either in kind or in value. The developer provides financial resources, technology, and skills, while the government grants the exclusive right or license.

“The main difference between a production sharing agreement and the tax royalty regime is that with the former, the Government shares in the actual production of minerals or mineral products,” Batebe said. “This means that in addition to the standard royalties and taxes, the Government also receives a share of the production.”

She emphasized that this ensures the government benefits more directly from extracted minerals, while the developer recovers costs, and production is divided equitably. UNMC’s 15% ownership interest in the Kilembe Mines project will enable government oversight and a participatory role, allowing UNMC to acquire technical knowledge from the operator and improve sector regulation, ultimately creating more jobs.

“Historically, mineral-rich African countries witnessed exploitation of their resources by foreign entities with little or no real benefits,” Batebe said. “Production sharing mechanisms are one of the ways to ensure that African states directly benefit from their mineral resources.”

Uganda aims to leverage its minerals sector to grow its Gross Domestic Product (GDP) tenfold to $500 billion by 2040, as outlined in its National Development Plan IV (NDP IV). The revival of Kilembe Mines is expected to return the minerals sector to its 1960s “golden years,” when it contributed up to 30% of GDP, a figure that has since dropped to about 2% annually.

Dr. Gerald Banaga-Baingi, UNMC chief executive officer, stated that investments of $230 million to $250 million are anticipated for both the extraction of established resources and new exploration ventures.

Batebe detailed that the mine’s brownfield project includes a hard rock copper mine and processing plant, the Mubuku 1 hydropower plant, auxiliary mine facilities, cobalt-rich tailings, and associated minerals such as copper, cobalt, gold, zinc, nickel, manganese, and other base metals.

“Although the mines have been dormant, they have been under care and maintenance since 1982 by Kilembe Mines,” Batebe said, noting that the mines have known reserves and resources of copper/cobalt in ore and tailings estimated at 4.6 million tonnes.

Under NDP IV, Uganda targets increased copper and cobalt production to meet rising global demand, driven by clean energy transitions. This initiative aims to catalyze industrialization through value addition and generate employment.

“The country expects the developer, through the mineral production sharing agreement, to establish smelting and refining facilities to produce grade A copper cathodes with 99.99% purity and cobalt metal with 99.8% purity, directly advancing Uganda’s industrialization agenda,” Batebe explained. The global demand for copper is projected to increase by 4% and cobalt by 15%, primarily due to their critical role in renewable energy and electric vehicle technologies.