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Tuesday, 3 February 2015

‘KING AT CENTRE OF IRON MINE FAILURE’

King Mswati III is at the centre of a US$141 million arbitration dispute after it was claimed his appointees deliberately worked to make a multi-million dollar iron ore mining business in Swaziland fail so the King would not have to repay US$10 million he had been paid by the company. 

The dispute centres on a company called SG Iron Ore Mining (PTY) Ltd. (formerly Salgaocar Swaziland (PTY) Ltd) that was set up in 2010 to mine iron ore at Ngwenya Iron Ore Mine within a protected area inside the Malolotja Game Reserve.

Salgaocar Swaziland was 50 percent owned by Swaziland. The King is an absolute monarch and he keeps all mineral royalties in trust for the nation. In practice, he chooses how the money is used and this helps finance his lavish lifestyle. The King, who rules over an impoverished kingdom of 1.3 million people, has 13 palaces, a fleet of top-of-the range BMS and Mercedes cars and enjoys a lavish lifestyle that includes international travel.

It was forecast in 2011that 200 million tonnes of ore would be extracted from the mine and that a royalty of 50 US cents per tonne would be paid.  On that basis the King stood to get US$100 million.

It was widely reported at the time that Salgaocar Swaziland, part of a global conglomerate based in India, had also given the King a gift of a McDonnell Douglas DC-9 twin-engine jet aircraft. One report put the value of the plane at US$46 million. 

The Swazi Government denied the jet was a gift from Salgaocar, but declined to name its donor. The company refused to confirm or deny its involvement.

But within two years of opening the mine closed, leaving debts estimated to be more than US$4 million. About 700 jobs were lost by the closure. 

It was reported that the venture failed because the price of iron ore on the world market fell.

On 29 January 2015 Southern Africa Resources Ltd (SARL), which had a 50 percent stake in the business, issued a media statement announcing it was to bring a notice of dispute and that it would bring international arbitration proceedings against the Kingdom of Swaziland at the International Centre for Settlement of Investment Disputes (ICSID).

It said the actions were a result of Swaziland’s ‘effective expropriation of SARL’s 50 percent stake in SG Iron Ore Mining (PTY) Ltd’, a joint venture created by SARL and the Kingdom of Swaziland to restart the mining of iron ore in Swaziland.

The statement said, ‘SARL invested over US$50 million in the project. SARL contends that the King’s appointees in the company subsequently engineered the company and project to collapse. 

‘“The collapse of the project was orchestrated by the King’s appointee to the Board of Directors, whose main intention appears to have been to avoid repaying the loan/advance dividend of US$10 million that SG Iron Ore made to King Mswati III in 2012,” said SARL Counsel William Kirtley of Dugue & Kirtley AARPI.’

The statement said SARL was seeking compensation of more than US$141million, plus other damages and interest. 

The statement continued, ‘According to the notice of dispute, beginning in August 2014, the King’s appointee to the Board of Directors did not permit any further iron ore to be sold, despite vessels arriving at the port to load the cargo, starving the company of cash. The King’s appointee to the Board of Directors then used the artificial cash crisis as a pretext to request that the company be placed under Judicial Management and then liquidation. 

‘This action was taken without the approval of the foreign investor, and without the Board of Directors’ approval, despite the agreement that SARL’s President, who is also the Executive Chairman of SG Iron Ore, Shanmuga Rethenam, was to chair all SG Iron Ore’s Board meetings and to have the casting vote on all matters. 

‘Swaziland’s judiciary then put the company into provisional liquidation and the King of Swaziland sent his army to guard the mines. 

‘Swaziland has also threatened to issue a Warrant of Arrest for Shanmuga Rethenam and to request an Interpol Red Alert, although it has yet to specify a criminal charge. 

‘“Clearly the threat to issue a Warrant of Arrest for one of the largest foreign investors in the country is totally uncalled for,” Kirtley said.

‘“It is a shame that the Kingdom of Swaziland has refused to negotiate an amicable resolution to this investment dispute, which concerns a project that should have been in the interest of both SARL and Swaziland, and with respect to which SARL spent over US$50 million to help rebuild Swaziland´s mining industry, which has fallen into disrepair,” said Kirtley. 

‘“By using State organs to press the reset button, Swaziland has avoided the repayment of a loan/advance dividend of US$10 million, while reducing the value of SARL’s investment to nothing.  We are confident that our client will prevail before the impartial arbitral tribunal that will decide whether Swaziland´s actions constitute an illegal expropriation of SARL’s investments in the company in the country.”’

See also

PRIVATE FIRM GAVE KING HIS JET
KING TO MAKE US$100m FROM JET FIRM
http://swazimedia.blogspot.com/2012/04/king-to-make-us100m-from-jet-firm.html

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