Eritrea: Mining companies dig in despite evidence of human rights abusesPublished by MAC on 2015-11-08
Source: Statement (2015-11-06)
The London-based organisation Eritrea Focus has reflected upon the situation of Nevsun Resources' controversial Bisha mine in the country.
Previous article on MAC: UN Report Alleges Forced Labor at Canadian-Owned Mine in Eritrea
The statement notes that on top of that report, a second UN agency - this time the Security Council's Monitoring Group on Somalia and Eritrea - has found evidence of forced labour practices at Nevsun's Bisha mine in Eritrea. (See: http://www.un.org/ga/search/view_doc.asp?symbol=S/2015/802)
Among its findings, the Monitoring Group found that Nevsun had used military conscripts in the construction of the mine, in possible violation of the military sanctions against Eritrea:
"Throughout its mandate, the Monitoring Group has received testimony from numerous sources, including from former senior Eritrean officials, that Senet, Segen and Mereb have used military conscripts to build and work on the mine. According to multiple credible sources, the State-owned contractors and subcontractors hired by Nevsun to provide labour are engaged in an informal pay structure, whereby the contractors and subcontractors charge a certain amount to Nevsun for each military conscript or local worker employed at the mine while they pay far lower wages to the military conscripts or local workers. Although the exact figures of labour agreements between Nevsun and the contractors remain unknown, currently the workers of contractors and subcontractors are being paid monthly wages of between 200 and 500 nakfa. The rest of the funds paid by Nevsun to Segen and Mereb are being held by the aforementioned contractors and thus, by extension, by the military and the Government because the contractors are effectively State-owned companies."
"The Group found that Nevsun had hired Segen and Mereb to provide labour in an arrangement where they paid workers far less than the amount that they were charging Nevsun for the labour. It is suspected that the difference is being withheld by Segen and Mereb, and thus, by extension, by the Eritrean military and Government."
The use of forced labour at the Bisha mine is the subject of a lawsuit filed by three Eritrean refugees against Canadian-based mining company Nevsun Resources Ltd. in Vancouver last year. For more information see: http://business-humanrights.org/en/nevsun-lawsuit-re-bisha-mine-eritrea
Mining companies dig in despite mounting evidence of human rights abuses
Eritrea Focus statement
6 November 2015
On 29 October 2015, obviously very pleased with themselves, Nevsun Resources announced from Vancouver their seventh consecutive quarterly profit for July-September 2015. The figures were, however, far below expectations with revenue down 30% at US $291.4m compared to corresponding period in 2014. Even worse, net income stood at only $45m, 64% down on prior year. Net earnings per share was a mere $0.01 - down 67%. Despite these disappointing numbers, the company announced a dividend pay-out of $0.04 per share, which is four-fold the net earnings per share.
Not surprisingly the shares dropped from $4.22 on 28 October to $3.79 on 30 October – first day of trading after the announcement. At their peak the shares were trading at $8.63.
Cliff Davis, the CEO, blames the poor results on weaker metal prices and lower production at Bisha mine, which, in our view, is only a small part of the story. What is hitting the company hard is the UN sanctions and greater awareness by the international community of the gross human rights abuses committed by the Isaias regime and the company’s use of “slave” labour from military conscripts, which many have alleged.
Mining sector inward investments
Last month Sunridge Gold were pronounced ‘good to go’ after their Asmara project signed a comprehensive permitting agreement with the government of Isaias Afwerki. Sunridge CEO, Michael Hopley, announced the deal saying “we chose Eritrea because of the tremendous opportunity it presents.”
But what is this “tremendous opportunity”? The mining companies might say untapped resources. The regime in Eritrea might say a stable political and economic situation. The United Nations might say the “complete lack of transparency”. The thousands fleeing Eritrea every month might say slave labour.
In late October, the United Nations Security Council Monitoring Group on Somalia and Eritrea (SMEG) published their report on Eritrea (http://www.un.org/ga/search/view_doc.asp?symbol=S/2015/802) pursuant to Security Council Resolution 2182 (2014). This detailed report was put together by a team of UN experts covering finance, transport, armed groups, humanitarian issues and the regional context – its authoritative warnings must be heeded and cannot be dismissed as ill-informed or biased.
Warning 1: Forced labour of military conscripts
“Throughout its mandate, the Monitoring Group has received testimony from numerous sources, including from former senior Eritrean officials, that Senet, Segen and Mereb have used military conscripts to build and work on the mine.”
“According to multiple credible sources, the State-owned contractors and subcontractors hired by Nevsun to provide labour are engaged in an informal pay structure, whereby the contractors and subcontractors charge a certain amount to Nevsun for each military conscript or local worker employed at the mine while they pay far lower wages to the military conscripts or local workers.”
Here the Monitoring Group point to the slave labour of military conscripts that’s been long reported by refugees from Eritrea – and was specifically denied by Nevsun when they met with the Foreign and Commonwealth Office over the summer. With the UN continuing to point to the use of slave labour it’s time for action to be taken to end the abuse of military conscripts (military conscripts who, it’s also worth noting, can and do include any Eritrean of working age).
Warning 2: Over $1bn of payments to the regime of Isaias Afwerki
“Since 2011, Nevsun has paid close to $528 million in income taxes, royalties and other government remittances to the Government, $226 million to the Eritrean National Mining Corporation (ENAMCO), which owns 40 per cent of the mine, in the form of dividends and $299 million in local supply of goods and services. The Monitoring Group has not been provided with, nor has it been able to obtain, independently audited financial statements or records from Nevsun, the Government or ENAMCO to verify the above figures and, especially, payroll payments made for local services provided by Nevsun, its subcontractors and its local employees.”
The numbers detailed above total $1,053,000,000 paid by Nevsun to the Eritrean regime. It’s not a huge jump to see the lifeline that this is providing to the under-fire government of Isaias Afwerki.
Warning 3: Zero transparency in financial dealings
“The Group’s lack of critical access to information on the country’s financial architecture and financial flows has rendered the task of determining whether the mining sector is used as a financial resource to destabilize the Horn of Africa region a difficult on.”
“Given that the Eritrean economy is controlled by the ruling PFDJ party and the military, it is extremely difficult to distinguish corporate structures and ownership between PFDJ-owned companies and the military. A former senior official within PFDJ stated that there was no difference between the Ministry of Defence and PFDJ when it came to money”.
Repeatedly the Monitoring Group came up against the “complete lack of transparency” in mining industry finances. This transparency made their already difficult job of mapping the reach of the regime almost impossible. It now must be time for the companies making profit from Eritrea to help the UN and international community properly monitor the Security Council resolutions.
The mining companies and investors talk of the “Eritrea discount” on their share prices, an investment term meaning impact on the share price due to human rights abuses by the government. In directly these mining companies are saying their shares currently trade below what they should command in an open market because of the brutality of Isaiais' regime on its own people. It is high time these companies listen to the public and their would be investors and desist from investing in Eritrea.
Eritrea Focus is an association of Non-Governmental Organisations(NGOs), human rights organisations, exile and refugee groups and individuals concerned with the gross abuse of human rights in Eritrea