Hima Cement investor, Sarrai Group is set to take over and re-develop Kilembe Mines based in Kasese District after signing a new agreement with the government.
Hima Cement which is also based in Kasese District was acquired by Sarrai Group last year at a transaction value of USD 120 million.
The investor signed a mineral production sharing agreement on March 3rd with Energy Minister Ruth Nankabirwa, and Finance Minister Matia Kasaija representing government as signatories.
Sarrai Group Ltd and Nile Fibreboard Ltd emerged as the best bidders out of the 14 firms that expressed interest.
According to Minister Nankabirwa, this flagship project will produce copper cathodes and cobalt metal, which are critical for the transition to clean energy technologies, in addition to driving Uganda’s industrialisation, job creation and support to local mining operations.
The latest Auditor General’s report shows Kilembe Mines shareholders have long been negotiating with a strategic partner to redevelop the company’s production assets and restore it profitability.
The Mines current losses are attributed to historical issues, including legal cases and asset damage from natural calamities, which are expected to be resolved once the partnership is finalized.
Kilembe core mining operations ceased in 1982, and its current role is the care and maintenance of assets that have suffered losses due to outdated infrastructure, machinery, and 1950’s technology prone to breakdowns.
The Mines power generation facility was also halted early in the previous financial year due to safety concerns over its 70-year-old infrastructure, with refurbishment planned through the strategic investor partnership.
Irene Mwoyogwona: Beyond the Numbers – How Pride Bank's Award-Winning CFO Combines Profitability and Social ImpactThe Auditor’s report also details how Kilembe mines unpaid dues increased by 5% rising from UGX 2.2 billion in the 2022/2023 financial year to UGX 2.3 billion in the 2023/2024 Finance Year.
Despite considerable doubt regarding the recoverability of some of the dues amounting to UGX 1.52 billion (65%), the company was yet to initiate the write-off process for these amounts.
Other challenges that plagued the Kilembe Mines include failure to pay a Board of directors appointed in June 2022 to oversee the operations, with retainer fees amounting to UGX 417 million due to the Board.
The company’s operating margin dipped to -112% which is extremely below 15%, which according to the Auditor, is a sign that the company continues to spend more on operating costs than generating revenue.
The company’s accumulated losses stood at UGX 46 billion as at 30th June 2024 with its assets not yielding positive returns and could not even cover its short-term obligations.
This is a developing story….
