African Rainbow Minerals (ARM) has come out strongly in defence of its investment in Evolution Energy Minerals in Tanzania and refuted allegations that it, and its associated companies, breached confidentiality and non-compete agreement with Pula Group by pursuing a rival project.
This comes as Tanzanian-based Pula Group has filed a $195 million (R3.4 billion) lawsuit alleging that ARM - which is owned by South African billionaire Patrice Motsepe - breached a non-compete agreement by investing in Evolution Energy Minerals, an Australian firm operating adjacent to Pula’s graphite project.
The lawsuit emanates from an alleged breach of contract in 2021, where the Motsepe associated companies invested in Evolution, a competing graphite mining project, adjacent to the Pula Graphite project whilst a confidentiality and non-compete agreement was allegedly in force.
The suit was filed against Motsepe and his associated companies - African Rainbow Capital (ARC), and ARCH Emerging Markets - for violating a non-compete agreement by investing in Evolution Energy Minerals, which has a project adjacent to Pula’s graphite project in the Ruangwa district in Tanzania.
Pula is applying for a default judgement against the companies that failed to appear before the court in December 2023 after the Motsepe associated companies argued that the Tanzanian court had no jurisdiction on the matter.
All parties involved in the matter will appear before Judge J. Gonzi of the Commercial Court of Tanzania to receive orders for the Pre-trial Conference and directions regarding Pula’s default application against Motsepe and his associated companies.
In response to Business Report yesterday, ARM said it was considering investing in minerals that it had not mined in the past when the Pula Graphite Project was presented to it for its consideration.
An ARM spokesperson said the company concluded a Confidentiality Agreement with Pula but subsequently decided not to invest in the Pula Graphite Project and communicated its decision to Pula.
“Pula issued summonses against ARM, ARC, ARCH, and Dr Patrice Motsepe, alleging breach of the Confidentiality Agreement. ARM, ARC, ARCH, and Dr Patrice Motsepe deny any breach of the Confidential Agreement and also deny that there is any merit to the allegations and claims brought by Pula,” said the spokesperson.
“The business conduct of ARM, ARC, ARCH and Dr Patrice Motsepe are based on a commitment and adherence to principles of integrity, ethics, governance, and compliance with agreements that they have concluded.
“The matter is currently before the High Court of the United Republic of Tanzania, Commercial Division. As such ARM is not able to comment further.”
The case is expected to set a legal precedent in protecting the rights of local mining and exploration companies competing against international counterparts in Tanzania - 70% of mineral exploration in Tanzania is conducted by Australian and Canadian companies.
The quantum of the suit is among the largest ever filed in Tanzania’s mining industry and is based on a third-party valuation of what Pula stands to lose as a result of the competitive disadvantage resulting from the Motsepe associated companies’ violation of a confidentiality and non-compete agreement.
Charles Stith, the chairman of Pula Group and former US ambassador to Tanzania, said ARM and ARC’s conduct cast serious aspersions on the respective boards’ compliance with good corporate governance.
“I find it strange that we're at the point where the issues in this suit are soon to be decided by the courts. While Patrice Motsepe is an individual and ARCH is a privately held company, both ARM and ARC are publicly traded companies,” Stith said.
“Both boards have a fiduciary responsibility in this matter, it is interesting that after being informed about this action that they didn’t charge executives to, at least, try to resolve this suit before this point.”
BUSINESS REPORT