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In the previously war-ravaged and tightly knit community of Locomo in Kitgum District, the locals have a saying: “The land belongs to the dead, it is under the care of the living, and it is being held in trust for future generations.”
There is an innate connection between the tiny rural population of some 300 people and the land they work and see around them.
Largely, it is used for subsistence farming and animal husbandry; for decades, the wider northern Uganda region was witness to war and atrocities as government forces battled with the infamous Lord’s Resistance Army. In recent times, the residents have also had to face the violence of cattle rustlers from the neighbouring Karamoja region.
But in a fortuitous twist of fate, the Locomo community now stands to benefit from a world-class discovery of high-quality graphite, a mineral that is key to lithium-ion batteries found in smartphones and electric vehicles.
The development of the Orom-Cross project by London-listed company Blencowe Resources Plc is awaiting the final go-ahead from investors. Its CEO Mike Ralston was in Uganda inspecting progress earlier this month and the company, which has just issued a new tranche of shares on London’s Alternative Investment Market stock exchange, boasts that returns will be extremely profitable. If the project proceeds to production, it could generate hundreds of millions of dollars in revenue, provide employment to locals and tax to the Ugandan government.
However, although the locals of Locomo are custodians of the land for their ancestors and their future generations, they are not sure they will receive a fair slice of the pie.
They are by far the least powerful of the actors that have now come into play with such a prize up for grabs.
At the State House in Kampala, the project is being watched carefully as President Museveni eyes a potential large export earner for the country and a handy negotiating card that can be leveraged in negotiations with foreign powers, in particular China and the US.
The competing geo-strategic interests of those two countries have also entered the fray. They are desperate for graphite to spur the clean energy transition away from fossil fuels.
Intriguingly, both countries are involved in the project. In recent weeks, especially since Donald Trump’s re-election, the superpowers have also ramped up their rhetoric on trade wars.
China has threatened to target America’s mineral-critical supply chains, with graphite one of the products high on their list. China controls a major part of the minerals needed for the energy transition.
In this context, Blencowe seems to have has sided with the West. Its recent pronouncements on X/Twitter suggest that its product is vital for Europe and the US to diversify from reliance on China’s reserves. “Invest in us” is the tone of its rallying cries.
“China’s ‘supply chain warfare’ underscores the urgency of diversifying critical mineral supply chains. Projects like Orom-Cross, with its Ugandan Graphite & partnerships like SAFELOOP, are pivotal in creating secure, non-China-dependent resources for EVs & beyond,” a Blencowe X post on November 29th reads.
SAFELOOP, which stands for Securely Advancing Future EVs with Li-IOn batteries through Optimized Pathways, is a collaborative consortium involving 15 entities from 14 countries, representing a blend of research, manufacturing, and business across Europe.
The consortium is managed under the European Commission’s €100 billion Horizon Europe Programme, from which Blencowe seeks to benefit as a critical supplier in the European EV chain.
Blencowe’s strategy, in the grand scheme of things, is “to process graphite and build anode capacity in Uganda, which aligns with the global trend of supply chain diversification.”
On June 11th,2024, Blencowe’s official X handle featured a Financial Times article under the headline,‘The graphite fight: US tariffs trigger race to build non-Chinese supply chain,’ which showed that graphite had become the latest resource to cause trade tensions between the US and China, with Washington putting pressure on electric vehicle and battery makers to build a new non-Chinese supply chain for graphite anodes, a crucial component in electric vehicle batteries.
The move followed President Joe Biden’s announcement on May 14th, indicating that US tariffs of 25 per cent were due to kick in from 2026 on natural graphite—a form of carbon—processed in China.
A U.S. government press release published on May 14, 2024, noted that “the concentration of critical minerals mining and refining capacity in China leaves our [U.S] supply chains vulnerable and our national security and clean energy goals at risk.”
Under this bubble of critical mineral supply chain wars, which we shall later return to, the people of Locomo in Kitgum District may not know it, but they could soon be at the sharp end of a global whirlwind.
For the present, however, the promise of money has created its own divisions in Kitgum District.
Although Blencowe agreed to pay significant sums to the local community to boost skills, education, health and general infrastructure, there have been loud murmurings of discontent. Where is the money we were promised? Some asked.
In mid-2024, with the help of London-based Finance Uncovered, the CEO East Africa Magazine began to investigate. By carefully examining the company’s annual accounts and other financial statements, we set about tracking some of the promised funds.
And what we found was not, as some had suspected — without foundation — egregious wrongdoing by the company, but instead wranglings among the so-called representatives of the community itself over who was to get what and when.
The rows, which included a threat by a local council to immediately halt the company’s operations in the district, centre on a private “surface rights agreement” that mining companies often sign with landowners in return for digging into the ground.
Blencowe has promised prosperity and several corporate and social responsibility initiatives, but the ordinary people of Locomo worry they may be the ones to lose out.
Rising from the ashes
After decades of war and strife in the last decade, Kitgum District has begun to recover from the trauma caused by Joseph Kony and the Lord’s Resistance Army (LRA).
With an urban population totalling 48,890 (21.8%), this implies that 174,900 (78.2 %) people, who form the majority of Kitgum District’s population, live in rural areas.
Approximately 100 km northeast of the town of Kitgum lies the village of Locomo in Orom Sub County, and it was in this isolated part of the world in 2013 that large quantities of graphite were found. The timing couldn’t have been better. As a mineral seen as essential to supporting the transition from fossil fuels to cleaner energy sources, graphite is particularly valuable in manufacturing lithium-ion batteries, which are used in devices like smartphones and electric vehicles.
Studies done thus far estimate the Orom-Cross deposit contains as much as 2 – 3 billion tonnes of graphite flakes, most of which are near the surface and can be mined relatively easily and cheaply. The area being explored is about 20 sq km, affecting ten villages and about 300 people in Akurumor parish. Most project-affected people are in the Locomo village, where the bulk of the graphite is found.
According to annual reports and corporate presentations, Blencowe Resources estimates that an investment of USD130 million over the next few years will yield company returns of USD482 million over the next decade and a half. Blencowe is in the final stages of a detailed Definitive Feasibility Study study that it will use as the basis on which to approach investors for further money.
In the interim, the company attracted interest from both superpowers. The Development Finance Corporation, an arm of the U.S. government, recently provided a USD5 million grant towards the studies that will determine whether a final investment decision is made, likely in the new year. The company also recently tested bulk samples from the mine with Chinese customers, whose government is building the largest renewable energy projects in the world.
For the citizens of Locomo and the surrounding district of Kitgum, these developments have raised hopes that the associated economic benefits will be a step forward in modernising the region and materially improving its citizens’ lives.
Before the CEO Magazine started investigating, many of the locals had no idea what kinds of sums had been promised. We examined Blencowe’s annual accounts for 2023. Under Note 15 for long-term creditors, the figure was revealed: some £1.4m (UGX 6.4 billion) in total to be paid in several installments over several years.
This was the surface rights agreement with the Locomo Land Owners Association. It had originally been signed in front of the community and then lodged at the Directorate of Geological Survey and Mines at the Ministry of Energy and Mineral Development in Kampala in May 2018 before Blencowe’s arrival on the scene. At that time, the rights were held by Consolidated African Resources (Uganda) Ltd (CARU), a Ugandan company.
The agreement granted CARU a 49-year lease over the prospecting area in return for compensation. Payments became due at the point where the company would require access to different sections of the prospecting area, so the timing of the payments was entirely at the discretion of the company.
The association in turn was responsible for making disbursements to individual community members and administering a student scholarship scheme the company agreed to fund.
While a land valuer was used in the process of drafting the agreement, when asked by reporters no-one could explain how the actual rates were determined. This investigation was therefore unable to assess whether the agreed rates were fair. The issue is also compounded by the fact that the land in this part of the country is predominantly used for subsistence farming.
Blencowe, whose executive chair is Cameron Pearce, an Australian and a founder of the company, acquired CARU and the surface rights agreement in 2020.
In the wake of the Covid-19 pandemic, the company and the land association decided to revise the agreement in September 2022. The amounts to be paid were not altered but the second version shortened the period between payment installments. Blencowe will now make a further eight equal installments at defined dates with final payment due in 2035.
The revised agreement requires provision of local education and sensitization of the local communities in Akurumo parish on the opportunities and advantages of mining graphite, including provision of employment priorities to the local capable members of Akurumo parish.
In response to our questions, Blencowe CEO Mike Ralston said considering the size of the mineral area and the fact that the payment structure was based on access, the next payments would not have been due for a long while and this was something both parties considered “unreasonable”. Blencowe was therefore happy to respond to the association’s request.
According to a letter addressed to the land association by lawyers representing Blencowe in 2022, the community will be paid approximately £142,000 (at current exchange rates) at each of the eight installments left on the agreement, or approximately £1.13 million in total between now and 2035.
Blencowe said two payments had already been made to the community: one before it acquired CARU and the second when the revised agreement was signed in 2022. It firmly maintains it is up to date with the payments, with the next one of which is likely due in 2025.
But when reporters visited the area earlier this year, they found a degree of uncertainty, confusion and anxiety about the payments and the agreement, for example that inflation in Uganda would erode the value of any settlement as time progressed.
Blencowe firmly maintains it is up to date with the payments, but when we visited the area, we found a degree of uncertainty, confusion and anxiety about the compensation payments and the agreement, for example, it was likely that inflation in Uganda would erode the value of any settlement as time progressed.
Some residents said they had not received monies due to them and that there had been delays. They were under the impression this was the fault of the company.
Mr Felix Ayella, the Vice Chairperson Lucomo Land Owners’ Association disclosed that there has been issues with the processes of compensation and the communities had gone for over 5 years without their installments.
Nelson Bruno, a project affected person, and also doubling as the Orom Sub County LC III Chairperson of Oromo says following negotiations between Consolidated African Resources and the Locomo Land Owners Association, it was agreed that UGX 400,000 (USD 107) would be paid for one acre at every section; this means that if a project affected person has one acre, they would earn UGX 4 million (USD 1000) over the lifecycle of compensation until 2035.
However, different projects affected shared that they were paid different amounts not commensurate to the land value and market rates and other disturbances such as planned destruction of crops, trees and other assets were catered for but at a minimal rate.
Mr Bruno received his first payment of UGX 1.2 million (USD 322) in 2019, and expects a full payment of UGX 13 million (USD 3490) by 2035 for his three and half acres affected by the project.
Community members interviewed revealed there was also a discrepancy in compensation rates. John Lupiri, 38, shares Bruno’s frustrations, and questions the fairness of the compensation process.
“My 3 acres of land with my maize, simsim and cassava were destroyed and only paid UGX 250,000 (USD 67) per acre,” Lupiri explained.
‘Mismanagement’ of funds
As well as the compensation processing delays, the CEO Magazine discovered allegations of mismanagement against the leaders of the Locomo Land Owners’ Association. It seems that the discontent among the community was such that the Resident District Commissioner, an office holder appointed by the President, became involved and instructed processes to be followed, particularly around the handling of funds.
Documents obtained regarding the activities of Locomo Land Owners Association leaders reveal gross mismanagement of funds received from Blencowe for corporate social responsibility activities.
The documents were part of minutes recorded during a meeting between the Association leaders and Mr William Komakech, the former Kitgum District Resident District Commissioner in 2022.
A source familiar with the issues said that the association spent UGX 240 million (£51,303) acquiring two tractors for communal use and which were to be rented out on commercial terms. It was agreed that any money generated from doing so would be banked on a monthly basis. However, in 2020, only UGX 1.6 million (£342) was banked and nothing the following year.
It appears that the association’s chair had had UGX 2.3 million (£491) in his custody for the whole year. The Commissioner said such monies should be held by the Treasurer.
Some insiders at the land association have also questioned accountability of over UGX 30 million meant to deal with hunger in the community, and why there has been no election held for new executives since 2017.
The land association and the association chair did not respond to questions we submitted.
Blencowe says it has no say in how the funds are distributed by the land association and indicated it had no intention of trying to influence the decision.
In response to questions over mismanagement of funds at the land owners association, Blencowe stated it would work with any relevant authorities to ensure compensation continues should it be made aware of any improprieties or legal proceedings against the association or any of its members.
District council land grab
The difficulties with the association are not the only problems plaguing community relations in the area.
In December 2023, the Kitgum District Council, under which the village of Locomo sits, moved to suspend operations of Blencowe after councillor Charles Oryem tabled a motion that alleged “numerous irregularities”.
Oryem, in a document read out at a district council meeting, noted that no information or formal documents had been made publicly available to the district council, despite ongoing activities within the explored area.
He listed a host of other gripes including that the agreement reached with the land owners association favoured only one parish. Separately, Oryem believed there has been a lack of transparency around how students would be selected for scholarship scheme and that the area could miss out on wider economic benefits.
Arwai Christopher Obol, the chair of the council, told us his request to access the surface rights agreement had been unsuccessful. He said: “We are now investigating because why is the community not satisfied? It’s a question that we need to look into critically, yes. But the chances of having the community being exploited is very very eminent.”
When the CEO Magazine examined the council’s move, it was not clear on what authority the district could suspend or call for the suspension of operations of a mining company because under Uganda’s Mining and Minerals Act of 2022, the Department of Geological Survey and Mines takes the lead in regulating mining companies.
Blencowe has also not yet formally started mining operations: it is still in the exploration phase, and as such had only paid USD 100 to the central government for royalties on the bulk samples it had taken from the area.
The company said that it was certainly not aware of any royalties that should have been paid to the district council, and certainly not prior to mining operations commencing. It also pointed out that it only sought an agreement for compensation on the land in one parish, as the entire Orom-Cross prospecting area is located within the parish of Locomo.
Blencowe described the incident as an “interference” created by certain local parties for their own agenda. It said this was quickly shut down by senior Ugandan government authorities once they learned of these activities.
The reaction of the government also underscores the strategic importance of the project to the country. President Museveni imposed a ban on raw exports of minerals in 2015. As part of its development of the Orom-Cross deposit, Blencowe plans to build a processing plant that will purify the graphite to a 99.95% concentrate, thereby uplifting its value and increasing the potential for the operation to generate valuable foreign exchange for Uganda.
The issue of community relations is an important factor in early stage mining operations and companies are adept at highlighting their efforts in their corporate and social responsibility reports.
In its 2023 strategic report, the company reports: “[The company] has agreed to help provide local education and sensitization of the local communities in Akurumo parish on the opportunities and advantages of mining graphite. CARU will give employment priorities to the local capable members of Akurumo parish.
“Since the acquisition of CARU the Group has donated to local causes, such as a scholarship programme and to fight against COVID-19. The Group will continue to donate to the local communities around the region of Uganda in which the Project Licences are located.”
None of the rows within the community are mentioned – although there is no reason why they should be unless they are deemed to have a financial effect on the company.
There is no suggestion of any wrongdoing by Blencowe and it insists it has a good public relations operation in effect in the Locomo area. After visiting the area earlier this month, Mr Ralston told Finance Uncovered: “The Community is supportive and our relationship is strong.”
Alam Nabil, the Blencowe Country Director in Uganda insists that the company has had a number of communal meetings to enlighten the community on company operations.
“We have community events which are documented. For example, the school donation was done in full presence of the entire community,” he says.
But as the importance of the mine and its fortunes comes nearer to fruition, it remains to be seen whether it is able to ensure the local residents are treated fairly.
Vincent Kedi, Commissioner of Licensing and Administration at the Directorate of Geological Survey and Mines, said it was important that Blencowe ensures community relations are good and that there is no information gap.
“When you are going to develop a mining project in a community, you must have a social license to operate. The community must understand what you are doing. They should be appreciative,” he said.
Graphite demand and the ESG question?
The Orom-Cross graphite project in Uganda has been identified as one of the largest, highest-quality graphite projects in the world. This project is located in a market that is forecast to demand exponential tonnage of graphite in the future.
As such, it anticipates strong demand linked to renewable energy and the accelerated growth of non-fossil fuel transport options.
Blencowe’s most recent corporate presentation quoted World Bank data, revealing that the world graphite market is expected to grow to USD 21.6 billion by 2027, with graphite demand increasing by 500% between 2018 and 2050.
McKinsey shows that the global demand for batteries will compound by 30% year-on-year to 2030, led by Li-ion batteries in electric vehicles. According to the US Energy Administration, renewables are expected to provide nearly half of the world’s energy by 2050.
Blencowe, which is in the final stages of the Definitive Feasibility Study, will set up a graphite production processing plant in 2025.
According to proactiveinvestors.co.uk, a Definitive Feasibility Study (DFS) is the cornerstone of project development in the mining industry. It is the culmination of all prior study stages and delivers a final verdict on a project’s technical and economic viability.
A DFS illuminates the granular details of a project’s potential by delving into the meticulous assessments of geological data, reserves, mining methods, processing technologies, infrastructure requirements, environmental impacts, legal obligations, and market analyses.
On September 5th, Blencowe Resources announced signing a Memorandum of Understanding (MOU) with Singaporean graphite sales and marketing specialist Triessence Limited and a leading Asian SPG and Anode material producer (“PG Partner”).
The partnership aims to establish a Joint Venture (JV) for a graphite beneficiation facility in Uganda that produces 99.95% purified graphite for lithium-ion batteries.
However, according to the International Energy Agency, the huge rise in demand for critical minerals raises questions about whether the growth in demand—in most cases well above the historical pace—can be supplied reliably and whether the environmental and social consequences associated with mineral production can be managed properly.
Critical minerals, essential for a range of clean energy technologies, have become a prominent topic on the policy and business agenda in recent years.
Rapid growth in demand is providing new opportunities for the industry, but volatile price movements, supply chain bottlenecks, and geopolitical concerns have created a potent mix of risks for secure and rapid energy transitions.
This has triggered an array of new policy actions in different jurisdictions to enhance the diversity and reliability of critical mineral supplies.
Blencowe seeks to enter a market met by supply bottlenecks. For instance, Blencowe identifies China’s position as the world’s largest producer of graphite as threatened by adverse winter conditions and increasing costs from tightening labour and environmental standards.
Outside of China, the largest graphite projects occur in Mozambique through the Syrah Resources Balama Project and Tanzania, an area noted for large, high-purity flakes, and Brazil. The economics of the demand and supply of this mineral, as analysed by Blencowe, indicates a total forecast supply for 2025 of approximately 1,150,000 tonnes per annum, with China supplying 400,000 tonnes per annum, Mozambique 350,000 tonnes per annum and other countries supplying the balance of 400,000 tonnes per annum.
This total supply of 1,150,000 tonnes per annum does not cover a forecast total demand for flake graphite of 1,550,000 tonnes per annum by 2025.
The environmental factor
The Orom—Cross graphite mining project is situated on the foothills of the Orom mountains, which constitute the Rom Central Forest Reserve, which measures 10,904 hectares.
Uganda’s National Forestry Authority has identified the forest reserve as one of the network of critical sites for biodiversity in Uganda.
As such, when Blencowe set out to conduct a Definitive Feasibility Study, one of the four major thrusts identified in its prospectus required that the company conduct revised environmental impact studies to extend the previous impact studies conducted in conjunction with the mining license award in 2019.
Additional information obtained from Blencowe’s annual report indicates that, although the Orom graphite project is still at an early stage of development, further consideration will need to be given to environmental and social issues affecting the project.
The company identifies unforeseen environmental liabilities resulting from future and historical exploration or mining activities, which may be costly.
Such risks may include on-site sources of environmental contamination, such as oil and fuel from the mining equipment, and the rehabilitation of the site upon expiry of the project licence.
Section 216 (1) of the Mining and Minerals Act, 2022 requires that every holder of a mineral right, licence or permit shall carry out an environmental and social impact assessment of his or her proposed operations in accordance with the National Environment Act,2019.
“The holder of a mineral right, licence or permit referred to in subsection (l) shall commence his or her field operations under this Act only after securing a certificate of approval of his or her proposed operations from the National Environment Management Authority,” the section reads in part.
Section 217 (1) of the same law also requires that an applicant for a mineral right, licence, or permit submit to the Minister an environmental management and monitoring plan approved by the National Environment Management Authority indicating the type and quantity of wastes to be generated from any exploration, mining, processing, smelting, or refining operations under this Act and the proposed methods of disposal.
Blencowe will be required to undertake high environmental safeguards during its mining operations, especially since graphite is a critical mineral.
On September 2, 2024, Blencowe reported that it had already submitted an updated ESIA report reflecting the revised Orom-Cross operation plan, enhancing the content of environmental and social commitments to align with guidelines from potential funding parties.
Blencowe also indicated that it has also successfully achieved ESG accreditation through a well-known industry agency, Digbee ESG, for its current policies and planning on ESG.
“This certification is a major step towards satisfying both the investment community and industry expectations for sustainable and environmentally responsible operations at Orom-Cross.
Significant progress continues within the DFS, including plant design, power supply studies, and infrastructure development,” the company said in a statement.
A joint communique authored in April 2024 by the Climate, Energy, and Environment Ministers of G7 countries explains why environmental, social, and governance (ESG) principles are vital for critical minerals.
The communique, authored at a meeting held in Italy, reaffirmed the growing importance of critical minerals for the clean energy transition and required that strong ESG standards be vital for creating responsible and resilient critical minerals supply chains, ensuring local communities benefit, advancing innovation and competitiveness, and respecting human dignity and human rights while minimizing environmental footprints.
“We are committed to supporting open, transparent, rules- and market-based trade in critical minerals with traceability, opposing market-distorting measures and monopolistic policies on critical minerals, and promoting dialogues between extraction, producer and consumer countries. As the key enabler to overcome our challenges, we are committed to implement the “Five-Point Plan for Critical Mineral Security” as annexed,” the communique reads in part.
The Kitgum District Development Plan 5-year plan for 2021/5 shows that the district is already experiencing environmental degradation arising from the problem of emerging extraction and trade in sand, gravel, graphite, and murram, which leaves unrestored burrow pits in the district’s landscape.
Blencowe undertook mining 700 tonnes of graphite in 2023; however, it is not yet clear how much environmental damage was caused or if there were any remedies.
During our visit to the Locomo community, we were unable to access the mining area where the graphite samples were mined. Dan Komakech, Blencowe’s Community Public and Media Relations Officer cited safety concerns and the mining area was far and deep in the wilderness.
However, he noted that the burrow pits were covered successfully after the graphite samples were taken out.
Wany Oyok David, the Kitgum District Natural Resources Officer, was unable to visit the area where the graphite samples were mined due to financial constraints.
“We are not so aware of what damage was there on the environment, trees, but what’s needed is to make sure that the environment is recovered,” he said.