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Nevsun Resources denies accusations of human rights abuses at at Eritrea Mine

By Tajuddin
In BUSINESS
Nov 21st, 2014
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 Nevsun's Bisha Mining in Eritrea

Nevsun’s Bisha Mining in Eritrea

Victoria, British Columbia, Canada ( DIPLOMAT.SO) – Nevsun Resources Ltd. (NSU), a takeover target which mines gold and copper in Eritrea, is being sued for alleged complicity in human-rights abuses at its operations in the African nation. The company denied the allegations.

The suit filed yesterday by three plaintiffs in the Supreme Court of British Columbia claims the Vancouver-based company’s Bisha mine was built using “forced” laborers who faced the threat of torture by the Eritrean government, according to the filing.

“We are confident that the allegations are unfounded,” Nevsun Chief Executive Officer Cliff Davis said in a statement. “Based on various company-led and third-party audits, the Bisha mine has adhered at all times to international standards of governance, workplace conditions and health and safety.”

Human rights conditions in Eritrea are “dismal” with indefinite military service, torture, arbitrary detention and restrictions on freedom of expression driving a refugee exodus, according to Human Rights Watch. Military conscripts provide forced labor in civilian roles, the New York-based group said in its World Report 2014.

Nevsun has a 60 percent shareholding in Bisha Mining Share Co., while the Eritrean government holds the remaining stake through the state-owned Eritrean National Mining Corp. The mine produced only gold until last year, when it began to expand into copper and zinc. It plans to produce 80,000 metric tons to 90,000 tons of copper this year and aims to start zinc production at the beginning of 2016. The site is located 90 miles (145 kilometers) west of Eritrea’s capital, Asmara.

Segen Subcontractor

QKR Corp., a mining fund headed by former JPMorgan Chase & Co. (JPM) banker Lloyd Pengilly, is close to making a bid of about $1 billion for Nevsun, according to people with knowledge of the situation. QKR is funded by Qatar’s sovereign wealth fund and Jan Kulczyk, Poland’s richest man.

Nevsun confirmed yesterday that it has received from various parties expressions of interest on a potential corporate transaction and that any discussions are at a preliminary stage.

The lawsuit alleges that by entering a commercial relationship with the Eritrean government, Nevsun “aided, abetted, contributed to and became an accomplice to the use of forced labor, crimes against humanity and other human rights abuses at the Bisha mine.”

The trio of plaintiffs in the case against Nevsun, all Eritrean nationals who say they fled the country after being forced to work at the mine, are seeking damages, according to the court filing. To build the mine, Nevsun “engaged” companies called Segen, Mereb and the Eritrean military, which sourced the “forced labor,” the filing says.

Joe Fiorante of Vancouver-based Camp Fiorante Matthews Mogerman and Dimitri Lascaris, a partner at Siskinds in London, Ontario, are co-counsels for the plaintiffs, according to a statement.

The case is Gize Yebeyo Araya, Kesete Tekle Fshazion and Mihretab Yemane Tekle v. Nevsun Resources Ltd., S-148932, Supreme Court of British Columbia, Vancouver.

Forced labour

Eritrea has been widely condemned by international organizations such as the United Nations, the International Labour Organization, and Human Rights Watch for its widespread and systematic use of forced labour.

According to these organizations, forced labour conscripts are regularly used as cheap labour for essentially civilian work, put to work in civil service jobs, development projects, and commercial and agricultural enterprises often owned by individual generals or party officials; conditions are harsh and pay is barely sufficient for survival; and forced labour conscripts are regularly subjected to physical abuse and torture. One infamous torture method known as the “helicopter,” as documented in reports issued by human rights organizations such as Human Rights Watch and Amnesty International, is alleged to involve stripping victims of their clothing, tying their arms and legs behind their back, and leaving them on the ground for hours or even days at a time.

Dimitri Lascaris, co-counsel for the plaintiffs, stated, “In my view, the mere act of doing business with a government that is as reprehensible as Eritrea’s is morally repugnant. No ethical corporation would seek to profit from a relationship with such a repressive regime.”

The plaintiffs allege that Nevsun used forced labour in the construction of the Bisha mine from 2008 onwards, through its subcontractor Segen, a construction company controlled by Eritrea’s ruling party, the People’s Front for Democracy and Justice (PFDJ). Workers were held against their will in abysmal conditions. It is also alleged that many were subjected to physical abuse and torture.

The Bisha Mine is Nevsun’s principal business and has generated over US$1.6-billion in revenues since production started in 2011.* Nevsun has projected that the Bisha Mine will continue to generate significant cash flow for its shareholders over the current remaining mine life of eleven years.

“Our clients have assumed great personal risk in coming forward to file this lawsuit,” said Joe Fiorante, Q.C., co-counsel for the plaintiffs. “However, they are determined to ensure that the company that profits from this mine pays for the human costs involved in building it.”

*Of this amount, over $350 million has been attributed to Nevsun’s shareholders and over $240 million to ENAMCO. ENAMCO may have foregone and may currently be foregoing much of its attributed profit in order to pay for its ownership interest in the Bisha Mine.

Human rights violations

Eritrea is one of the most repressive regimes in the world. It is a dictatorial one-party state with no elections, constitution, functioning legislature, or independent judiciary, and all media is controlled by the Ministry of Information. All power is concentrated in the hands of President Isaias Afewerki, in office since 1991. (Source: Human Rights Watch, World Report 2014; Freedom House, Countries at the Crossroads 2011 – Eritrea)

Eritrea, an international pariah state, has been under UN sanctions since 2009 for its support of the al-Shabaab militants in Somalia, a terrorist group that killed two Canadians in Nairobi last year and has threatened to conduct attacks on Canadian soil in the past. In June 2013, Canadian Foreign Affairs Minister John Baird expelled Eritrea’s consul general for his office’s continued illegal attempts to extort money from Eritrean-Canadians. (Source: Human Rights Watch, World Report 2014; National Post, “Eritrea consulate receives ‘final straw’ warning to stop extorting expatriates in Canada,” July 14, 2014; National Post “Eritrea consulate still extorting ‘diaspora tax’ in Canada, a year after top diplomat expelled over scheme,” June 18, 2014)

Eritrea’s abysmal human rights record includes well-documented practices of forced labour; arbitrary arrests and detention; extrajudicial killings; torture; inhumane prison conditions; sexual and gender-based violence; and violations of children’s rights. The abominable conditions inside the country have made this tiny nation of 6 million people the world’s 10th-highest refugee-producing country according to UNHCR statistics, with a refugee population of over 300,000 in 2013 – 40% of whom have fled in the past five years. (Source: United States Department of State, Eritrea 2013 Human Rights Report; United Nations Human Rights Council, Report of the Special Rapporteur on the situation of human rights in Eritrea, May 13, 2014; United Nations High Commissioner for Refugees, Global Trends 2013)

In particular, Eritrea has been widely condemned by international organizations such as the United Nations, the International Labour Organization, and Human Rights Watch for its widespread use of forced labour. Forced labour conscripts are regularly used as cheap labour for essentially civilian work, put to work in civil service jobs, development projects, and commercial and agricultural enterprises often owned by individual generals or party officials. Conditions are harsh and pay is barely sufficient for survival. Conscripts are regularly subjected to physical abuse and torture. One infamous torture method, known as the “helicopter,” involves stripping victims of their clothing, tying their arms and legs behind their back, and leaving them on the ground for hours or even days at a time. (Source: United Nations Human Rights Council, Report of the Special Rapporteur on the situation of human rights in Eritrea, May 13, 2014; International Labour Organization, Direct Request concerning the Forced Labour Convention, 1930 (No. 29), 2010, 5th para.; Human Rights Watch, Hear No Evil: Forced Labor and Corporate Responsibility in Eritrea’s Mining Sector; International Crisis Group, Eritrea: Scenarios for Future Transition; Amnesty International, Eritrea: ‘You have no right to ask’ – Government resists scrutiny on human rights; Freedom House, Countries at the Crossroads 2011 – Eritrea)

After decades of governmental mismanagement, Eritrea ranks at or near the bottom of many major international rankings, including:

– 182nd out of 187 countries in the UNDP’s 2013 Human Development Index
– 180th out of 180 countries on Reporters Without Borders’ World Press Freedom Index (last place for seven consecutive years)
– 160th out of 177 countries on Transparency International’s 2013 Corruption Perceptions Index
– 184th out of 189 economies in the World Bank’s Doing Business 2014 index

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