African Rainbow Minerals sued for breach of contract

TANZANIA: PULA Graphite Partners and its parent company, Pula Group LLC, have resubmitted a lawsuit seeking 195 million US dollars against South Africanbased African Rainbow Minerals Ltd (ARM) and three of its affiliates.

The lawsuit amount is determined by a thirdparty assessment of the potential losses Pula may incur due to the competitive disadvantage caused by AMR’s breach of their agreement.

The lawsuit was initially filed in the High Court of Tanzania (Commercial Division) in December 2022 under Judge Abdallah Gonzi, claiming a breach of non-disclosure, non-competition agreements, and standstill clauses.

However, in May 2023, Pula dropped the lawsuit for technical reasons, but the complaint was refiled in November 2023. The violation of the non-compete clause stemmed from an investment through Patrice Motsepe’s web of companies into Evolution, an Australian-based company with a mining license in the Ruangwa region, where Pula Graphite Partners are developing a competing graphite project.

Explaining about the lawsuit, Pula President, Dr Mary Stith stated: “Withdrawing and refiling the suit was based on a technicality. We are comfortable with the course of action recommended by our lawyers. We intend to refine our lawsuit because we believe our case is strong, ensuring that Tanzanian companies have a fair chance to defend their interests against foreign competitors.” In 2020, Pula boss Ambassador Charles Stith met with ARM co-partner representatives, owned by South African Mr Patrice Motsepe, whereas a non-disclosure and noncompete agreement was signed on behalf of Pula and ARM, with the parties agreeing to potentially cooperate in mining activities in Tanzania.

As a result of signing the contract, Pula shared confidential information with Mr Motsepe’s group concerning mining business and investment in mining activities. The information included details about the nature of its graphite mining exploration activities in Ruangwa, Tanzania, and technical know-how on Tanzania’s graphite reserves in the region.

A key aspect of the contract was a commitment not to compete while it was valid. The initial contract between the plaintiffs and ARM was for two years, but Pula alleges that ARM violated the non-compete clause by delaying implementation and deciding to cooperate with a competitor, Evolution, in Ruangwa.

Displeased with the actions of their former partner, Motsepe’s group of companies, Pula Graphite Partners and Pula Group LLC filed a claim for damages.

On December 20, 2023, all parties were summoned to appear at the Commercial Court to receive orders on how to proceed with Pula’s action.

Of the four Motsepe companies ordered to appear, only African Rainbow Capital showed up. Consequently, Pula filed a default application against Motsepe, African Rainbow Minerals, and ARCH, a British company that bought shares in Evolution, in which Motsepe’s company is a major shareholder.

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