Gold

by Matthew Hart

  They were mining a strike that ran for half a mile. They had trenched the length and screened it with bamboo shades. From the floor of the trench, shafts went down to the mining galleries. Some of the shafts reached depths of 100 feet. Sometimes they hit water, and the miners clubbed together to rent pumps. On a rough head count, about 300 people were working in the mine. Many more supported it.

  Mechanics serviced the pumps and blacksmiths made tools. The smiths pumped their bellows with one foot while hammering at iron implements on their anvils. Vendors sold popsicles and water, cigarettes and candy. A small solar array powered a battery-charging station for cell phones. Masses of bicycles and Chinese motorcycles leaned together under a thorn tree. A man with an air pump between his knees sat in the scanty shade repairing tires.

  The whole site, and others like it, belonged to the village of Diabougou on the Falémé River. The chief levied “license fees” on miners who were not native to the village, which was most of them. The hamlet had swelled from a population of 1,000 to about 10,000—a rapid influx of outsiders drawn by the gold boom. Diabougou was a boomtown. In stalls along the widest thoroughfare you could buy shoes and shirts, blankets and mattresses, plastic toys, vegetables, fish, televisions. Two cell phone dealers competed head-to-head across the street. On one side of the town stood the old village of round mud houses with thatched roofs; on the other, dwellings bashed together out of anything at hand: mud, tin, planks, cardboard, vinyl sheets. Scooters buzzed through a labyrinth of lanes and boys toiled up from the river with handcarts loaded with plastic water jugs.

  Inexorably, the gold rush was erasing an old way of life. On the way to the town we’d met a large herd of goats filling the road. The goatherd was a young man in outlandish costume. He wore a round black hat with a narrow brim, and a loose, ragged skirt almost to his ankles. Tall and thin, he looked at us with profound astonishment. He emitted a series of short, low whistles, like a sentence of code, and the goats surged off the road. He stopped in the grass and gaped at us in bafflement as we went by. I was told these herders have roamed immemorially through Mali and Senegal, following the grass, and are now disappearing. They mine gold instead.

  On the flats beside the river stood a line of sluices fed by water pumps. To recover gold, they directed water down a sluice and shoveled ore in at the top. The water carried the ore over strips of carpet nailed to the bottom of the channel. Light soils flowed away while the heavier, gold-bearing gravels snagged in the carpet. They would use mercury to concentrate the gold, handling the toxic substance with bare hands. According to Moussa Bathily, a Teranga geologist, Friday was the day reserved for this gold recovery. No one would work at the minesite on Friday. I asked him if that had anything to do with Friday being the Muslim holy day. “Oh, no,” he said. “They leave the mine because they say that Friday is the day the devil comes to put back the gold.”

  12

  KIBALI

  On one side of the contest were murderous, well-armed brigands in possession of the world’s original cash crop—gold. On the other side: a powerful mining company.

  ON A FEBRUARY DAY IN London I set out to write this book. I flew to Entebbe, Uganda, where I spent the night at a hotel on the shore of Lake Victoria, battling a cloud of gnats that were feeding on my ears. I had Peter Bernstein’s book, and riffling through the first pages I spotted a reference to the queen of Sheba bringing gold to Solomon. I began to read, but the text dissolved in a veil of pests, and I gave up and covered my head and tried to sleep.

  I was on my way to a discovery much richer than the fabled queen’s mines. In the gold world everyone was talking about Kibali, a breathtaking target in one of the most benighted countries in the world—the Democratic Republic of Congo. Like Congo itself, the deposit had a tortured past and a future made tantalizing by the abundance of its riches. In its century of history the Kibali goldfield told a story of oppression and war, of old money and vested interests, of businesses stalking each other. Dazzling technologies went side by side with destitution. I end with it because it captures the thrill of a modern gold rush, its speed and ruthlessness, and also because it shows how unsettling and barbarous gold can be, and then again, how fortunate to find. In Kibali were all the sadness and excitement of the human condition.

  In the morning I went back to the Entebbe airport and squeezed into a single-engine Cessna Caravan stuffed with overheated mining stock analysts. They had come straight from a grueling tour of gold mines in Ivory Coast and Mali, and except for a cheerful, fresh-looking young woman from California, they were all damp and grumpy. We took off for Eldorado.

  The Kibali gold project lies in the northeastern Congo, a war-torn region only partly pacified by United Nations peacekeepers. The Lord’s Resistance Army, a killing machine of drug-addled child soldiers based in Uganda, was still kidnapping and murdering in the province when we visited in early 2011. We cleared Congolese formalities at Bunya, an airport bristling with the machine gun nests of the U.N. force. An elderly man at a table in the airport building received my $90 cash payment, and slid my passport to another functionary, who stamped me into the Democratic Republic. From Bunya to Kibali was a twenty-minute flight.

  The target lay in a dejected valley scarred by exploration tracks. From a hilltop vantage point beside the cell phone tower we could see the crumbling huts of a village on the far slope. A drill rig rattled on the hillside. The equatorial sun beat down through a layer of thin gray cloud. The mud of a drained lake bed had puckered and hardened in the heat. Beneath the wrinkled surface lay 10 million ounces of gold.

  AUSTRALIAN PROSPECTORS HAD DISCOVERED THE gold in 1903, on a hundred-mile-long formation called the Kilo-Moto greenstone belt. Congo was then the personal possession of the Belgian king. Until Congolese independence in 1960, the mines produced about 12 million ounces. After independence, the new government transferred the mines to a state-owned company. It struggled to operate the mines. It looked for foreign partners. Barrick operated a mine near the present discovery, until the war arrived.

  In 1996 Rwandan and Ugandan troops invaded Congo to dislodge the tyrant Mobutu Sese Seko. When Mobutu fled, his successor tried to expel the foreign armies, which were feasting on Congo’s rich resources. A bloodbath followed, drawing in forces from Zimbabwe, Burundi, Angola, and Namibia. In a rampage often called the First World War of Africa, 35,000 foreign soldiers murdered, raped, and pillaged their way through the country. They stole diamonds, oil, uranium, even parrots. They slaughtered rhinoceroses for their horn. The spoils of war poured out of the Congo. In 1998 the conflict reached Kibali.

  In August 1998 Ugandan soldiers occupied the goldfield. They had planned to run the mines as industrial concerns, but found the task beyond them. They resorted to artisanal mining—basically, smashing the rock to bits with hammers and picks, and sometimes explosives, and carting out the ore by hand. They drafted local miners to the work, charging them fees to enter the site or collecting a cut of the ore. They beat miners who refused to work. They forced them to blast out the gold-rich pillars of rock that had been left in place to stabilize the mine. As a result the mine collapsed, killing a hundred miners trapped inside. The collapse knocked out the pumps. Water flooded the mine and valley floor, forming the lake whose dried-out bed still marked the site when I was there.

  Things got worse in 2002, when international pressure forced Uganda to begin withdrawing its forces from Congo. As they did, rebel militias moved onto the goldfield, bringing to the brutalities already in place a campaign of terror driven by tribal hatreds. In one massacre, women and children dug their own graves. Then their captors roped them together and butchered them with machetes and sledgehammers. The conditions in the mines were horrendous. Miners died of suffocation in tunnels once ventilated by air circulation systems that had fallen into disrepair. Similarly, failed pumps meant that miners had to wade for miles through chest-deep water in narrow tunnels to reach the mining galleries. Once there, the men used iron bolts and ordinary ha
mmers to batter ore from the stopes, and lit fires to “soften” the rock.

  The mines delivered rich returns to the usurpers. The Ugandans took $9 million worth of gold from the district in four years of occupation. Their successors did even better, with one armed group selling as much as sixty kilograms of gold a month, worth three quarters of a million dollars. For circumstances had changed. After three years of slumber the gold price had awakened. The Ugandans had been getting $290 an ounce from their Swiss buyers; the militias got more than $400. The gold price had just set out on what would become the most phenomenal streak in its history, the ten-year bull run that set off the world gold rush. This was a two-edged sword for the plunderers. In the short term it put more money in their pockets, but in the long term it attracted the attention of forces that would want the gold themselves. One of these was a black African tycoon.

  SIR SAM JONAH WAS A celebrated gold miner who had started out in his teens as a mine laborer in Ghana, studied mine management in Britain, and by the age of thirty-one had become the chief executive of Ashanti Goldfields, a Ghanaian miner that he ran for eighteen years. In a single decade he raised Ashanti’s production from 240,000 ounces a year to 1.6 million ounces, turning it into a top gold miner, and, in 1996, managing to list it on the New York Stock Exchange. He had his setbacks too. In 1999 a wrong-way bet on the gold price almost ruined the company. But Jonah pulled Ashanti through. The Prince of Wales knighted him in 2003. In 2004 the magnate merged his company with AngloGold Limited, a South African miner owned by the Anglo American group. The merger created what was at the time the world’s second biggest gold miner, AngloGold Ashanti.

  The next year, 2005, Jonah resigned his executive position at the new company, although he stayed on the board. Among the reasons he gave for leaving was the wish to pursue other ventures. One of those was a company called Moto Goldmines Limited, a Toronto-listed junior looking for gold at Kilo-Moto. They were going to find a very large amount of it, as Jonah was in a good position to guess. He had taken Ashanti into Kilo-Moto nine years earlier, in 1996, when the company bought into a joint venture with the Congo state-owned company OKIMO to explore and mine a 3,800-square-mile concession.

  Let’s pull back to a bird’s-eye view and consider the field. Below us is a geological formation long considered one of the world’s best bets for gold. Explorers knew its potential, but hadn’t staked it out and scrutinized it because the gold price wasn’t high enough to compensate them for the risks inherent in making a discovery, namely: the runaway corruption of Mobutu’s regime, or later, the fact that northeastern Congo was a terror-stricken killing ground. But in 2003 a national government was forming in Kinshasa with international support, giving hope that Congo’s war would end. Mining companies began to maneuver for a place on the Kilo-Moto.

  I suppose it all got a bit lurid, what with mining companies drooling at the riches, and the homicidal gangsters actually running the digs showing up for meetings in Kinshasa. AngloGold funded one such trip, and Human Rights Watch accused them of giving the killers “material benefits and prestige.” The company said it had only paid $8,000 out of petty cash, and had done it mainly to protect its own employees. Anyway, the parties worked things out. The killers got commissions in the Congo army and Moto Goldmines got Kibali.

  I have said that Moto was a “Toronto-listed junior,” which might sound inconsequential. But Toronto is the world’s leading gold-mine city. Some sixteen hundred miners list their shares there. It has the world’s largest pool of capital for mine finance. More than $280 billion worth of mining stocks traded on the Toronto Stock Exchange in 2012. Almost three quarters of the equity raised in the world for new mining ventures that year came from Toronto. More than 500 analysts in the city follow mining stocks, and three of the world’s biggest gold miners are based there. “Junior” means a small mining company focused on exploration, as opposed to a senior, like Barrick, that operates large mines. Regardless of its size, Moto was the cat’s paw of important interests—Sam Jonah, AngloGold, and through arrangements with OKIMO, the Damseaux family, Belgian industrialists with a cattle ranching and transportation empire in Congo dating back to 1931. Moto was the mailed fist of power, never mind the glove.

  They drained the lake and drilled the bed. They hit gold, and kept on hitting it. Their press releases sang out on the business wires, confirming the promise of the Kilo-Moto greenstone belt. The gold price rose. Moto’s value rose. One industry website called it “the hottest gold stock in the world.” Now it was time for the next part of the drama. Moto had gobbled up the goldfield, and now they would get gobbled up themselves. The fight for Moto pitted two gold-rich tycoons against each other in a battle that the victor quarterbacked from the saddle of a speeding motorcycle.

  “WE BEGAN TO WATCH MOTO in 2006,” said Rod Quick, the chief of exploration for Randgold Resources, a Channel Islands–based gold miner. “I tracked their data hole by hole. I plotted it. I visited the site.”

  Both companies understood this relationship perfectly. A junior company exists to attract such predators. The prey hopes—intends!—to be caught and swallowed whole. It’s important for the hunter to remember this. “Each time we got a drill result from them I’d put it into the mix,” said Quick. “Obviously, juniors are only going to report their best holes, so you have to factor in what you know are the lower grades and make an estimate based on that.” Even so, the judgment was that Moto had outlined a deposit of at least 5 million ounces of gold.

  “The first thing we did,” Mark Bristow, Randgold’s chief executive, told me at a meeting in Cape Town, “was to get the [Congolese] government to buy in. I told them, ‘If you are not supportive of our bid, we will not go ahead. We promise we’ll build a mine: here are our plans. We are launching a hostile takeover [of Moto]. Are you behind us? We don’t want a fight. We don’t want an auction. We want to kill it.’ ”

  Bristow is a fifty-two-year-old South African with a Ph.D. in geology and the build and temperament of a Cape buffalo. He has a weakness for such diversions as hurling himself out of airplanes for a thirty-second free fall; shooting Grade-V rapids on the Zambezi River; and bungee jumping at Victoria Falls, where you drop ninety-five feet before you reach the end of the cord. He has homes in London, Johannesburg, Mauritius, and the ski resort of Jackson Hole, Wyoming. But mostly he lives in a succession of airplanes, crisscrossing Africa on the hunt for gold.

  With its joint venture partner, AngloGold Ashanti, Randgold took a run at Moto in February 2009. With $258 million in the bank, the South Africans were “cashed up.” But they had competition—Lukas Lundin, a Vancouver-based Swedish minerals magnate. One of Lundin’s companies was Red Back Mining, which at the time was riding high on the success of its Tasiast gold discovery in Mauritania, a property swelling in value as the gold price rose through $1,000 and the size of the deposit grew by bounds. Red Back made an all-paper bid—an offer in which the currency was Red Back stock. The offer valued Moto at $486 million. “There is no question in our minds that [it] is a world-class gold project,” Red Back said.

  Randgold responded by taking a “blocking stake” in Moto—a technical maneuver allowing it to block the Moto board from accepting the Red Back offer. Moto was listed in Toronto, in the province of Ontario. Under Ontario securities law, a takeover needed the support of two thirds of shareholders. Randgold had managed to get voting control of just over a third of Moto’s stock, effectively preventing the two-thirds quorum from forming. Randgold did not own the shares, but could vote them through a “soft lock” agreement with the actual shareholders. A soft lock commits the participating shareholder to support a course of action, but only to a point. That point, for example, might be an even better deal than the one Randgold was contemplating. In such a case the lock would dissolve and the shareholder would be free to take the better offer. Randgold’s control was thus provisional, but it prevented the Moto board from accepting Red Back’s offer right away.

  Bristow worked on
his counterbid while roaring north up Africa on a forty-nine-day motorcycle trip from Cape Town to Cairo with his two sons and three of his friends. “We had a huge intercom system on all the bikes,” said Grant Bristow. “Helmets were wired so we could take cell phone calls individually by satellite. But if you used the intercom to talk to somebody else, you overrode any incoming phone call. So there would be these extended periods when Dad was doing business and no one was allowed to talk.”

  They were riding heavy BMW bikes with special after-market shocks to handle the brutal roads. “In northern Kenya there was this massive corrugation from the truck convoys, and four of the bikes blew their shocks,” Grant Bristow said. Worse than the discomfort was the danger: Sudanese bandits lie in ambush for the convoys on that stretch of road.

  The riders made it through. Bristow cobbled together a half-stock–half-cash offer that was $30 million sweeter than Red Back’s. By the time the riders got to Addis Ababa, Randgold had Kibali in its pocket.

  Cashed-up tycoons were the order of the day. Like Bristow, they all seemed to glow with the oxygen of extreme sports. Red Back’s Lukas Lundin, the scion of a Swedish mining-and-oil dynasty whose founding asset, Lundin Petroleum AB, had rivaled Apple Inc.’s spectacular stock performance by multiplying its value fifty times since it had started trading in 2001, had climbed Mount Kilimanjaro, competed in the Paris-Dakar motorcycle race, and liked to plunge down thickly wooded mountainsides in pursuit of the thrill of extreme skiing. When I was in Cape Town at a mining convention after the Kibali visit, the halls were thronged with people debating whose was the mine of the century—Bristow’s Kibali or Lundin’s Tasiast, although by then Lundin’s role at Tasiast was that of shareholder in a company he did not control. He had sold the Mauritanian property for a pack of stock in a company run by another high-octane mogul.