A community in western Uganda has stopped a Chinese mining firm from further exploration for amethyst (coloured quartz) on the suspicion that the prospector is illegally exporting ore, in what could be a harbinger of future conflicts fuelled by perceived lack of transparency in mineral deals.

Suspecting that the prospector was trading in mineral wealth outside the scope of his licence, authorities of Budongo sub-county in the western district of Masindi last month threw Chinese prospector Brothers Investment Ltd out of a mining concession for amethyst.

Although local communities do not have the power to halt activities of a prospector with a valid permit, Brothers Investment was advised to stop operations over fears that the tense atmosphere might result in serious conflict.

The incident exposes the growing mistrust between host communities and the central government, as Uganda taps into her substantial mineral wealth.

Experts say the law allows prospectors to extract reasonable quantities of mineral ore for testing. However, resource nationalism and deep-seated poverty in the host communities are creating a negative atmosphere, highlighting the need for a fresh look at how the benefits of mineral wealth can be equitably distributed between the state and the communities.

According to local officials, members of the community suspected that the company was exporting the minerals without paying royalties, or responding to the environmental concerns the community had raised.

Arising from the disagreement, the district chairman asked the company to stop operations until officials from the Ministry of Energy explain whether the prospector is operating in accordance with the law, and define the scope of the community’s stake in the project.

Brothers Investments holds a three-year licence that allows it to explore an area of 400 square kilometres, but operations had been confined to just one site after the second one hit the water table.

The locals believe what is being mined is silicon, but the Ministry of Energy says it licensed the Chinese firm to prospect for amethyst.

Silicon is a transparent brittle stone that has both metallic and non-metallic properties. It is a semi-conductor of electricity making it useful in the electronics industry.

Commissioner for Geological Survey and Mines Edwards Kato said, “This has been exaggerated, but we are planning an official trip to the area because geologically there is no silicon in the area. The company is licensed to explore for amethyst that can be cut and polished and sold as a gemstone due to its pink attractive colour. There is nothing exciting about these gemstones as they have very low market value compared with other gemstones like diamonds.”

Trouble started when workers of Brothers Investment, that opened its exploration site in Budongo a year ago, ferried stones for many months.

Chairman of the local council Bategeka Joronim said, “They were exploring for silicon and our role was to provide security and help them in any way .... We had no objection.

“All of a sudden they were taking the transparent stones. Our concerns came later when we saw that they were on the same site every day, extracting and taking. If it is exploration, do they have to exhaust what is there before they start mining? That is what is puzzling us,” he added.

According to Mr Kato, the Mining Act does not limit the volumes of minerals an exploration company can extract for testing. While the law may not specify the amount, other experts say there is an implied limit in the Act.

“The law does not limit, but you must take only what is a reasonable quantity for testing. You cannot do it again and again or else it becomes a mining operation,” said Dennis Kusasira, a lawyer specialising in oil, gas and mining.

The law gives powers to the commissioner to determine whether the quantity extracted is too much, and whether the investor should pay royalties.

How the royalties get to the host community is another grey area because they cannot monitor the extraction rates. “Even if they were to pay us, no one knows how much it would be because there was nobody to determine how much they were taking,” said Mr Bategeka.

The law requires the companies to make quarterly reports on their operations.

The Budongo case is not isolated. In Busia, gold-mining company Busia Mining Ciel halted operations in 2007 after failing to get local permission. At the centre of the conflict was compensation to local communities.

Last year, Moroto district authorities declined to sign documents allowing Moroto Cement Factory to start operations without explaining how it acquired 500 acres of land, and how the community would benefit from the project.