PLUNDER FROM THE EAST

BY GOLDEN MATONGA

They arrived in Malawi as legitimate Chinese investors but immediately started trading illegally in Southern and Eastern Africa’s wildlife and wildlife products. The law eventually caught up with them, but the crimes they were found guilty of were just the tip of the iceberg. The Platform for Investigative Journalism (PIJ) can reveal that the Lin-Zhang syndicate is also in the illegal mining business and that some of these operations continue despite the leading syndicate members being in jail. Without having licences to do so, the syndicate has been mining and exporting precious metals, including gold, and coal.

The proceeds of these operations are not declared and there is evidence that officials were bribed. Meanwhile, Malawi’s government says it is trying its best to monitor mining activity and the export of the country’s mineral wealth.

Activists in Malawi are calling on the government to audit all mining licences following PIJ’s investigation into the Lin-Zhang syndicate’s illegally mined and exported gold and coal being conducted with only exploratory mining licenses.

The ring’s illicit mining operations were uncovered between 2017 and 2020 when the syndicate started getting arrested. Authorities investigating the syndicate’s wildlife trafficking operation discovered that they were hiding wildlife products among minerals being exported from the syndicate’s mines.

The PIJ followed this trail and over months of investigations, the unit reviewed troves of documented evidence and interviewed scores of people, including former members of the gang, criminal investigation officers and employees working for companies owned by the syndicate.

The PIJ also reviewed internal company correspondence, bank statements, a registrar of the companies’ records, mining records, online information and evidence from the kingpin’s phone.

After the PIJ presented a detailed set of findings and questions to Malawi’s Department of Mining, it confirmed that key members of the Lin-Zhang gang, including kingpin Lin Yunhua, currently own three mines in Malawi that are licensed to operate exploration mines in Blantyre, Balaka, Chitipa, Mangochi and Ntcheu. They, however, illegally export precious mineral resources such as gold, graphite, and coal.

In July 2018, Hua Run Mining ceded some of its operations in Wenya, Chitipa province at the northern tip of Malawi close to the Zambian border, to Muhop Mining.

Muhop Mining, as documents confirm, then proceeded to mine and export coal despite Hua Run only having an exploratory licence and before the government approved Muhop Mining’s takeover of these operations. The national armed forces discovered this and reported the illegal mining operation.

The PIJ has a copy of the letter from the department of mines to Hua Run Mining objecting to full mining operations being conducted without the mine having the licence to do so. However, the government did not cancel the licence as it threatened to, which raises questions. The government told PIJ that its investigation into the reported illegal mining found no evidence of mining.

In 2020, Muhop Mining, which had taken over from Hua Run, secured a three-year licence for coal prospecting (no: EXPLO588) at the Wenya mine, even though, as PIJ can confirm, it had been mining and exporting coal at this mine since 2018. In May 2022, Muhop was granted once-off permission to sell 115 tons of coal that had been unearthed as part of its exploratory mining licence in Wenya.

While this was granted under strict conditions, including paying mineral royalties, it raises the question of why Muhop applied for this special condition if it had a licence to mine and export coal as it had been doing. As Muhop doesn’t report to the EITI, it is unclear whether the strict conditions were met or whether it paid taxes and royalties. The mine, PIJ can confirm, export coal ore at K 432,000 per ton.

There are three directors for Muhop Mining, which was registered as a company on 18 August 2017: two Tanzanians — “Chief Tanzania” residing in Dar es Salam and “Omar” residing in Mbeya — and Lin. A letter to a bank that PIJ has seen confirms that company directors include Jia Shengquan and Li Haoyuan (son-in-law of Li Yunhua) and financial director Lin Huixin. All the named officials are linked to the illegal wildlife trafficking syndicate, Lin-Zhang. Li Haoyuan, was among those jailed for wildlife trafficking. He also faces charges of financial crimes, such as money laundering and illegal forex, but these cases are still ongoing through the protracted court process.

In July-August 2019, Lin was tasked by an associate named Jingsong Shao (aka Kingsong Shao) to renew Plinth Mining’s active mining licence ML0230/17 that would expire on 7 August 2019. Shao, a Chinese businessman based in Dubai, is also a director of Plinth Mining. Evidence suggests that Lin was seeking to renew the licence while he was in hiding. His subordinates, including his daughter Huixin Lin and an unknown person nicknamed “Jun Hua”, were helping with this according to evidence seen by PIJ.

While questions remain as to how the gang gets away with illegal mining, kingpin Lin’s phone records confirm that he boasted about bribing officials. The syndicate’s Plinth Mining had a licence for exploratory mining, but PIJ can show that it has been mining gold and exporting the precious metal. When Plinth’s exploratory licence expired on 6 August 2022, the company’s directors applied for a renewal. The government rejected the application after investigating that Plinth was actively mining gold in its Ntcheu operations in contravention of its exploratory licence conditions.

Malawi’s Director of Mining, Burnet Msiska, told PIJ: “An investigation was carried out by the ministry, through the Department of Mines, for Plinth Mining Group Limited, and it was confirmed that the company was mining gold in the exploration licence area. The term extension application for the exploration licence was refused on that basis.”

TAXING QUESTIONS

The PIJ investigation confirms that none of the three mining companies reported earnings on Malawi’s Extractive Industry Transparency Initiative (EITI) database. While this suggests that they have not been paying taxes or royalties, the Department of Mines says small mining operations like Hua Run Mining and Muhop Mining are not obliged to report to the EITI as this only applies to medium to large mining companies.

However, the government confirmed that the Lin-Zhang syndicate’s Plinth Mining company is a medium-sized enterprise and therefore should report to the EITI, but it has not. The department of mines told PIJ that this was because the mine “was not in full production” at the time its licence expired.

The effects of mines operating illegally and dodging taxes and mineral royalties are apparent in Wenya in Malawi’s Chitipa district. The journey to get there is a tough, rough ride. The area is a heart-breaking example of poverty and under-development. It is also an example of the effects of lucrative illegal mining where the proceeds are not declared for taxes and royalties and where poor communities do not benefit from the mineral resources in the earth beneath their homes.

INNER WORKINGS OF A GANG

The founders of the Lin-Zhang syndicate arrived in Malawi from Fujian province, China, in 2014. Its first merchandise shop in Lilongwe turned out to be a front for more sinister activities, including the trafficking of wildlife products obtained from Malawi and other Southern and Eastern African countries

A Malawian teenager was recruited by the syndicate when he was just 16. He was initially employed as a translator at a Chinese cultural centre in Blantyre that also functions as a children’s home. This former syndicate insider spoke exclusively to PIJ about the group’s operations. In the interest of the source’s safety, PIJ has opted to keep his identity anonymous.

“I didn’t know the full details of their operations, but I became a key member of their operations. They would ask me to go to the border of Malawi and Zambia and said I will find a car parked at a particular point with keys inside without anyone [in the car]. I would go and drive the car to our premises. Sometimes, I would just see the goods arrive or [see them] in the office. I didn’t know who they were working with,” he recalls.

When asked whether police and other authorities being bribed was part of the operations, the former insider nodded but did not elaborate.

The young man became so well acquainted with the syndicate operations that he felt bold enough to start a smuggling operation on the side while still working closely with the syndicate. Then his luck ran out. One day, as he was transporting ivory from Blantyre to a dealer in Lilongwe, he was stopped at a roadblock just before the Dedza boma. Police, some in plain clothes and others in camouflage, were searching every car, causing an unusual queue on the small stretch of the M1 highway.

“I was confident they wouldn’t arrest me. They searched my car. They searched inside and searched the boot; they didn’t find anything. One of them shouted, ‘but he is the person we were looking for’. Apparently, they had been tipped off about me and were aware of my movements and [had been] tracking me from Blantyre. I later realised I was on Interpol’s red list [of wanted criminals]. I knew then that the game was over. I just showed them where the ivory was, and I was arrested,” said the insider, who later heard that other syndicate members had also been arrested.

Next to be arrested, in December 2020, was Lin Hui Xin, (aka Huixin Lin) daughter of Lin-Zhang kingpin Yunhua Lin. Huixin Lin was arrested in Lilongwe and charged with money laundering and registering a non-existent company known as Moni International Company Limited. Moni was falsely billed as a company manufacturing and selling iron sheets. The bank account she opened at Standard Bank Capital City branch with account number 9100000342170 and the K 371,069,027.93 that was deposited into it, connected her to the syndicate’s wildlife trafficking business.

Creating legitimate business fronts was the modus operandi of the syndicate, the insider confirmed. Lin, for example, partnered with investors of the Grand Mall Complex in Lilongwe when his family moved to Malawi. Lin was able to pose as a legitimate businessman for years, even attending the 2018 Malawi Development Forum, according to information he posted on the popular Chinese social media platform, WeChat.

Lin’s wife, Zhang Qinhua (aka Huaquin Zhang) was the next gang member to be arrested in July 2021 and went on trial alongside eight other members. They were sentenced to a combined total of 56 years in prison for illegal trade in wildlife products, including protected species like pangolins as well as rhino horn, elephant ivory and hippo teeth. Just one syndicate member was missing from the dock: the kingpin himself.
For three months Lin was on the run, but he was eventually arrested and sentenced in September 2021 to 14 years in prison for trading in rhino horn, conspiracy, and money laundering.

List of directors for Hua Run Mining

List of Directors for Plinth Mining Group

List of directors of Muhop Mining Company

Illegal gold mining in places such as Machinga, Mangochi (Namizimu forest in Makanjira) and Lilongwe (Nathenje) as well as the involvement of foreigners in these operations has been known for years, yet little has been done to stop these activities.

After Lin’s arrest, investigators found messages on his phone that confirm he bribed mining officials and smuggled out the majority of gold from his companies’ mines (90%) without paying taxes. Lin also instructed one of his Chinese collaborators to bribe mining officials when seeking to renew a mining licence, according to evidence PIJ has seen.

In another chat, Lin boasted to his friends that his group was able to bribe Malawian mining officials with tens of thousands of US dollars to apply for, and get, any mine they wanted.

Lin has a long history of enabling corruption in Malawi and bribing (or attempting to bribe) police force officers, mining officials, immigration officials, judges, court clerks and more. A law enforcement source on condition of anonymity told PIJ that this was “Chinese ‘raising’ and co-opting local Malawians”.

Lin is a director for Plinth Mining Company Ltd Malawi, which was registered on 9 August 2016 in Blantyre. It was granted an “Exclusive Prospecting Licence” for gold on 500km2 of land in Balaka in the Neno and Ntcheu areas (EPL0447/16). It was also granted an active mining licence in the Matope area (ML0230/17). One of these licences, the media reported at the time, was for a whopping 25-year period.

“Gold exploration [in Malawi] is the first of its kind, and we are expected to start our operations any time from now as the government has already given us a go-ahead by honouring us with a licence,” Hilton Banda, the company’s geologist at the time, was quoted saying during a press briefing.

In an interview with PIJ this week, five years after the media interview in which he represented Plinth Mining Group, Banda said he had stopped working for the company before it started mining operations or signed any mining development agreements.

“I cannot remember the names of the directors because we only helped them with the EIA (environmental impact assessment). It was a long time ago. I heard they were interested in renewing the contract, but I am not sure if they did. Most of the things were being done in Chinese and they did not share a lot of work,” said Banda.

He said he was not aware of any illegal mining by the Chinese syndicate but pointed out that the licenced area had a lot of illegal mining activity by small artisans who sell the gold to foreigners, including Chinese investors.

“Maybe they decided not to invest in a mine that is expensive and were buying from the artisans instead. I have no information about that but illegal gold mining is happening in a number of areas,” he added.

Banda also clarified that while the gold exploration licence granted to Plinth was only for three years and subject to renewal, the mine itself has a 25-year lifespan.

PIJ could not find any evidence that the company has been declaring any gold exports to Malawi government agencies. A spokesperson for the Malawi Revenue Authority (MRA) said the revenue collector could not respond to PIJ’s questions on the matter. “Unfortunately, taxpayer information is confidential and divulgence is not allowed,” Wilma Chalulu told PIJ.

However, PIJ has seen further evidence of Plinth Mining Group’s links to Lin. On 2 July 2019, Lin sent two contracts to two WeChat users (originally in Chinese): A “Mine Cooperation Development Agreement” between “Malawi Plinth Mining Group Limited” and “Zhang Jianhua” regarding “Plinth’s” mines in the “Lisungwe area” (EPL0447/16 and ML0230/17) for a period of three years.

According to the contract, “Plinth” would be responsible for the “coordination of local environment and government departments”, while Zhang Jianhua would be responsible for managing the mines and for aspects of the production, including “supply guarantee of production materials, levying mountains and transportation”.

According to the contract, “Plinth” will receive 25% of the profits, while Jianghua will receive 75%. The contract was sent to the users “wxid_oerhaaynn5ea22 ???? (“Enjoy Yourself”)” and “wxid_2ac0rm8at2i822 ???? ????” (“eagle soaring and sailing”).

Lin was also brokering a deal between Shao and another Chinese person, Jianhua Zhang (who was also referred to as “Boss” by Lin), regarding the sale of “goods” at a price of 1.3-1.5 million (the currency was not specified but is most likely in RMB. RMB 1,300,000 is around US$ 181,850). Although the details of the deal were not available, it appears to be connected to one of the contracts.

Oil, gas and mining companies are legally obliged to pay income taxes and royalties on any sales of minerals as well as pay taxes deducted from employees, known as pay as you earn (PAYE). Since 2015, when Malawi joined the Extractive Industry Transparency Initiative (EITI), such payments are supposed to be published. But there is no record of any tax or royalty payments.

A review of annual reports, including the second EITI report which covers the 2015-2016 fiscal year (published in June 2018) and the third EITI report for the 2016-2017 fiscal year (published in November 2019) — which covers the period in which the three companies were under review — do not contain any information about any payments made by the three “exploration” companies.

Besides the illegal coal and gold companies, the syndicate also appears to have been interested in further mining opportunities such as graphite, lead, zinc and other base metals located in Lilongwe, Salima and Dowa, according to correspondence between company officials and Malawi’s department of mining.

In an interview with PIJ, Brighton Kumchedwa, Director of Wildlife and Parks said: “Of course, they were involved in money laundering. [They] were charged with money laundering in court. But we never got any information about mining activities. We found them with things like ammunition and grenades, which might now suggest were [being] used for [mining operations].”

The precise value of the illegal and legal mining activities engaged in by the syndicate remains unknown, but it is estimated to run into billions.

Kossamu Munthali, chairperson of the Natural Resource Justice Network (NRJN), a group of civil society organisations promoting good governance of Malawi’s natural resources, stressed how crucial this money could be for a country like Malawi if the government was able to put in place the necessary due diligence and proper management of its mineral wealth.

“It’s like a free-for-all. The government is pretty aware that over 250 licences were issued for mining, but our call has been clear — why can’t we conduct an audit to find out the beneficial ownership of these mines,” he added.

Munthali called on law enforcement agencies to act on PIJ’s findings and further investigate other reported cases of corruption in the mining sector.