Descending upon Namibia's environmentally sensitive Kavango East region in 2015 was the easy part for junior Canadian oil and gas company ReconAfrica.
Controversially, initial company statements suggested a key part of ReconAfrica's proposal included the search for"unconventional resources" which generally includes shale and other rock formations that require hydraulic fracturing to extract oil and gas deposits. Documents obtained by amaBhungane suggest that ReconAfrica has already spent an astonishing R445 million, raised from investors, to drill three test wells.
ReconAfrica management has denied any wrongdoing:"ReconAfrica will continue to remain compliant and apply business best practices in all areas of operation," ReconAfrica spokesperson Ndapewoshali Shapwanale told amaBhungane in November. The investors disagree:"This is a straightforward securities fraud case. Defendants concealed material information from the public about the data from their first two oil and gas test wells, and about their plans to frack in Namibia, while selling millions of dollars of ReconAfrica stock to unsuspecting investors," lawyers for the aggrieved investors wrote in papers filed last month.
The Viceroy report on ReconAfrica was devastating, noting,"[ReconAfrica's] mining assets are not highly speculative: they are borderline imaginary. Despite a C$2bn market cap, [ReconAfrica] has a near-zero chance of finding any asset of value in their exploration site, and an even lower chance to capitalise on any find."
It quoted Namibia's Petroleum Commissioner, Maggy Shino, confirming in a recorded interview,"There is no way we will license [ReconAfrica] or any other company to carry out fracking or unconventional hydrocarbon exploration in Namibia." This is one of the main issues raised by investors in the class action suit: they argue that ReconAfrica should have disclosed that Namibia had never and potentially would never allow fracking in the country.
Following this announcement, ReconAfrica's shares dropped by a further 39% to $1.41 per share on 9 November. "Namcor's decision to sell its stake is a vote of no confidence in the ReconAfrica project after evaluating geological tests," said Totten Jr. In 2013, Katti and his Brazilian partners in oil firm High Resolution Technology announced to Namibians that they had discovered significant oil off the Namibian coast.
But ReconAfrica's lawyers say there are simply no facts to support this, dismissing it as pure speculation. Yet evidence of the way being smoothed for the company has raised questions about how it has gone about its business, with complaints emerging that the company and the government have taken shortcuts.
When officials from the same ministry visited one of the company's sites in February 2021 to investigate, they were refused entry. They were told that they couldn't enter the site due to high-risk operations taking place at the time of the visit. In terms of the Communal Land Reform Act, ReconAfrica should have applied for a lease over the land where it planned to drill its test wells.
In 2021, through its environmental, social, and governance programme, ReconAfrica said it committed C$10 million towards ESG projects. The company stressed that auditor reports for the years ended December 2020 and 2021 did not express a modified opinion and there had been no"reportable events", which are generally a flag for issues raised by auditors that could not be resolved.