ALLEGED TRANSFER OF THE 2009 CONTRACT

These mining rights are not to be transferred.

       – Contract between the IC and Eden, 2009, article no. 8.

 

In the 5 December 2021 open letter that five church members sent to the EXCOM it is stated that Eden neither extracted nor sold the minerals from the mine.[1] Eden left the execution of these two activities to a third party. From 2017 until the first half of 2021, GT-verktakar took the minerals and sold them, at which point Lambafell inc. took over for the remainder of the year.[2]  

The authors of the open letter brought attention to two points to the existing execution as the Eden Mining had a third party take and sell the minerals from the mine. First, it seemed like this was in violation of the contract of 2009:[3]

  1. In the opening of the contract, it is stated that the contract concerns “an exclusive right held by the mining rights holders to utilize the mineral mine.”

  2. The utilization is explained in article no. 2: to utilize the mine is to extract the minerals and sell them on one’s own account. Eden was the mining rights holder—i.e., had the mining rights—and these mining rights comprised the right to utilize the mine.

  3. In article no. 8, any transfer of these rights is forbidden: “These mining rights are solely bound to the current holders of these mining rights and their spouses. These mining rights cannot be transferred [to a third party].” (Emphasis added.) The question is, if the mining rights comprised the utilization of the mine (i.e., taking and selling the minerals), did Eden not transfer the mining rights by having others taking and selling the minerals?

  4. In article no. 3, Eden’s payments to the landowner are explained and the first payment is “10% of the gross value of sold materials off the site.” From the wording it can be seen that it was Eden that is to sell the minerals off the site, meaning that Eden is to sell the minerals to someone that transports the minerals from the location. It cannot be but assumed that Eden was to extract and process the minerals (processing the minerals means to create different types of gravel if varying value) and not somebody else. Eden sold the minerals to contractors—and the contractors were the ones doing the mining, selling the minerals, and transporting them from the mining area. The question is: Did Eden them sell the gravel from the mining area, i.e. off the site? 

Secondly, in the open letter it was pointed out how the IC’s income from the mining was reduced extensively in the way Eden executed the provisions of the contract. In the case of Eden selling the product on the open market without any intermediaries, the price would have been that of the final sale, for instance 700 or 2000 ISK per cubic meter, depending on the type of gravel. Instead, Eden sold the material to the contractors for 150–200 ISK per cubic meter and the contractors mined the material and sold it. Thus, the share of the IC was extensively lower (10% of 150–200 ISK instead of 700–200 ISK) than it would have been if Eden had executed the mining themselves. This appears to be in contradiction to the purpose of the company Eden and of the contract: in the contract, this purpose is stated in literally bold letters: to create a steady flow income to the IC. The open letter stated that this loss of income was a fact even though the implementation of the contract as it took place would constitute a transfer of the contract. In other words, the implementation of the contract was greatly disadvantageous to the IC even though it could possibly be considered within the frame of the contract.[4] 

It must be taken into account that the EXCOM is not a firm. A reasonable commission would have been in accordance to sound practice to those guiding the EXCOM to potential mining rights holders—a single fair commission to an agent which would have no further involvement. 

For further clarification for the reader, the numbers are as follows. During the years 2017–2021, the profit gained from the Mt. Lambafell mine was as follows:[5]

  • The IC received ca. 25 million ISK

  • Eden received ca. 180–190 million ISK

  • GT-verktakar and Lambafell inc. received ca. 1000 million ISK (1 billion ISK)

 

Contractors?

The co-owners of Eden asserted throughout the years that they were running the mining operation according to the contract, and that they had contractors working for them.[6] But it seems that in this case contracting included everything from A to Z. The contractors mined and sold the minerals. Eden has neither owned mining equipment nor trucks nor a special sales office. What purpose did the company then serve? What comprised their running of the mining operation? And furthermore, when Lambafell inc. ran the mining operation, it included the mine on its website, stating: “Steinsteypan is in charge of mining and mineral sale in Mt. Lambafell by Þrengslavegur road through its subsidiary company, Lambafell inc.”[7] 

Neither the EXCOM nor Eden have explained how so-called contracting did not violate the provisions of the contract’s transfer prohibition, nor have the same explained the essential purpose of that prohibition.

 

Wholesale?

At the GCAS-meeting, 24 May 2022, the Eden co-owners rendered a new explanation of how the company had operated. One of the owners insisted that the operation was not in the form of contracting but that it was a wholesale. Eden had served as the wholesaler and GT-verktakar and Lambafell inc. had been the retailers. 

Wholesale and retail are distributive links in the chain of business. It is often hard for one party to supervise a large part of the business process, such as the import and distribution. Thus, a compartmentalization is established out of necessity: party A has connections in other countries, buys some merchandise and imports it. Party A is the wholesaler. Parties B then buy that merchandise from the wholesaler and sell it in their stores. Parties B are the retailers. 

However, such compartmentalization is not essential when it comes to utilizing a minor mine in Iceland. Besides, no such arrangement is known in the Icelandic mining industry. Such an arrangement is not used, simply because what purpose would the wholesaler serve? As this document has already made clear, such a wholesaler would only serve the purpose of diminishing the IC’s profit since he is an unnecessary intermediary. 

A wholesaler gets his merchandise from a supplier and sells the merchandise directly to the retailer with around 10–20 % markup; if the wholesaler has to store the merchandise, the markup amounts to approximately 30–40%. But during the period 2017–2021, Eden sold the minerals to “a retailer” for approximately 180–190 million ISK while the “supplier” (the IC) received around 25 million ISK. This means that Eden’s markup was much higher than what is known in the wholesale/retail chain and therefore Eden’s mode of operation cannot be considered as a wholesale. It is totally out of proportions to claim any wholesale arrangement with Eden receiving 160 million ISK as “a wholesaler’s markup” for the 25 million ISK that the IC received.[8] This amount cannot be considered anything else than a commission—and that an ample one.

 

Conclusion

Regardless of whether Eden’s operating protocol is termed contracting or wholesale, neither the EXCOM nor Eden have explained why it was essential or profitable to the IC to have Eden as an intermediary between the IC and the party that mined and sold the minerals, why such an arrangement was not a violation of the contract’s prohibition of transfer of the contract, and, if Eden did not violate that prohibition, what the prohibition of transfer was really about.  

It is also worth reiterating what an immense loss of profit the IC has suffered. Eden sold the gravel to a third party for ca. 180–190 million ISK. This third party, in turn, sold it further for many times the price which it purchased the gravel for. From their profit, Eden paid 25 million ISK to the IC. But if Eden had operated the mine themselves and sold the gravel to the final buyer (but not to a third party), Eden’s share would have been many times higher (the amount the third party received), and the IC would have received the 180–190 million ISK (the amount Eden received). 

If Eden had operated the mine in this way (i.e., directly, instead of being an intermediary), and still just paid the IC an amount half the size of 180–190 million ISK—“only” 90 million ISK—, that amount would nevertheless have been many times higher than the amount that the IC did indeed receive from Eden (25 million ISK). 

In a word: The IC seems to have lost huge amounts of potential income from its mines due to the intermediary position of Eden, a position that seems to be in direct violation of the transfer prohibition in the contract of 2009. This, however, is not the only issue that cut down the IC’s profit from Eden’s mining operation. That will be the subject of the next chapter.


[1] Open letter to the EXCOM, 5 December 2021, p. 10.

[2] Eden has at no point denied the participation of these companies. The author of this report has been in contact with the owners of these two companies who have confirmed the aforementioned. Also, there are solid documents from that time as an irrefutable proof of this fact, e.g., the contract between Eden Mining and GT-verktakar and the 2021 financial statement of Lambafell inc.

[3] Open letter to the EXCOM, 5 December 2021, p. 10.

[4] Open letter to the EXCOM, 5 December 2021, pp. 10–11.

[5] Cf. Kristján Ari Sigurðsson, “Hverjum ber að gæta hagsmuna Kirkju sjöunda dags aðventista?” (Whose Responsibility Is It to Protect the Interests of the IC), Samantektin, 22 September 2022, Appendix 1, p. 1. Kristján Ari obtained the figures and/or calculated them from official and published documents.

[6] A concrete example: In the wake of a fatal accident in the Mt. Lambafell mine, Eiríkur Ingvarsson wrote about “a contractor’s employee.” Eiríkur Ingvarsson, “Vinnuslys í Lambafelli” (Occupational accident in Mt. Lambafell) Kirkjufréttir, 30 October 2020.

[7] Cf. “Vefsíða Lambafells ehf.” (2021) (Website of Lambafell inc.) in the Appendices.

[8] Kristján Ari Sigurðsson has refuted this entire wholesale/retail claim of Eden regarding their mining operation. Cf. Kristján Ari Sigurðsson, “Hverjum ber að gæta hagsmuni Kirkju sjöunda dags aðventista?,” pp. [1–2].