KHARTOUMKHARTOUM (Reuters) - Late last year, as President Omar Hassan al-Bashir's hold on power weakened, one of Sudan's most feared militia leaders lashed out against the government of his long-time ally and benefactor.

In a speech to cheering troops, militia chief Mohamed "Hemedti" Hamdan Dagalo sympathised with the thousands of protesters who had poured onto the streets in December demanding food, fuel and an end to corruption. He hit out at officials "who take what isn't theirs."

"There are some people who are doing great harm, and they are the officials, not the poor," he raged.

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After years of loyally supporting Bashir, Hemedti took part in the military coup that toppled the leader in April and is now a senior figure in the transitional government that is preparing the ground for elections in three years' time. Under the constitution, members of the transitional government aren't allowed to engage in private business activity.

Now a Reuters investigation has found that even as Hemedti was accusing Bashir's people of enriching themselves at the public's expense, a company that Hemedti's family owns was flying gold bars worth millions of dollars to Dubai.

Current and former government officials and gold industry sources said that in 2018 as Sudan's economy was imploding, Bashir gave Hemedti free rein to sell Sudan's most valuable natural resource through this family firm, Algunade. At times Algunade bypassed central bank controls over gold exports, at others it sold to the central bank for a preferential rate, half a dozen sources said. A central bank spokesman said he had no information about the matter.

Airway bills and invoices, reviewed by Reuters, give a rare glimpse into Algunade's dealings - a closely-guarded secret in a country where two thirds of the population live in poverty. The documents, covering a four-week period from the end of last year, show Algunade sent around $30 million of gold bars to Dubai, around a ton in weight.

In the past, Hemedti has spoken openly about owning gold interests, most recently in an interview with the BBC in August. "I'm not the first man to have gold mines. It's true, we have gold mines, and there's nothing preventing us from working in gold," he said then.

But in response to Reuters' questions for this article, Hemedti's office denied any link between the commander and Algunade. In a separate interview, Algunade's general manager, Abdelrahman al-Bakri, said the firm is owned by Hemedti's brother Abdelrahim, who is also the deputy head of Hemedti's Rapid Support Forces (RSF). Nevertheless, Bakri maintained there was no connection between Algunade and Hemedti and his RSF, which has evolved from a militia in Darfur to Sudan's most powerful paramilitary group.

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"Algunade is as far as can be from the RSF," he told Reuters at the firm's heavily secured headquarters. He showed Reuters registration documents that named Abdelrahim as the company's owner. Reuters was unable to contact Abdelrahim. Bakri acknowledged that Algunade exported gold to Dubai in late 2018 but said it had done so at the request of Bashir's intelligence agency. He denied the firm sold gold to the central bank at a preferential rate.

MY PROTECTOR

Hemedti's grip on Sudan's vital gold trade illustrates the scale of the challenge to rescue an economy broken by decades of mismanagement, corruption and war.

His career began as a militia man in western Darfur, where rebels took up arms against Khartoum in 2003. Bashir mobilized several militia to quell the revolt and, in the conflict that followed, some 300,000 people were killed and two million more driven from their homes. The government disowned "outlaw" fighters who murdered civilians, but the International Criminal Court issued an arrest warrant for Bashir for war crimes and the United States imposed further economic sanctions against his government.

In Darfur, Hemedti earned a reputation as a ruthless commander and a loyal servant to Bashir. The president called him "Hemayti," meaning "my protector." After Hemedti seized the goldmines of Darfur's Jebel Amer mountain region, Bashir allowed him to hold onto the prize.

"He became the new king of Jebel Amer and its gold," said Amjad Farid, a politician and pro-democracy activist. "For Bashir, he was his loyal boy, his protection force."

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Hemedti and his militia took full control of the Jebel Amer mines in 2017 - the year the United States began lifting economic sanctions against Sudan. He faced few obstacles as he expanded his operations from Darfur to South Kordofan and other regions of the country.

Algunade traded with poor, artisan miners who used toxic mercury to extract gold, at grave risk to their health. The leftover soil, known locally as "Karta," was trucked to Algunade's plants where it was treated with cyanide to harvest the remaining ore.

These practices have sometimes brought Algunade into conflict with local people. In October, people in the town of Talodi, South Kordofan, set fire to the Algunade plant, accusing the firm of plundering their gold and polluting their soil.

"This gold belongs to us and this is our land, handed down by our grandfathers. Why should we give the gold to Algunade? We burned the factory to stop pollution and to stop them stealing our gold," said miner Haroun Abdallah.

Algunade's general manager, Bakri, said the "citizens of South Kordofan should say thank you very much to Algunade" for all it had done for the area. He estimated the attack on the facility caused damage of about $6 million.

A global campaign against the use of mercury in gold mining and other industries led to a United Nations treaty, the Minamata Convention on Mercury, which will prohibit the manufacture, import and export of products containing mercury by 2020. Sudan's Energy and Mining Minister Adil Ibrahim told Reuters his country would comply with the agreement. The convention does not extend to cyanide, however.

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"Cyanide is more serious because it seeps into the earth, and can be washed by rain, and it kills so many animals and seeps into drinking water and affects vegetation in the area," said Anwar al-Haj the chair of Sudan Democracy First Group, a non-governmental organization which advocates for democracy. It published a report in 2018 that asserted a link between the use of hazardous chemicals in mining and increased miscarriages, birth defects and deaths.

Energy and Mining Minister Ibrahim said the government would help miners find alternatives to mercury, but cyanide use would continue because, if handled properly, it isn't harmful.

SPECIAL TREATMENT

Sudan's central bank is supposed to oversee gold exports, but two current and one former government official and several industry sources told Reuters that Bashir sometimes allowed Hemedti to circumvent this rule. The former president let Algunade sell gold as it liked, these people said, because Hemedti's RSF militia was a useful counterweight to generals in the regular military whom Bashir perceived as a threat to his rule.

The export documents and invoices reviewed by Reuters, covering a four-week period from the end of 2018, showed Algunade doing business with one counterparty in Dubai, a company called Rozella. Contacted by Reuters, Rozella confirmed the firm had dealt with Algunade. A company official said transactions between the two companies took place over a period of three months in late 2018. Algunade's general manager Bakri told Reuters that Rozella was the only firm Algunade dealt with in Dubai.

Under the arrangement with Bashir, Algunade would hand some of its export earnings to the state, to pay for the government's fuel and wheat purchases, government officials said. Algunade's general manager, Bakri, confirmed that some of the proceeds of gold sales were used to buy fuel. He said Algunade bypassed the central bank only for three months in late 2018, at Bashir’s request.

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A senior government official, however, told Reuters, "there were no official records showing that Algunade gave money" to the state. This official said Hemedti used proceeds from gold exports "to buy weapons for Bashir and himself." He estimated that Hemedti pumped millions of dollars into buying weapons and vehicles for the RSF that roams the streets with rocket-propelled grenades and machine guns mounted on jeeps. Asked if revenues from Algunade's gold sales were used to buy weapons, Bakri maintained there was no connection between the firm and the RSF or Hemedti. Hemedti's office declined to comment beyond denying any link between the commander and Algunade.

The head of Sudan's gold exporters' union Abdel Monem al-Siddiq said that even when Algunade sold its gold to the central bank as it was supposed to, it received a preferential rate - a claim Algunade's general manager Bakri rejected as "fake news."

With tens of thousands of soldiers, the RSF is Hemedti's power base. It is deployed across the country to protect gold mines and strategic buildings. Thousands of its fighters have fought for Saudi Arabia and the United Arab Emirates in Yemen's civil war. Hemedti's fighters are deeply loyal.

"The leader sometimes takes the time to talk to us militiamen by telephone. We will always support him," said one fighter, declining to be named because he wasn't permitted to talk to the media. He said he was paid $20,000 to fight in Yemen for six months. Many of his countrymen live on less than $10 a month.

"IT'S A MESS"

Energy and Mining Minister Ibrahim faces a big challenge to reform the gold industry. He said successive ministers failed to ensure concessions were awarded fairly and transparently, leading to corruption. "It's a mess," he added.

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Finance Minister Ibrahim Elbadawi, who estimated Sudan needs up to $5 billion in international support, said the government will push to end monopolies in sectors including gold mining. Algunade's general manager Bakri insisted Algunade doesn't have market dominance.

For many Sudanese, Hemedti and his firm are symbols of the country's repressive past and economic inequalities.

One gold trader told Reuters how he stood up during an industry conference recently to complain that Hemedti's gold business had become too dominant. Two days later, he said, police hauled him to the prosecutor's office for questioning about his comments. His account couldn't be independently confirmed.

At the gold souk in downtown Khartoum, a large sign advertising Algunade blazes above rows and rows of idle jewellery shops. Few Sudanese can afford to buy these days, said shopkeeper Mohammed Awad. When asked if gold exports had harmed his business, another trader pointed to the Algunade sign above him and said: "We hope that Hemedti will change his ways and keep the gold inside the country."