Base Titanium workers on site at Maumba in Kwale County. Under a new law, local investors are required to own at least 35 per cent of foreign firms. Photo/File
What you need to know:
Base Resources is under pressure to comply with a legal notice requiring foreign mining firms to cede 35 per cent stake to locals.
Local investors can buy the 560 million shares that are listed on the Australian Securities Exchange (ASX) and now trading at Australian $0.40 (Sh35.60).
Base Resources, the parent company of Base Titanium, has begun marketing its shares to large Kenyan investors after partnering with broker CFC Stanbic.
Mr Tim Carstens, the CEO, said the company did a road show mid last month to introduce large investment funds to the industry. Kenya’s extractive industry is still in its infancy and most would-be investors are yet to warm up to the idea of putting money in the sector.
“For most, it was their first introduction to mining investment opportunities and so it is going to be part of a process to increase understanding and comfort in making an investment. Reaching that point is going to take some time,” Mr Carstens said an email response.
Local investors can buy the 560 million shares that are listed on the Australian Securities Exchange (ASX) and now trading at Australian $0.40 (Sh35.60).
Base Resources in the past contested the applicability of the rule extracted from the Mining Bill, saying it can only comply in three years by listing on the Nairobi Securities Exchange.
Canadian Stockport Exploration, mining gold in Western Kenya, recently raised $500,000 (Sh43 million) to fund its operations bringing on board local investors. This resulted in the appointment of Zeph Mbugua, the TransCentury chairman, to its board.
It is not clear what stake the local investors, who went on board independent of TransCentury, took but it was apparent that firms could be trying to comply with the new ownership rule.
“The 35 per cent local equity rule is not well defined. We support local equity, obviously, as we have already moved in that direction,” Stockport Exploration chief executive Jim Megann said last week.
The Base Resources invite comes after the firm reported securing funds required for operations at the Kwale mines but it indicates it will not follow the Stockport route.
“Having already raised more than $200 million (Sh17 billion) in equity, we have no need to raise any more direct investment and so the opportunity is for Kenyans to buy the existing shares at market price,” said Mr Carstens.
The firm also has a $170 million (Sh14.5 billion) debt option available.
The 35 per cent rule, however, is still murky since Attorney General Githu Muigai’s opinion that the rule cannot be applied retrospectively has been disputed by the Environment minister Chirau Mwakwere — a member of the Jubilee Coalition whose candidate has been declared President-elect — who could as well return to the docket even after losing his parliamentary seat.
“The rule’s implementation and restrictions will be significant in defining if it promotes or damages the development of the industry,” Mr Megann said.
A host of other firms are yet to make public their compliance plans and must have been expecting a reprieve when Prime Minister Raila Odinga promised to scrap the rule. Mr Odinga emerged second in the just concluded presidential poll but has challenged the declaration of Uhuru Kenyatta as the winner.
Base Resources is yet to complete work on the Kwale Mineral Sands Project but has given a possible date of September; the first shipment is set for the first quarter of next year.
The Kwale project is expected to earn Kenya $2.2 billion (Sh188 billion) in sales and $300 million (Sh25.6 billion) in taxes and royalties over the next 13 years.
