Balala now cracks the whip on mining companies

Cortec Kenya, the company that won the rights to exploit the multi-billion- dollar rare earth and niobium deposits at the Kenyan coast early this year, topped the list of casualties as the government suspended more than 30 mining licences, citing irregularities in their award.  

Mining secretary Najib Balala said all licences awarded between January and May this year stand suspended, pending the decision of a review team he has appointed to vet the processes.

“I have today revoked all the prospecting, exploration and mining licences issued between January 14 and May 15 this year,” Mr Balala said at a Press briefing in Nairobi.

READ: Balala stops issuance of mining licences

Mr Balala also sent home the Commissioner of Mines, Moses Masibo, accusing him of presiding over the irregular award of the licences.

The decision puts on hold Cortec Kenya’s Sh5.4 trillion mining project at Kwale’s Mrima Hills, setting the stage for court battles with investors. Revocation of the licences came as a rude shock to Cortec Kenya’s management who have been laying grand investment plans for the mines.

Cortec Kenya had received a clean bill of health from the National Environmental Management Authority (Nema) to mine niobium and rare earth metals in Mrima Hills only two weeks ago, making the latest decision a complete surprise.

READ: Nema gives rare earths miner licence terms

Nema later clarified that the licence was conditional as it emerged that some Mining ministry officials were less than enthusiastic about the licensing.

The top managers of Cortec were on Monday caught flat-footed by the licence revocation move that came just days after they announced an ambitious Sh44 billion mining programme.

“It doesn’t sound like a very well informed situation,” Cortec Kenya’s managing director David Anderson told the Business Daily on phone from Tanzania.

“I am going to announce our course of action as soon as I have spoken to our offices in Australia and Cape Town,” he added.

Mr Anderson said his firm was awarded its licence after complying with all the legal requirements. The list of Cortec’s shareholders includes Jacob Juma, the businessman associated with Erad, the firm that is seeking to auction National Cereals and Produce Board assets over a failed maize supply deal.

Mr Juma also has interest in Tiomin fields at the Coast. 

Of the revoked licences, 31 were issued in the last half of the January – just after Parliament was dissolved on January 15 to pave way for the March 4 General Election. 

“Another round of licence award frenzy took place just days before the newly-appointed team of Cabinet secretaries assumed office,” Mr Balala said.

Under the 2010 Constitution, issuance of such licences requires approval of Parliament.

The Kenya Chambers of Mines (KCM), a private sector lobby representing the interest of mining firms, has however rejected the minister’s explanations, setting the stage for legal battles.

“There are procedures for such cancellations. You cannot talk of January 14 being the transition date without explaining how the date was picked. Why not March 4 (the date of election)?” said KCM Chairman Adiel Gitari.

Cortec Kenya Ltd is a subsidiary of the Australia-headquartered Pacific Wildcat Resources, which holds a 70 per cent stake in local operations. 

A statement on the Pacific Wildcat Resources website says Cortec was awarded a Special Mining Licence for 21 years to undertake its project on 142 hectares of Mrima Hills.

Section 17(1) of the Mining Act grants the Commissioners of Mines the authority to issue a firm a special licence even without a lease agreement, but the arrangement has to be formalised through a gazette notice.

Mr Masibo declined to confirm whether this was the case with Cortec’s licence, only promising to grant interviews at a “later date”.

Cortec has roiled the market in the last two weeks with the announcement of the discovery of 47.8 million tonnes of niobium and declared Mrima Hills as one of the world’s highest grade niobium deposits.

The tests also showed large deposits of rare earth. From the test results, the value of rare earth in Kwale is estimated as Sh5.4 trillion ($62.4 billion) while niobium deposits in the area are estimated at $35 billion.

With this rosy assessment, Cortec announced plans to initially set up a Sh301 million pilot processing plant by September next year to start processing the minerals.

In the meantime, the company would be going into the stock exchange to raise additional Sh43.5 billion to build a final plant to process the vast mineral resourced discovered at the Coast, Mr Anderson told journalists.

On Monday, Mr Balala banned such public announcements as he accused Cortec and other mining companies of hyping their prospects to boost their share prices and raise easy money in the international market.

In future, the announcement of mineral finds and results will only be made after the firms obtain approval of the Mining secretary, Mr Balala said.

To get such approval, the firms will be required to submit their results to the ministry 21 days earlier to create room for independent verification.

Mr Balala said the current situation where mining companies enjoy freedom to make roadside announcements regarding discovery of minerals in parts of the country had created unnecessary expectation from public.

“We just hear that people have discovered huge deposits of minerals, which cannot be verified independently by our technical experts because they don’t understand how the firms arrived at their conclusions,” said Mr Balala.