Mwakwere hits titanium firm with licences cancellation

Environment and Mineral Resources minister Chirau Ali Mwakwere has derailed the plans of an Australian firm involved in titanium mining at the Coast after the government cancelled three of four licences held by Base Resources.

The minister has cancelled the licences that cover an area 113 square kilometres in Ganze, Kilifi County for what he termed as “non-performance.”

Base Titanium said it was planning to start commercial operations in the three sites after starting production on its Sh25.5 billion Kwale Mineral Sand Project, the only remaining site with a licence, in October.

The cancellation comes amid opposition to the minister’s recent directive for foreign mining companies to cede at least 35 per cent of their shareholding to Kenyan investors by Base Resources, which lobbied the Treasury to rescind or suspend the ownership rule.

READ: Foreign mining firms to cede 35pc share to Kenyans

“They were given a licence close to 15 years ago and they have nothing to show for it to date,” said Mr Mwakwere in telephone interview Friday, adding that the cancellation was not targeted at Base Titanium because five other smaller firms are also affected.

The firm acquired the licenses in 2010 after acquiring Tiomin Resources, which was originally granted the licenses in 1998, but its projects were delayed by a series of setbacks including demonstrations by environmental groups, disputes with local farmers over compensation for land and drawn out talks with the government.

The licenses cancellation has thrown Base Titanium into panic since it was planning to start commercial operations on the three blocks and had sought for fresh licenses on land adjacent to the affected blocks.

The Australian firm had in October applied to the commissioner of mines for three additional blocks in Kilifi to consolidate its grip on Kenya’s mining sector.

“We are still consulting on our position following the recent developments and due to its sensitive nature, we will make our directions known at a later date,” Joe Schwartz, the Base Titanium general manager told the Business Daily on Friday.

“We were banking on the expected cash-flow from the Kwale plant for us to move operations to the three Kilifi blocks.”

Mr Schwartz say that his firm had established the three Kilifi blocks contained about 950 million tonnes of mineral sands like rutile, zircon and ilmenite estimated to be worth Sh420 billion ($5 billion).

The Kwale project, whose production will start in October, will have an initial 11-year mine life that could possibly be extended by a couple of years.

It is expected to produce 330,000 tonnes of ilmenite a year, about 10 per cent of the world’s supply, another 80,000 tonnes of rutile per year, which represents 14 per cent of global output, and a further 40,000 tonnes of zircon.

Base Resources acquired Tiomin’s assets for $3 million and pledged a 2.0 per cent royalty from revenues. It will have to inject an additional 2.5 per cent royalty to the government once production commence in 2013.

Mr Mwakwere reckons that the firm’s inactivity is hurting Kenya’s mining potential. A surge in global commodity prices and investor appetite for new frontier markets has revived interest in Kenya’s mining potential.

Investors are interested in gold; mineral sands such as titanium; coal, and mineral earths such as titanium, rutile, zircon, and ilmenite.

Firms involved include UK-listed GoldPlat, which was granted the first gold mining license in the country in 2011; China’s Fenxi Mining (coal); and London-listed African Barrick Gold is prospecting for gold in western Kenya.

The Economic Survey 2012 indicates that Kenya earned Sh18.3 billion from mineral production in 2011, a 21.1 per cent increase from the previous year’s Sh15.1 billion.