Foreign investors win battle for control of mining firms
What you need to know:
The law is among the key changes proposed to the Mining Bill being refined at the Attorney-General’s office.
The Mining Bill would replace the Mining Act of 1940, which has only been revised twice in 1972 and 1987, with little in-put on contemporary practices in the sector such as fair sharing of revenue.
A controversial law requiring foreign mining firms to cede 35 per cent ownership to local investors will be repealed to help Kenya attract investments in the extraction sector.
Mining Secretary Najib Balala said the law introduced last October is among the key changes proposed to the Mining Bill being refined at the Attorney-General’s office.
“I am keen to confirm that the Government of Kenya is repealing the 35 per cent local ownership rule after the completion of the mining Bill,” Mr Balala told a conference in London.
The rule introduced last October in a bid to help maximise the benefits from the fledgling sector triggered anxiety among foreign-owned mining firms.
Their main concern was the fate of investments that they had already made and how these would be shared with yet to be identified local partners.
Mr Balala said the government would repeal the law to restore investor confidence in the competitive sector.
“A vibrant mining sector will create jobs and generate significant revenues for the government. We are here to crowd investors in and not out,” Mr Balala said.
Kenya has more than 300 local and foreign firms prospecting for minerals or producing on a small scale, up from less than 30 two years ago, Kenya’s Chamber of Mines says.
The country has proven deposits of titanium, gold and coal and is also estimated to hold deposits of copper, niobium, manganese and rare earth minerals.
Goldplat has assets in Kenya, South Africa, Ghana and Burkina Faso. The company in January 2012 poured the first bar of gold from its Kilimapesa mine, marking the beginning of production in Kenya’s first gold project.
Goldplat warned that the uncertainty over the local stake rule by Kenya would affect its operations as well as those of other investors in the mining industry.
A draft of the Bill also proposed to increase royalties on minerals such as gold by up to threefold. It also offered to have mineral-specific structure for royalty payments and charges, deviating from the current law where royalties are pegged at three per cent for all categories of gems.
Diamonds and other precious minerals were also to start attracting royalty charges at 10 per cent and five per cent respectively.
The creation of a dedicated ministry in-charge of mining signalled President Uhuru Kenyatta’s resolve to boost the performance of the industry which has for years been hindered by vested interests and resistance from local communities.
The Mining Bill would replace the Mining Act of 1940, which has only been revised twice in 1972 and 1987, with little in-put on contemporary practices in the sector such as fair sharing of revenue.
Official data showed that most companies parted with royalties at 2.5 per cent instead of the preferred three per cent.
Some firms, especially the medium and small-scale ones that run illegal mines, even failed to make payment altogether. This has seen the average royalty payment stand at between Sh15-20 million despite the massive prospecting activities that have been taking place across the country.
The London-listed Goldplat said it had halted activity at its Kilimapesa mine and downsized the workforce to stem losses.
“In order to eliminate losses caused by continued operational constraints and the current uncertain gold price environment, the company has put the Kilimapesa Gold Mine in Kenya on a care and maintenance programme until the project economics can justify the reopening of the mine,” it said in a statement.
Goldplat has assets in Kenya, South Africa, Ghana and Burkina Faso. The company in January 2012 poured the first bar of gold from its Kilimapesa mine marking the beginning of production in Kenya’s first gold project.
“With regards to Kilimapesa, we will continue to assess the viability of the operation and engage with all the stakeholders including the local community and the Kenyan government to map the way forward,” it said in a statement.
