Politics
A Kenyan mining milestone
Australia’s Base Titanium is in tense royalty talks with the Kenyan government for its first shipment of ilmenite. Joe Schwarz, the general manager for Base Titanium in Kenya, does not like to be called a foreigner. He was born and raised in KenySchwarz speaks Swahili and has spent more than 30 years in mining operations across the African continent.
This is probably why he is the most visible member of Base Titanium’s management team, as he has to deal with everyone from the local community to top government policymakers in addition to the daily considerations of running a business. In mid-February, it was all smiles for Schwarz and Kenya’s mining minister Najib Balala as Base shipped the first consignment for export: 25,000 tons of ilmenite worth $4.5 million and destined for China. However, the company expects to export 330,000 tons per year.
In the weeks building up to the big day, reports indicated that the company was yet to receive a minerals export licence from the ministry, clouding prospects of shipping out the ilmenite as scheduled. “We hope to get the permit anytime,” Schwarz told the media the day before the shipment. “The minute we get it, the loading begins.”
At play is the government’s ongoing effort to revise royalties. The company says it should be held to the agreement it signed five years ago when it was licensed to operate in Kenya. Behind closed doors, managers have been in one meeting after the other with government officials.
The matter seems yet to be settled. “Calculation of royalties will only be done after shipments have been dispatched from Kenya,” Balala said. He also added, “So, those other details of calculations will come in due course.” According to Kenya’s newspaper The Star, the minister has been pushing for Base to increase its royalty payments from 5 percent to 10 percent and to give up a 10 percent equity stake to the government.
Even as he scaled this one hurdle, Schwarz could expect little rest. The county government of Kwale, where Base Titanium runs its mine, has been claiming that it was not properly consulted before the shipment was made.
Residents must benefit
Governor of Kwale Salim Mvurya says residents of the Coast Province county have to benefit from the mineral wealth and will need to be included in any discussions on proceeds of mineral exports. This is ominous. Last year, Ireland’s Tullow Oil had to stop its operations in northern Kenya as residents stormed its drilling sites demanding jobs and supply contracts.
Monica Gichuhi, chief executive of the Kenya Chamber of Mines, says Base is an important test case for Kenya: “Base is a significant player and globally investors have been watching the Kwale mining project to see how it goes. It is an indication to other mining companies that the country is ready.”
For Base Titanium, it should all be worth the effort. Mining consultants at Kipya say the mine at Kwale will break even in three to four years and has a production period of about 12 years. For the first seven years, the company expects to export 330,000 tons of ilmenite, 79,000 tons of higher grade rutile and another 30,000 tons of zircon.
Source: The Africa Report