Business
Kenya’s First Titanium Export Puts It Among Mining The Big Leagues
“Although Kenya’s mining sector is still too small for its potential, we have a wealth of onshore and offshore mining experience to offer it.” Australia is the world’s largest mineral producer accounting for 16 percent of global output. The country has an annual mineral production of nearly $72 billion.
Compared to its closest neighbour Tanzania, which has substantially developed its mining industry over the past 15 years, Kenya is in its nascent stages in mining and is deemed one of the least explored countries in Africa. Delineation of a substantial deposit of niobium and rare earth elements at Mrima Hill, near Mombasa and identification of the Mui Basin coal deposits, in the eastern region, together with the recent establishment of a stand-alone Ministry of Mining, have led to the increased profile of the sector.
During the Mombasa tour it emerged that Kenyans will be asking pertinent questions in the coming years that include: how the country and host communities benefit from its mineral resources; how this benefit is measured; and whether to trust the numbers from companies and the government.
Explorers Paradise
There are many indicators of benefits associated with mining including revenue through royalties from various license and permit fees as well as taxation. All eyes are on how the Kenya Government cuts a deal with mining companies over royalties. In August 2013, Najib Balala, the cabinet secretary for mining in Kenya raised mining royalties from 2.5 percent to 10 percent, raising uproar in the mining sector.
“We entered an investment agreement with the Government’s Treasury Department which supersedes all other regulations and locks royalties at 2.5 percent for 5 years. A rate of 10 percent is therefore off the charts,” Simon Wall, External Affairs and Development Manager at Base Titanium Limited told AFKInsider in Kwale. He explained that the mining firm had already done its project financing with various financial institutions, based on the 2.5 percent rate.
Base Titanium officials cite high cost of power, costing the firm between $6-9 million per year and heavy capital outlay as some of the reasons a hike in royalties could run it out of business. “We have issues but are in the process of concluding negotiations to ensure that interests of investors and the Government of Kenya are safeguarded,” Najib Balala, Mining Cabinet Secretary told the media in Kwale while officiating the first shipment of mineral exports by Base Titanium, at their port facility in Mombasa.
The ten percent royalty rate is higher than the 1.5 percent in India and five percent in other more advanced mining jurisdictions such as South Africa or Australia. In August 2013, the Ministry of Mining issued a gazette notice (Prescription of Royalties on Minerals Regulations, 2013 listed under Legal notice 187).
