WEDNESDAY, OCTOBER 31, 2012 - 00:00 -- BY SOLOMON KIRIMIMining...

WEDNESDAY, OCTOBER 31, 2012 - 00:00 -- BY SOLOMON KIRIMI

Mining sector investors have expressed mixed reactions over a new law binding them to a minimum of 35 per cent local shareholding before being licenced.

“The reasoning is noble to ensure Kenyans participate in the mining industry, but how to implement it, is the question,” said Monica Gichuhi, chief executive of Kenya Chamber of Mines.

According to Gichuhi, the regulation is prohibitive for companies with mining licenses and funded for exploration. She said sudden change of terms of licensing would hurt loans and partnerships based on former regulations.

“We are requesting the Minister to ensure the regulation benefits Kenyans and not a few people,” said Gichuhi.

Already, Australian miner Base Resources' shares have been hit by the regulation slumping 31 per cent on Monday on worries that its key project in Kwale may be interfered with.

It said it was seeking talks with the Kenyan government to clarify whether the rule would apply to its $275-million Kwale titanium project.

"The investment agreement provides that in the event of the Government taking action tantamount to expropriation or nationalisation, Base is entitled to compensation for the full market value of all property thus taken," the company said referring to legal advise.

Base resources is due to start producing 330,000 tonnes of ilmenite a year in the second half of 2013, which will account for about 10 per cent of the world's supply, 80,000 tonnes of rutile a year, which represents 14 per cent of global output, and 40,000 tonnes of zircon.



The chief executive of Redrock Resources which is prospecting for gold in Migori, Andrew Bell, said he supports the government's policy, but transition to the new regulations should be reasonable for existing operations and mining rights.

“It is risky business because you are never assured of finding anything and the amounts of money and years spent on hopes that may never yield anything can hinder participation of local equity holders unwilling to loose money,” said Bell.

The Commissioner of Mining and Geology Moses Masibo said the new 35 per cent equity regulation refers to both exploration and mining licenses.

He said all concerns raised by the existing investors will be addressed, while ensuring Kenyans benefit sufficiently through legal provisions.

"These are meant to benefit the local communities and stringent vetting will be applied to ensure no individuals take advantage of communities in through equity shares,” Masibo said.

Ali Mohammed, permanent secretary at the Ministry of Environment and Mineral Resources, told Reuters the government will give special consideration to foreign companies with existing mining licenses.

http://www.the-star.co.ke/news/article-93593/state-sets-out-new-ownership-rules-foreighn-miners