Will foreign firms cede 35pc stake? Debate rages on The resolve...

Will foreign firms cede 35pc stake? Debate rages on

The resolve of the Kenya Government to wring 35 per cent stake from foreign mining firms could be headed for a major test after an Australian Stock Exchange-listed firm issued a statement saying its Kwale titanium project would not be affected.

But Environment and Mineral Resources minister Chirau Mwakwere in interview with the Business Daily dismissed the position taken by Base Resources — which he said has already filed a compliance plan indicating it would list on the bourse. He said no one would be exempt from the legal notice issued by the ministry.

The Kwale project has dragged on for more than a decade in the process changing hands from Canadian Tiomin to the Australian firm.

In a statement announcing closing of a financing deal for the Kwale titanium project, the firm said it had obtained legal advice that its activities will not be affected but the minister said the company should be aware that the lawyers were not the issuers of the notice.

“We have clear legal advice from two leading Kenyan law firms that the regulation recently introduced by the minister for Environment and Mineral Resources that seeks to mandate a 35 per cent minimum Kenyan equity participation in mining licences cannot be legally applied to the Special Mining Lease No. 23 covering the Kwale Project,” said the firm.

Mr Mwakwere’s stand was supported by the Kenya Chamber of Mines which said all mining and exploration licences must be treated the equally.

Apart from the legal notice, which gave foreigners five years to comply, the same local shareholding structure has been reaffirmed by the Cabinet which has endorsed the Geology, Minerals and Mining Bill, 2012 which is awaiting parliamentary endorsement.

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

The minister says by issuing the legal notice under the old mining laws made in the 1940s, he wanted to make sure Kenya gained even if Parliament failed to pass Mining Bill in time.

Mr Mwakwere’s position has spooked the markets with Base Resources stock falling on impact.

In an apparent copycat act, mineral-rich DR Congo is set to implement a law requiring that 35 per cent stake in mining concessions be reserved for the State, up from the previous five per cent, provoking similar reaction in exchanges where mining firms are listed.

“The lawyers are not the issuers of the notice. Others are complying and if anything we have their proposals for compliance,” said the minister.

Interestingly, Base Resources is making their statement at a time the government has guaranteed the firm borrowing to the tune of $310 million which should allow them to begin exporting titanium by the end of next year.

On Friday, managing director Tim Carstens, whose firm was reported by The EastAfrican to be lobbying top public officials for exemption, insisted that the rule could not affect the old licences but said his firm would comply later by listing on the Nairobi Stock Exchange.

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