High hopes in Kwale as mining giants get down to business

Thursday November 10 2011

Base Titanium workers at Maumba, Kwale, where the mining firm is constructing a dam to provide water for processing the mineral. Photo/GIDEON MAUNDU

Base Titanium workers at Maumba, Kwale, where the mining firm is constructing a dam to provide water for processing the mineral. Photo/GIDEON MAUNDU 


Kwale, one of Kenya’s poorest counties, is sitting on mineral wealth worth billions of shillings.

And now with plans for the commercial exploitation of titanium, niobium and rare earths, there is optimism that the fortunes of the county and its people will get a huge boost.

Experts say the combined value of the minerals is nearly Sh350 billion.

After 17 years of protests, inquiries and reports, the stage is finally set for titanium mining by an Australian company.

And two South African firms have been given the greenlight to explore for niobium and rare earths in the region.

For titanium, all government approvals have been granted and the building work will begin this month, according to officials of the mining firm, Base Titanium Ltd.

It will take close to two years to complete the buildings, a dam and access roads and once that is done, mining and processing will start immediately thereafter – around August 2013, according to Base Titanium general manager Joe Schwarz.

Base Titanium early this year finished updating a feasibility study carried out five years ago by former mine owners Tiomin Kenya, paving the way for work to start.

The mining is expected to last for 13 years, during which time gross sales are expected to be around Sh130 billion, yielding an estimated net present value of Sh39.5 billion, said Mr Schwarz.

Payable royalty

The total royalty payable is 2.5 percent of gross sales value, Mr Schwarz said. It will be shared by central government and the county government

“The project will directly employ about 350 people, but total employment during the construction period could peak at close to 1,000. The value of the project to the national economy is significant. It will almost treble the value of mineral exports from Kenya,” Mr Schwarz said.

Base Titanium, an Australian mining company, bought the mines from Tiomin Kenya, a subsidiary of Vaaldiam Mining of Canada (formerly Tiomin Resources) last year.

Tiomin Kenya was first granted exploration rights in 1996.

But clearance for the project has been long and difficult, with Tiomin having invested around Sh3.6 billion by last year when the mines were acquired by Base Titanium.

“Mining requires investing large sums of risk capital in exploration and sometimes there are no guaranteed returns,” Mr Schwarz said.

In Kenya, Tiomin faced a lot of unforeseen hurdles, which have now been overcome.

“It has been a steep learning curve for us all,” he added. In 2006, the firm had secured the necessary funding but could not start mining since land acquisition issues had not been resolved.

The debt finance package was withdrawn when access to the land was denied. The firm has since spent Sh600 million on resettlement programmes.

“The Government recognises the importance of this project and has been very supportive. All necessary approvals and transfers were completed in a short space of time, enabling the transaction to be settled very quickly so Base can proceed immediately,” Mr Schwarz continued.

The company had secured all the necessary funding. The capital cost estimate is Sh25.6 billion, with Sh17 billion of it borrowed, supplemented by an equity capital raising of a similar proportion.

Geologists say that the mining of the titanium was unlikely to harm the residents since the minerals existed naturally in the soil and the rocks.

“The land is leased to the company under a Special Mining Lease. Once mining is completed, the infrastructure will be removed and the land rehabilitated according to international standards,” said Mr Schwarz, adding that the Government would decide on the use to which the land would be put, which could be agriculture, forestry or settlement.

However, some residents have grown impatient with the slow progress made before the mining starts.

The former MP for Msambweni, Mr Abdalla Ngozi, said Base Titanium had taken an inordinately long time and that company officials had not been keen on informing residents about their progress.

“We have yet to see any serious activities on the ground,” Mr Ngozi said.

Elsewhere in the county, two South African firms are currently prospecting for niobium and rare earths, first explored in the area in 1950s.

Niobium is used in strengthening steel for spacecraft parts, and for making water and sewerage pipes due to its resistance to corrosion, while rare earth oxides are used in high-tech electronics products such as nuclear batteries, laser repeaters, superconductors and miniature magnets.

A chronic global shortage of rare earths has triggered an increase in mining after China, estimated to account for 97 percent of the world’s rare earth supplies, tightened trade in them.

A truce between the local community and the two South African mining firms — Cortec Mining and Pacific Wildcat —was reached recently, paving the way for full exploration of a site believed to have the potential to earn the country Sh270 billion.

The community opposed mining on the ground that they were not involved and did not understand how the two firms intended to carry out the process.

A committee representing five villages from Mrima was set up and formed a trust that is receiving Sh1 million every month during the prospecting period. Once mining starts, the firms will double the money, which will be used to build schools and sink boreholes.

Mr Moses Masibo, the acting commissioner for mines, said the two firms would continue to explore for the minerals in the area.

Cortec was nearing the end of its exploration stage, before engaging environmental authorities who will assess possible degradation of the area as a result of mining before it is allowed to apply for a lease.

Officials at Cortec Mining have placed initial estimates of the value of niobium deposits in Kwale as around Sh300 billion over the next two decades.

Mr David Anderson, the managing director of Cortec, said the firm would apply for a mining lease once the environmental impact assessment covering the area was completed.

Diamond results

“Cortec will apply for a mining lease before the end of this year when the ongoing environmental impact assessment is complete,” said Mr Anderson.

In the notice to investors, the other firm, Pacific Wildcat, reported that niobium and the other rare minerals occurred consistently more than 30 metres below the surface.

“These first diamond results confirm the significant depth potential to the Mrima Hill deposit. As can be seen from the cross sections, we have now proved the high grade niobium mineralisation extends at depths substantially deeper than … 30 metres, “ said Mr Darren Townsend, Pacific president.

Cortec Mining is expecting to produce about four tonnes of concentrated niobium, which would earn Kenya around Sh14.4 billion annually.

In his estimates, Mr Anderson said that the rare earth reserves in Kenya came third after Brazil and Canada.

Residents opposed the project on health, environmental and resettlement grounds.

The Kaya Mrima Self Help Group had complained to the mines commissioner that the mining claims lie in a forest reserve area that required a special prospecting licence.

KFS has gazetted several kaya forests at the Coast and mining was banned within 50 metres of a kaya forest.

Mr Anderson said that the zones containing minerals that the KFS asked them to mark were 400 metres away from the kaya forest.

Also the amount of uranium in samples taken from 31 holes drilled so far was far below the international level.

He went on: “The mineralisation zone is not within a residential area. The minerals are contained in a small zone on top of the hill and the two firms will not require any land occupied by the residents.
Should extra land be needed it would be bought from the community.