Mining firm, Fluorspar to lay off workers

Battered by the double blow of the global economic downturn and spiralling local production costs, Kenya Fluorspar Company Ltd now says that it will lay off up to 80 workers. The company, the only major commercial enterprise in the Kerio Valley, closed its operations early in March when export orders dried up.

This followed an earlier shutdown when operations were halted from the end of last November to mid-January. Company chief executive Nico Spangenberg said: “We have only been in operation for a total of six weeks during the past five months and have not been producing fluorspar. Nevertheless, we have retained staff in the hope that the market will improve.

“The company has an annual output of 105,000 tonnes and the forecasted sales for 2009 is only 40,000 tonnes. We rely totally on export orders and when these stop, there is unfortunately no point in continuing mining or processing. We already have a stockpile of fluorspar which has arisen as a result of cancellation of orders,” he added.

Mr Spangenberg said that in addition to the impact of the global recession the company, common with other mining operations, had been suffering from effects of escalating local costs, which made it almost impossible to remain profitable.

The company’s monthly electricity bill has increased by 50 per cent to Sh11 million while petroleum costs amount to Sh15 million a month. Additionally, royalties demanded by the local council for the rights to mine have been raised from an annual charge of Sh1.3 million to Sh18 million an increase of approximately 1,300 per cent.

Besides the royalties levied by the county council, the government has also proposed in the new Mining Act currently under review, that royalties be levied at the rate of 3 per cent of turnover, regardless of the company’s profit and loss situation.

“Even if we had export orders for full production capacity, it’s difficult to see how we are expected to be profitable in the face of these huge increases to our production costs. Already we are losing money this year, and have yet to recover our past investment costs. A cow can only produce so much milk. If you are not careful, you can milk it to death,” said Mr Spangenberg.

He added; “we find the situation particularly distressing as we recognise our role as one of only a few income-generating concerns in the Eldoret-Iten region. The success of our operation is key to the welfare of the local community.”