Mining takes a hit from credit crisis

• Prices in the markets have declined leading to a slowdown in gemstone extraction

Mining is the latest local industry to feel the heat from the global financial crisis with the international price of minerals declining.

This has contributed to a reduction of gemstone mining activity in the country.

According to Mr Cedric Simonet, director of exploration firm IGE Kenya Ltd, the impact may be cancelled out though.

He gives an example of Tsavorite production from Kwale area having gone down over the last few months to support this.

“The extent of Tsavorite’s production decline is yet to be quantified but weakening of the shilling has brought some relief to the gemstone sub-sector, since most are sold in dollars,” he said.

Producers, while getting more value for their products in Kenyan shillings, are being forced to spend more on production costs.

Outlook

The major set back for mining companies has been the rise in fuel costs used by bulldozers and excavators during extraction. This came hand in hand with the global financial crunch.

It is estimated that over Sh1.5 billion has been invested in the industry but much more is needed to develop into a modern exploration and mining industry.

The global downturn has affected sales of jewellery which uses gemstones as a major raw material in countries like the US where commodities are bought using credit facilities.

The managing director of local mining firm, Rockland Kenya, Ms Alice Muthama, said prices of some minerals have decreased due to overproduction and reduced purchasing power in target markets.

“The Price of Tanzanite has decreased as a result of market saturation and reduction in purchasing power of the European, American and Asia markets where Kenyan gemstones are exported,” she said.

The price drop is not expected to last long due to global campaigns, shows and exhibitions aimed at promoting the sale of various gemstones.

The International Jewellery Show in Tokyo is scheduled for this Wednesday followed in February by the Tuscon Gem Exhibition in the US.

Also, according to the Kenya Chamber of Mines (KCM), in May 2009 there will be a gem and jewellery show and a congress that will last for six days in Panyu, China.

“This is aimed at linking suppliers with their sources as well as customers. The congress will also address the issue of the global gemstone price decline,” said KCM’s chief executive officer, Munyiri Kinyua.

He said the Gemstone and Jewellery Report of 2005 shows Kenya is one of the countries with a major occurrence of a variety of coloured stones.

Kenya is the main source of Tsavorite (emerald green grossular garnet) whose name is derived from the locality where it was first discovered.