Mining firm share price drops 59pc after licence cancelled

Cancellation of a firm’s licence for mining of minerals in Kwale has wiped 59 per cent of the share price of another company associated with the mining firm.

According to data posted on the Toronto Stock Exchange, Canada, the share price of Pacific Wildcat Resources dropped by 58.8 per cent to close at 0.035 Canadian dollar.

Pacific Wildcat Resources owns 70 per cent of Cortec Mining Kenya, a company that had been licensed to explore and mine niobium and rare earth metal deposits in Mrima Hills, Kwale County.

Cortec was on Monday among 42 companies whose licences were revoked by the Mining Cabinet Secretary Najib Balala on grounds that they were irregularly issued.

Following the news of the cancellation, the management requested the Investment Industry Regulatory Organisation of Canada (IIROC), which controls the country’s capital markets, to suspend trading of the share to avoid price meltdown. Yesterday’s trading was the first since the suspension.

Minerals valuation

“We requested the Canadian authorities to withdraw trading of the Pacific Wildcat Resources Share until we resolve the current issues,” businessman Jacob Juma, a shareholder of Pacific Wildcat Resources, told journalists on Wednesday.

On July 29 when Cortec announced that it had revised its valuation of the rare earth deposits at Mrima Hills from Sh5 trillion to Sh52 trillion, the share gained 28 per cent, having opened at 0.07 Canadian dollars and closed the day’s trading at 0.09 Canadian dollars.

Experts have accused mineral exploring companies of releasing unverified information to create a share price rally meant to help the companies raise capital. This has forced the government to issue strict guidelines on the release of such information.

“Prior to making any public analysis, projections or estimates the mining company should seek approval from the ministry 21 days before the date of announcements,” Mr Balala noted saying this would ensure unnecessary expectations are not created.

Mr Balala’s action has been criticised both by the industry players and analysts who have predicted that it may result in court battles with the affected parties – a situation that could derail activity in the mining sector.

Suit threat

Already, Cortec Mining, which is one of the largest companies affected by Mr Balala’s move, has threatened to challenge in court the revocation of its licence issued in March this year.

“Any attempts to unfairly or unconstitutionally revoke the company’s license will be vigorously challenged in the Kenyan courts,” said David Anderson, Cortec’s managing director, in a statement.

Through Mr Juma, Cortec on Wednesday said that it could also “pursue the option of challenging the revocation” at the France based International Chamber of Commerce or at the Dispute Resolution Tribunal in the United Kingdom where its other shareholder, Sterling Securities Limited, is registered.