Kenyan unit hurts Tiomin

Tiomin Resources recorded a loss of $35.4 million (Sh2.6bn) for the year ended December 31, 2009, partly due to writing off costs associated with its titanium project in Kenya, compared to a loss of $10.3 million (Sh783 million) the previous year.

Tiomin Chief Executive Officer Robert Jackson said the Toronto Stock Exchange-listed company’s local subsidiary, Tiomin Kenya Ltd (TKL), written off in 2009, accounted for about $30 million of the loss and non-recurring costs associated with a legal settlement accounted for $1.3 million.

He said in the audited annual report for 2009 Tiomin Resources on February 24, 2010, signed an agreement to sale Kwale mineral sands project in Kenya to Base Iron Ltd (BIL) of Australia. This, though, is subject to the approval of shareholders of the Australian.

The agreement provides for BIL to acquire the Kwale mineral sands, all the intellectual property associated with Tiomin’s mineral sands in Africa and an option to acquire 100 per cent of TKL.

In exchange Tiomin receives $3 million in cash at closing and if the project reaches commercial production a cash royalty of 1.5 per cent of all product revenue from Kwale paid monthly in arrears.

Jackson in February said the Government of Kenya needs to approve the transaction as BIL is well qualified to develop Kwale mineral sands project.

“It allows us to focus on Brazil. Australian companies understand mineral sands much better than those of North America and we think BIL is well qualified to develop Kwale,” he said in a press statement.

Jackson said BIL will pay Tiomin $60,000 deposit deductible from $3 million cash closing payment and pay a non-refundable $60,000 a month to sustain TKL until transaction closes.

He said conditions precedent (CPs) require among others BIL to raise minimum capital of Australian $7 million. If this is not met within 90 days of signing, either party may terminate transaction.

Jinchuan Group Ltd of China in October last year terminated an investment agreement to purchase 70 per cent of TKL and the Kwale project. Tiomin tried to seek clarification from Jinchuan concerning its notice of intent to terminate the transaction, which was scheduled to close on October 29, 2009.

“This decision by Jinchuan to attempt to terminate the deal two days before closing should be of considerable interest to any mining company contemplating a transaction with Jinchuan,” said Jackson.