Balala cracks the whipp, cancels 31 mining permits

Monday August 05 2013

Thirty one licences issued by the Mining Ministry have been revoked after Cabinet secretary Najib Balala said they were issued in unclear circumstances.

Mr Balala also suspended the Commissioner of Mines, Mr Moses Masibo.

He also named a taskforce to investigate over 500 licences given to mining companies since 2003 amid reports that some of the firms were dubious entities engaging in speculation and had no capacity to conduct commercial exploitation.

The taskforce chaired by Mr Mohammed Nyaoga will investigate the circumstances under which the licences were issued and the status of the companies which benefited.

Mr Balala told a press conference in his office that preliminary investigations indicated that only 20 out of the 500 companies were credible. All the others out to make super profits through speculation and hoarding of mineral resources while also benefiting from preferential treatment.

Among the companies likely to come into focus as the governments takes steps to streamline the mining sector, is Cortec which recently announced that there were deposits of niobium, a rare earth mineral worth over $100 billion in Kwale County.



Mr Balala said the announcement took the government by surprise as it did not have details of the find, and could, therefore, not vouch for the accuracy of the information.

He said a proposed Mining Bill, which has been forwarded to the Cabinet for approval, would require companies to first disclose such information to the government.

“Under the new law, we will require mining companies to notify the government within 21 days so that the government can verify the information to avoid companies engaging in speculation to make profits,” he said.

On Monday, the government admitted it was not aware of the activities of Cortec and the alleged mineral find in Kwale.

Mr Nyaoga’s taskforce was given 60 days to hand in its report, after which the government will decide which licences would be revoked and which would remain.

The focus will be on licences awarded between January and May, just after Parliament was dissolved.

Mr Balala wondered how the 31 licenses were issued yet the country was in transition.

“We have some that were issued even on Election Day and others on the day that I was sworn in,” he said.

He also announced that he would gazette new royalties and drilling charges under which mining companies will be required to pay a minimum of 10 per cent of their proceeds to the government as opposed to as low as 0.01 percent that some companies were currently paying.

“Last year, Magadi Soda Company for instance exported salt worth Sh16 billion and the government got only Sh 16 million in taxes,” he said.

Mr Balala also revoked the Export Processing Zone status of a company dealing in flouspar to stop the government from losing millions in royalties. EPZ companies are exempted from paying taxes for 10 years.

Drilling charges would increase from the current Sh800 for the first 50 metres of depth last revised in 1999, to Sh8,000.

The cost would increase by Sh1,000 for the next 50 metres up to 400 metres of depth, after which the government would negotiate what to charge.

Mr Balala said under the revised royalty rates on extracted minerals, mining companies would pay 12 percent of gross sales value for diamonds, 10 per cent of gross sales value for rare earth elements and radioactive minerals and 10 per cent for niobium.

Companies exporting gold would be required to pay eight per cent of sales and two per cent gross sales value on gold exported by dealers as opposed to old rates of 2.5 and five per cent enjoyed by two different dealers currently.

Later on Monday, Mr Masibo said he was yet to receive his suspension letter.