Balala must keep mining firms on their toes and weed out speculators

Tuesday August 6 2013

 

By JAINDI KISERO [email protected]

I sympathise with mining companies whose licences have been cancelled by Mr Najib Balala. A situation where a Cabinet secretary just wakes up one morning and — by fiat — declares that he has cancelled all existing licences is hardly inspiring.

But I fully support Balala if his intention is to weed out those big-talking speculators and smooth operators in the mining sector who thrive on deceptive games.

The regime for licensing mining companies in this country does not put so much weight on determining ability of applicants to raise capital for actual exploratory work. Any smooth talker carrying a briefcase can today walk into “Madini House” and walk out with a prospecting licence.

And, no due diligence is conducted on the integrity of the persons issued with prospective and mining licences. The Mining law itself is totally archaic.

Balala now has an opportunity to interrogate the licences which were issued for capacity to implement so as to separate the serious players from the jokers.

I agree with the Cabinet secretary when he accuses some mining companies of exaggerating prospects of discovery of minerals even in circumstances where they have put very little money in actual exploration work.

In the majority of cases, the true motive of these companies — especially those that are listed on international stock markets — is to prop up share prices.

Allow me to recount a personal experience to demonstrate how some of these companies play the game. As we know, the biggest news in Kenya right now is the reported discovery of rare earth minerals and niobium in Mrima Hills, Kwale County where the company, Cortec Mining Kenya, has been given a special mining licence.

Who is Cortec Mining Kenya Ltd? Pacific Wildcat Resources Corporation, a company listed on the Toronto Stock Exchange, owns 100 per cent of two UK-based companies — Sterling Ltd and Cortec Pty, which in turn owns 70 per cent of Cortec Mining Kenya.

A few weeks ago, the locally-based managing director of the company, South African David Anderson, put out a press release in which he claimed that lab tests had established a potential grand value of $100 billion of rare earths and niobium at Mrima Hills.

Mr Anderson announced that — following the tests — the value of rare earths in Mrima Hills was now estimated at $62.4 billion while niobium deposits in the area were estimated at $35 billion. Within mining circles, the claims were greeted with scepticism.

I decided to go to the web site of the Toronto Stock Exchange to establish the financial capacity of the company and see how much money they had committed to exploration activity in Mrima.

Locally, these companies can make any claim and exaggerate situations as they choose. But claims they make here in Kenya cannot be repeated at Toronto Stock Exchange where the standards of what you say are stricter.

So, I decided to test the claims of big discoveries in the local press by sending questions to the chaps based in Canada.

I e-mailed the following questions to the Toronto-based chief executive of Pacific Wildcats Corporation, Mr Darren Townsend.

First, from the filings you have made to Toronto Stock Exchange and from cash flow statements in your accounts, it is clear that you have not spent much on actual drilling activity in Mrima Hills. Confirm of deny.

What is the basis of reporting discovery of billions in the Kenya press when you admit in the filings to the TSX  that  commercial extractability have not been proved beyond doubt? 

Finally, is managing public expectations a big priority for your company: aren’t you concerned, for instance, that the exaggerated claims made in the Kenya press can stoke up isolationist, even secessionist feelings among the coastal people of Kenya?

Mr Townsend did not answer the questions. As a publicly quoted company, he said, Pacific Wildcat was bound by laws that prevent selective disclosure of information.

But I was surprised when on Saturday last week, the company made an announcement on the Toronto Exchange basically retracting the exaggerated claims that appeared in the local press.

“There is no certainty that all or any parts of the estimated resources of the Mrima Hill project will be converted into mineral reserves,” the statement said.

Balala must keep all mining companies on their toes.