KENYA: Kenya's Kwale mine to encourage foreign and local investments

Record ID: 362328

  • Title: KENYA: Kenya's Kwale mine to encourage foreign and local investments
  • Date: 16th August 2012
  • Summary: MOMBASA, KENYA (AUGUST 15, 2012) (REUTERS) VARIOUS OF MINING SITE/CRANE REMOVING EARTH VARIOUS OF AUSTRALIA'S BASE RESOURCES COMPANY STAFF ON THE SITE CRANE MOVING EARTH INTO TRUCK VARIOUS OF AUSTRALIA'S BASE RESOURCES COMPANY STAFF SHOWING TITANIUM DEPOSITS IN THE GROUND 5 TRUCK MOVING AT MINING SITE (SOUNDBITE) (English) TIM CARSTENS, MANAGING DIRECTOR OF BASE RESOUR
  • Embargoed: 31st August 2012 13:00
  • Keywords:
  • Location: Kenya
  • Country: Kenya
  • Topics: Business,Industry
  • Reuters ID: LVACAQ2RZ5THBBFPG3KATSLJBV45
  • Story Text: Kenya's first ever large-scale mine, operated by Australia's Base Resources, will start output in the third quarter of next year, potentially spurring further investment into the country's underdeveloped mining sector.
    The $300 million mine at the east African nation's coast, will supply 14 percent of the world's rutile when it is fully operational, earning $2.3 billion in sales over a 13-year life and adding 0.8 percent to Kenya's gross domestic product.
    The mine will also produce ilmenite and zircon, minerals whose price have more than doubled since last year on the back of Chinese demand.
    Situated on a 3,500 acre lease, the Kwale mineral sands mine is expected to create 350 full time jobs and earn the government $350 million in taxes and royalties during the mine's lifespan.

    "Kenya has had a mining industry for a long time but it has been a small scale, largely artisanal, mining industry... Kwale really represents that flagship mining project that Kenya's government needed to kick start the mining industry," said Tim Carstens, managing director of Base Resources.
    Authorities concluded in the 1970s that the country did not have any mineral endowments, opting to focus on farming, tourism, industries and financial services.
    But miners now believe it harbours mineral sands, coal, gold and iron ore deposits because it shares the same geological formations with neighbouring Tanzania, a significant producer of gold.
    If the Kwale project is successful, the mining industry and Kenya's government hope it will prove to be a catalyst for further investment by foreign and local companies.
    African Barrick Gold in July said it was acquiring a licence to prospect for gold in western Kenya.
    Interest in the country's resources was enhanced in March when British oil explorer Tullow Oil announced significant oil finds in the northern county of Turkana.

    "There is no question that Kenya has a mineral potential. I don't think that has been recognised for a long time but that certainly seems to be changing," Carstens said.
    Base Resources plans to start drawing down its $170 million debt facility with a syndicate of six lenders towards the end of this year, Carstens said, as part of the Kwale financing package.
    The company raised a further $160 million from equity markets last year, deploying the cash into ongoing construction of an access road to the mine, a dam, a dedicated port facility and a 132 kv power line.
    Carstens said the mine had already secured customers for its rutile, which will account for 51 percent of its revenue, and ilmenite, which will bring in 22 percent of revenue.
    The price of ilmenite surged from around $100 per tonne at the start of 2011 to $300-$400 per tonne for delivery in the first half of 2012.
    Carstens said demand for rutile, used for making paints, and Zircon, vital for creating tiles and ceramics, has grown in recent years on the back on new markets like China.
    He added that Zircon, which is expected to rake in 27 percent of the firm's revenue, might be sold through a trading desk.
    Carstens also warned any worsening of the global economic outlook could spoil the mining party for Kenya, especially if explorers and project developers are unable to raise funds for activities.
    The Kwale project, which was first started in 2006 by Canada's Tiomin, ran into difficulties when financing for the project fell through.

    "Seeing a project like this successful will go a long way towards giving some of the existing funds in Kenya the confidence to look at some of the next generation of mining projects," he said.
    An attempt to transfer the ownership to China's Jingchuan also failed, before Base Resources stepped in. Carstens said local capital participation was required to help the mining industry take off.
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