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Kenya to embark on massive exploration campaign to spur mining investment, economic development

6th March 2015

By: Henry Lazenby

Creamer Media Deputy Editor: North America

  

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TORONTO (miningweekly.com) – With a new regime in power, Kenya is raring to embark on a $70-million State-sponsored exploration drive to spur mining investment and the inevitable economic development that follows mining progress.

Kenya’s first Cabinet Secretary for Mining, Najib Balala, told Mining Weekly Online that with a mandate from the people of Kenya, government had set out to acquire national geological data through an aeromagnetic survey to be carried out as soon as its new Mining Code came into force.

The data collected would be housed in the country’s new geodata bank and would improve access to information for investors.

The country would also launch the only internationally accredited mineral certification laboratory in the East Africa region to provide critical mineral analytical services. The laboratory would provide qualitative mineral analytical services, certify minerals, identify various precious and semiprecious minerals, carry out research on mineral analytical techniques and provide assay and lapidary services.

Together with the national geodata bank, which would house the national mineral and geological data, the newly formed ministry launched its automated mineral licensing system in February, through the advanced online mining cadastre portal. This system would increase the efficiency and transparency in granting mineral rights and concession management, Balala said.

MOVING AHEAD
He pointed out that Kenya had recently celebrated 50 years of self-governance.

Kenya had a democratic system of governance with its parliamentary politics being characterised as open, free, fair and highly competitive. In August 2010, Kenya promulgated a new Constitution that established a national government, headed by the President, as well as a county-governing structure headed by governors. The country now had a bicameral Parliament with the Senate and National Assembly.

According to the Kenya National Bureau of Statistics, the country boasted a population of about 44.35-million people with a large percentage of its population living in the capital Nairobi.

Since its independence, Kenya had followed a mixed economic development strategy aimed at attracting foreign direct investment.

By implementing its most recent national development plans, Kenya had remained a regional hub for trade and finance in East Africa.

Kenya was strategically located in the region with a seaport capable of handling post-Panamax vessels, an extensive manufacturing base, excellent resources for agriculture and tourism, a highly skilled industrial workforce and a status as the international air transport hub for the region.

The country’s industrial activity was concentrated around the three largest cities, Nairobi, Mombasa and Kisumu; however, the devolution of government was expected to rejuvenate county commercial centres.

Kenya had outperformed other economies in sub-Saharan Africa and was now the ninth-largest economy in the region. Gross domestic product growth (GDP) rates had been above 5% for the last five years and as of 2013, Kenya’s GDP per capita was $1 246, with gross national income per capita at $2 780.

Balala stressed that it was still early days for the new Kenyan mining industry and, with further exploration and the uptake of mineral rights, he estimated that Kenya would have the capacity to position itself as a regional mining sector hub for Eastern Africa.

MINERAL WEALTH
Kenya was currently the third-largest producer of soda ash in the world and the seventh-largest producer of fluorspar.

On the metals side, the country currently produced titanium, gold and iron-ore. Export statistics for Kenya had indicated a constantly growing sector. In February last year, for instance, Kenya exported 25 000 t of titanium ore; however, it expected that with increased development, the country could contribute substantially more to the yearly global market.

Balala advised that Kenya had recently announced that it had world-class deposits of rare-earth elements in its coastal region. The recent discoveries were estimated to be worth $62.4-billion and could propel Kenya to the list of top five countries with rare-earth deposits in the world.

Further, the country had the world’s top six deposits for niobium. Commercial deposits of coal had been discovered in the north-eastern region of the country and were currently under review for potential uses and production.

Several global mining companies had active operations in the country, including Tata Chemicals Magadi, Kenya Fluorspar Company and Africa Diatomite Industries.

Kenya has sizeable deposits of limestone, marbles and dolomites mostly used in the cement manufacturing and construction industries.

Acacia Mining (formerly African Barrick Gold) had in October 2012 acquired the Aviva Corporation interest, in the Bumbo base metal prospect of western Kenya, through a joint venture with AfriOre International, a subsidiary of Lonmin.

The project comprised 2 800 km2 of the Ndori greenstone belt, which previous exploration had identified as holding significant potential for gold, as well as copper, lead and zinc. Acacia Mining would focus on advancing knowledge of the three primary locations where potential gold systems and base metals deposits might exist, Balala explained.

COLONIAL LEGACY
Initially, the country was mapped as an agricultural zone and this led to reduced exploration for minerals, he said.

“The country is vastly underexplored for minerals and its mining sector is currently dominated by the production of nonmetallic commodities,” Balala highlighted.

A new government came into power during 2013, the year when the Department of Mining was first established. Previously, mining was under the control of the Department of Mines and Geology, which was established in the 1940s. The current law, also dated from then, was established by the British. However, a lot of the active mining industry left with the British, when Kenya gained independence in 1963.

Balala noted that previous governments had failed for 20 years to review the Mining Code, but since he was appointed to the portfolio, he had been able to move the proposed legislation through the National Assembly within one-and-a-half years. It was now awaiting Senate approval, which was expected imminently.

He explained that the Bill would establish a 10% free-carried interest for the government in all mining projects.

The new Constitution was unique in that while it mandated government to manage natural resources on behalf of the people, any income generated from its interests was required to be spent on public programmes and precluded from government revenues.

Balala conceded that to implement this system, a lot of accountability was called for.

“The money we receive as royalties is not ours, we are just entrusted with it as national government. Transparency would be driven through a public online portal, which would work in tandem with the online cadastre,” he noted.

The Bill would also establish the National Mining Corporation that would supervise the country’s mining industry. An important aspect of the Bill was that artisanal miners would be pulled into the fold, which would, for the first time, regulate and support their industry while protecting companies’ and individuals’ tenements.

Balala added that Kenya had a liberal regime on profit repatriation, a vibrant stock exchange and trade agreements in place, making the country an attractive investment destination.

Since he was appointed to the mining portfolio, the government’s royalty income had swelled from about C$200 000 a year, to about $10-million, merely because compliance was enforced among industry participants.

STEPS FORWARD
Balala said several developments in the sector would make Kenya a more attractive destination for mining investments.

Most important was the establishment in 2013 of the first Ministry of Mining, of which Balala was appointed Minister to lead the industry’s development.

One of the most critical objectives was to intensify efforts to acquire mineral and geological data. A countrywide aeromagnetic survey project was expected to start soon to acquire geologic data to spur mining investment. A contract for this work had been awarded to the Chinese Geological Institute, a noncommercial entity and government body, which would work under the supervision of an independent panel to ensure the quality of data acquired was up to international standards.

Further, the ministry had also upgraded data acquisition and processing systems, which was expected to simplify access to national geological data for investors.

As part of its own economic development, as well as its commitment to the African Union’s African Mining Vision (AMV), Kenya was busy implementing several critical infrastructure development projects as a key economic pillar in Kenya’s Vision 2030, the nation’s development blueprint. As part of the country’s commitment to the AMV, Balala had submitted a bid for Kenya to host the African Mining Development Centre, which had received the backing of several sub-Saharan countries, he said.

The country was investing heavily in infrastructure projects that, collectively, would ensure that mining operations’ costs were reduced over time.

In Kenya, prospecting licences were typically valid for one year and subject to renewal for a maximum of five years, within which a company had to demonstrate exploration progress, or cede the claim for someone else to develop further.

Mining leases, on the other hand, could be issued for between 5 and 21 years. Leases could be renewed for up to 21 years.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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