Kenya to Form State Company to Own Stakes in Mining Projects

Kenya will form a state-owned company that will hold stakes in mines and establish a sovereign wealth fund to manage revenue from the industry, Mining Secretary Najib Balala said.

The government is repealing a law that required at least 35 percent domestic ownership, reducing it to 10 percent that will be held by the government, Balala said in an interview on July 9 in the capital, Nairobi. The new legislation, creating what will be known as the National Mining Corp., is expected to be enacted by November, he said.

“We are waiting for the new bill to be approved by Cabinet and parliament,” he said.

Kenya is the world’s third-biggest producer of soda ash, used in the manufacture of glass, and ranks seventh globally in output of fluorspar, used to make steel, according to the U.S. Geological Survey. The country also has deposits of gold, rubies and sapphires, though the industry represents less than 1 percent of its gross domestic product, according to the African Development Bank.

Investment in natural-resource development trails other countries in East Africa including Tanzania, which is Africa’s fourth-largest gold producer, and Uganda, which found oil in 2006 and may start producing the fuel next year.

Tata Chemicals Ltd., based in Mumbai, India, produces soda ash at Lake Magadi in Kenya, while West Perth, Australia-based Base Resources Ltd. owns the Kwale mineral-sands project in southeastern Kenya and Goldplat Plc operates a gold mine in western Kenya. Cortec Mining Kenya Ltd., a Nairobi-based exploration company, plans to start production at its niobium project in southeastern Kenya by 2016.

Airborne Survey

Balala, who was appointed as head of the newly created Mines Ministry in May, said his priorities as Cabinet secretary include conducting an airborne survey to determine the number of mineral deposits in the East African country.

The government estimates there’s as much as 1.5 billion metric tons of coal in four of 31 exploration blocks in Kitui, eastern Kenya, he said.

Kenya also envisages becoming a minerals-trading and processing hub, Balala said.

“My plan is to have a metal and minerals exchange, to have a gold refinery and exchange in Kenya and also to be a value-addition center for gemstones, iron ore, manganese and the heavy metals,” he said.

Sovereign Fund

The proposed new law calls for the creation of a Mineral Sovereign Fund into which a quarter of mining royalties received by the government will be held for future investment, Balala said. The state is proposing that three-quarters of total royalties go to the national government, 20 percent to county administrations and 5 percent to local communities, he said.

Investors are starting to take notice of Kenya’s potential for mining, Balala said.

“Everybody is streaming into the country and want to know what we have,” he said. “The minute we have the legislation in place and the airborne survey, then we will have a very transparent way of allocating these concessions to investors.”

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