Business Daily (Nairobi)
Jim Onyango
30 October 2009
Kenya's hope for titanium billions were shattered on Thursday after the Jinchuan Group - the Chinese company that was to buy a controlling stake in the mines from Canada's Tiomin Resources -- abandoned the deal, citing lack of full disclosure by the vendor.
Jinchuan, the state-controlled mining giant, said the talks had collapsed because of unnecessary delays which it blamed on Tiomin Resources in the latest setback to hit the project that has had numerous false starts for nearly 10 years since the Canadian firm acquired controlling rights over the mineral deposits in Kwale District.
The entry of Jinchuan into the mining project had raised hopes that it would bring in the money and technical skills needed for the take-off that has been delayed by Tiomin's thin financial backbone.
The Kenya government, which granted Tiomin full rights over the titanium deposits, accused the Canadian firm of using a string of excuses to undermine the takeover talks.
"We have told Tiomin that we are tired of the continued delay. As a government we have done everything possible to facilitate the process but the Canadians keep coming up with flimsy excuses," said Shadrack Kimomo, the chief geologist in the Environment ministry on behalf of the mines commissioner.
But Tiomin accused Jinchuan of acting in bad faith.
"This decision by Jinchuan to terminate the deal two days before closing should be of considerable interest to anyone contemplating a transaction with them," said Robert Jackson, the Tiomin Resources chief executive.
"We find this astonishing given that the Government of Kenya finally delivered on its material commitments to getting the deal done."
Jinchuan pulled out despite having pumped in Sh490 million to sustain Tiomin's Kenya office for nearly five years.
More recently, delays in commencement of mining have been attributed to the failure by Tiomin to acquire a "comfort letter" from the Kenya government as demanded by the Chinese firm.
The letter was to assure the Chinese that Tiomin's rights over the minerals were intact despite the 10-year delay.
Kenya issued the "comfort letter" this week stating its support for the mining project but Jinchuan Group walked out accusing the Canadians of dragging out the sale process.
"We have battled bureaucracy and corruption in Kenya for over a decade and our only remaining concern was to obtain the letter from the government" said Mr Jackson.
Boardroom tussles
"This effectively completed our list of material requirements to close the transaction."
Mr Jackson said Jinchuan's decision to pull out after 15 months, citing a previously un-raised concern of disclosure schedule was puzzling 'and should be of particular interest to other companies and governments'.
Mr Roberts further claimed that Jinchuan interest in the Kwale project was a bargaining chip to get a more favourable titanium supply agreement from elsewhere.
Tiomin, which has faced boardroom tussles with a section of its directors over the offer to sell the firm's Kenyan operations to the Chinese, is likely to face bigger troubles with Jinchuan in the global titanium market.
The Chinese firm has set its sights on acquiring smaller titanium mining firms in South Africa and Ukraine despite holding an 18.5 per cent stake in Tiomin Resources.
Tiomin Resources brewed more controversy yesterday when directors said they would go ahead with a planned shareholders meeting to ratify the planned sale of a 70 per cent stake in Tiomin Kenya to Jinchuan -- having circulated the notice of the meeting early October.
"We intend to proceed with our shareholders meeting to approve the transaction on October 29 regardless of this event," said Mr Jackson.
Opposition to the mining project by some Kwale residents and political challenges have delayed the start of the mining but have intensified since Tiomin was awarded a licence to mine the mineral but the company could not raise adequate funds to start operations in Kwale and even attempts in 2007 to have ATW-Venture Corporation-a Canadian mineral exploration firm to pump in Sh10.8 billion into the mining deal collapsed.
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