19 February 2013

Kenya: Local Shareholding Rule Hurting Miners

Gemstones miners are already feeling the impact of the 35 per cent local shareholding rule introduced by Environment and Natural Resources Minister Ali Chirau Mwakwere late last year.

According to Majala Mlagui who represents small scale miners at the Kenya Chamber of Mines, foreigners have shelved plans to partner with locals due to the confusion arising from the requirement.

"We have lost good deals because the rule introduced through a subsidiary legislation has not been fully understood by players in the sector" Mlagui said. "Small scale precious stones and metal miners usually seek capital from foreign equity partners because it is cheaper than bank loans an they are more risk tolerant than locals".

Mwakwere signed the legislation ahead of the mining bill which was at the time before parliament and is yet to be passed into law.The bill is expected to clearly spell out shareholding between foreign investors and locals as well as enhance the constitutional provisions on revenue sharing.

Mlagui said the bill needs wider consultation with investors in the sector to ensure the country reaps from its mineral wealth.She said the uncertainty created by the sudden introduction of the 35 per cent local ownership rule has already dampened the momentum that had been generated by the entry of multinational mining companies into the sector.

"Immediately the rule was introduced we started experiencing problems with prospective investors who would otherwise jump at the opportunity to put their money into the Kenyan mining sector," Mlagui said.

London Stock Exchange listed gold mining company Goldplat early this year announced it had halted its expansion plans in Kenya citing the new law.

Other mining foreign companies that are facing similar dilemma include, Canada's Pacific Wildcat which is involved in rare earth and niobium prospecting at Mrima hills in Kwale, and London listed African Barrick Gold, which is prospecting for gold in western Kenya.

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