17 October 2013

Kenya: Is Kenya Friend or Enemy of Miners?


THE Mining Business Investment conference starts today.

Kenya now has the opportunity to become a major mining player but is the government an enemy or a friend?

Base Titanium in Kwale is the first world class mining investment in Kenya. Rare earths will be mined at Mrima Hills and giant Barrack Gold is exploring western Kenya.

Unfortunately government is constantly moving the goalposts. Last year then Mining minister Chirau Mwakwere said all miners had to have 35 per cent local investors.

Now the draft Mining Bill says that miners have to surrender 10 per cent of their equity to the state. It has raised royalties on gross sales to 2.5 per cent for gold and 10 per cent for rare earths.

Combined with corporation tax, a miner in Kenya will now pay over 50 per cent of his revenue to the state.

But in Australia, the world's biggest mining nation, the state only takes 40 per cent. In Madagascar, the state only takes 30 per cent.

Mining Secretary Najib Balala should benchmark Kenya against other competing nations. He should pitch mining royalties at slightly below the international average to attract investors.

Otherwise international mining investors will run away and the Kenyan mining industry will never take off.

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