Titanium project thrown into a spin as Chinese firm withdraws buy offer

By John Njiraini

The controversial titanium mining project in Kwale has been hit by a new wave of confusion after a Chinese company opted out of an agreement to take control of the project from a Canadian company.

Jinchuan Group of China announced it was terminating an agreement to acquire 70 per cent of the project from Canada’s Tiomin Resources, just a day before the deal was to be closed.

Jinchuan said it was "not satisfied with the disclosure schedule" presented by Tiomin as it opted out of the deal, only two months after agreeing to acquire a controlling stake in Tiomin Kenya Ltd (TKL) and invest Sh1.8 billion to develop the project.

Ironically, the decision came only a day after Tiomin obtained authority from the Kenya Government, something that was the last condition before closing of the deal.

"We find this decision astonishing, given that the Government of Kenya finally delivered on its material commitments to getting this deal done," said Tiomin chief executive Robert Jackson in a statement.

He accused Jinchuan of using Tiomin to negotiate for supply contracts elsewhere, and said the company would proceed with a shareholders meeting to approve the transaction, regardless of the development.

Just two months ago, the companies signed an investment agreement that would have seen Jinchuan assume control of the project, dogged by twists and turns since Tiomin discovered huge deposits of titanium in Kwale.

The Chinese company, which is the biggest nickel producer, had committed to finance, develop and operate the venture that has failed to kick off due to controversies and Tiomin’s lack of capacity.

Soil relationship

Consummation of the deal would have seen Tiomin retain a 30 per cent stake, and cease to inject any further capital to the project.

The net cash flow generated would initially have been used to repay project debt, and thereafter net free cash flow was to be re-distributed pro-rata, 70 per cent to Jinchuan and 30 per cent to Tiomin.

The decision by Jinchuan to pull out of the agreement now throws the project into a spin and fuels fears that the project will never take off.

It could also end a relationship between the two companies, which has existed since 2005, when Jinchuan first got involved with the project after it bought 20 per cent of the mining rights at a cost of Sh750 million.

The Kwale project is estimated to hold 14 per cent of the world’s titanium deposits, amounting to 3.2 billion tones, which can be extracted in a span of 20 years.