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Untold story of Kenya’s biggest mining contract

By Standard Team | August 7th 2013
Mining Cabinet Secretary Najib Balala. (Photo:Standard)

By Standard Team

Kenya: A director of Erad Suppliers seeking to auction assets of the cereals board over a Sh600 million debt owns shares in a mining firm whose licence was cancelled on Monday.

Documents in the possession of The Standard show that Mr Jacob Juma owns 30 per cent of Cortec Mining Kenya, a subsidiary of Canadian Pacifi c Wildcat Resources (PAW), a mineral exploration company.

Cortec Mining received the licence from the Government on March 26, the same day that the Supreme Court began hearing a petition by former Prime Minister Raila Odinga against the March 4 election of President Uhuru Kenyatta.

The licence was issued even as Kenyatta, then President-elect, ordered all ministers and Permanent Secretaries in the former Grand Coalition Government not to approve any contracts or licences on behalf of the incoming Jubilee government.

Cortec is among 31 mining firms whose licences were revoked by Mining Cabinet Secretary Najib Balala on Monday.

And it is now emerging that the discovery of niobium and rare earths in Kwale is at the centre of the cancellation of mining licences, The Standard has established.

Just a few days prior to its licence being cancelled, Cortec had announced the discovery of niobium and rare earths minerals whose value it estimated to be more than Sh51.2 trillion.

Managing Director David Anderson claimed the mineral find is the world’s sixth-largest reserve of the rare metal with a mine-life of up to 18 years.

Rare earths is used in modern technology including cars, phones, diode lights among others. Niobium is specifically used to make alloys for jet engines and to strengthen steel.

But Cortec has been in the crosshairs of government especially given its ownership structure and the nature of its licence.

A list of cancelled licences from the ministry singles out Cortec and another nondescript firm — Wanjala Mining Company Ltd — as operating under a special mining licence described as “the first of its kind.”

In documents filed with the National Environmental Management Authority (Nema) and signed by Juma — and which are also in our possession — two UK firms jointly own 70 per cent in Cortec, while Juma owns the remaining 30 per cent.

This would put his share of earnings from the mine before statutory deductions at about Sh15 trillion, going by the value of the mine according to Cortes’s estimates.

The firm was issued with a Special Prospecting Licence (SPL), number 256, for about 610 square kilometres in Mrima Hill. It was initially issued for a two-year period from April 1, 2008 to March 31, 2010.

The licence was renewed for two more years to March 31, 2012. However, in December 2011, the SPL was further renewed for a period of three years until December 1, 2014.

In announcing the cancellation of the licences on Monday, Balala noted that the months between January and May were a transition period and major policy decisions could not have been arrived at as Parliament had been dissolved, and there was no substantive Cabinet and Minister to oversee the licensing.

Balala also suspended Commissioner for Mines and Geology Moses Masibo on allegations he overstepped his mandate.

The production of rare earths is expected to average between 2,900 tonnes and 3,600 tonnes of niobium concentrate per year.

Cortec identified four potential sites for the construction of the processing plant in Kwale County, including Kiruku Hill, Mwanguda, Kikoneni near Ramisi and Mwabovo on the foot slopes of Mrima Hill Forest Reserve.

The company estimates that at a production rate of 60ktpm (thousand tonnes per month), the mine will last about 20 years.

World production of this mineral grew to 100,000 metric tonnes in 2009. According to the British Geological Survey, Brazil produces about 95 per cent of output, followed by Canada.

The Kenya Chamber of Mines says more than 300 local and foreign firms are now either prospecting for minerals or producing on a small scale, 10 times as many as three decades ago.

Questionable circumstances

And most of the licences were issued under questionable circumstances to unqualified people and companies. The licences were allegedly awarded after the dissolution of the 10th Parliament, with Balala saying that there was no proper legal framework for the process.

Also revoked were all licenses of mining companies that are registered under the Export Processing Zone Authority. The companies were allegedly operating under the Export Processing Zones Authority (EPZA) to evade taxes.

Balala also revealed that royalties on minerals have been increased from August 1, 2013.

Firms that have been affected include Carbacid to extract carbon dioxide gas in Uasin Gishu, Madini Mining Company to prospect for iron ore in Kwale and Anglo African Resources to prospect for industrial minerals in Kilifi and Kwale.

Others include Dangote Quarries Kenya, Nobis Company, African Live Transport and Mineral Ventures, M-Benisa Ltd that prospected for precious and non-precious minerals in Kwale, Julius Gatimu Waithaka prospecting for gemstones in Kwale, Potterman Enterprises for non-precious metals in Kwale and Robert Lee-Steere East Africa prospecting for all minerals in Turkana.

Four of the revoked licences were issued as “Mining Licence under Mining Locations” and the rest, “Exploration Under Special Licence”.

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