* Minister says bill conforms to best practice
* Kenya unexpectedly raised royalties and revoked licences
* Frequent legal changes a deterrent to investors in nascent
(Adds details and context)
By George Obulutsa
NAIROBI, Oct 17 Kenya plans to claim a 10
percent stake in large mining concessions under a new bill
intended to give the state a greater share in profits from the
sector, Mining Cabinet Secretary Najib Balala said on Thursday.
Successive governments have had little success in trying to
develop Kenya's mining potential, with foreign exploration
companies discouraged by poor infrastructure and an outdated
The government that came to power early this year has tried
to help matters with a new ministry and legal changes, but has
at the same time made clear it wants a bigger slice of revenues
to help ease pressure on the state budget.
"The bill ... envisages there will be a 10 percent free
carrying interest on all larger mining concessions. And this
will be held by government through the national mining
corporation," Balala told a mining conference in Nairobi.
"Free carrying interest" means the government does not
expect to pay for the stakes.
"We are not going to be destructive," Balala said. "We have
gone to the best practice, and we have seen 10 percent free
carrying interest on the large mining companies, and also on
Kenya has proven deposits of titanium, gold and coal and is
also estimated to hold significant deposits of copper, niobium,
manganese and rare earth minerals.
President Uhuru Kenyatta created the Mining Ministry this
year to give the sector more prominence and try to diversify an
economy reliant mainly on tourism and agriculture.
The Chamber of Mines says there are more than 300 local and
foreign firms prospecting for minerals or producing on a small
scale, up from fewer than 30 two years ago.
But analysts say the frequent legal changes have unnerved
foreign mining companies.
In August, Kenya unexpectedly increased royalties on a range
of minerals and revoked some mining licences issued between
January and May, in the period before and after national
Last year it passed a law requiring mining firms to have a
35 percent local shareholding, prompting foreign investors to
warn that it could drive them off. In June, the new government
promised to repeal the law.
"This extreme policy-making volatility has discouraged
investors and is a serious disincentive to global mining
companies," said Aly Khan Satchu, a Nairobi-based analyst who
was at the conference where Balala spoke.
Balala said the cabinet would discuss the new bill when it
meets next Thursday. He said licence holders would be given a
definition in due course of what constitutes a 'large
The Mining Ministry expects to have communicated by end of
November with all those affected by licence cancellations, and
to start reissuing those licences before the end of the year, he
Balala said the new law would also lay out details on how
mining revenues will be shared between the national and county
governments, and also make applying for mining licences more
This month, Australia's Base Resources started
operations at a long-delayed $305-million titanium mine intended
to be the flagship of Kenya's mining expansion.
A subsidiary of Canada's Pacific Wildcat Resources
is scouring the coastal region for niobium, which is used to
make alloys for jet engines and to strengthen steel.
The bill does not affect Kenya's rapidly-growing oil and gas
sector, which is subject to a separate set of laws.
Balala said Kenya also wants to encourage mining companies
to list on the Nairobi Securities Exchange.
(Reporting by George Obulutsa; Editing by Drazen Jorgic and