October 3, 2013 / 2:12 PM / 4 years ago

Base Resources ready for titanium mining in Kenya after delays

* Coastal project has been delayed since 2006

* First export of minerals by year-end

* Kenya raised mining royalties to reap more from sector

By Joseph Akwiri

MOMBASA, Kenya, Oct 3 (Reuters) - Australian mining concern Base Resources expects to launch its long delayed $305 million Kenya titanium project shortly and export minerals before the end of the year.

It would be Kenya's first large-scale international mining project but has been delayed since 2006 due to financing issues, environmentalist protests, disputes with local farmers over compensation for land and protracted government red tape.

When completed, the project south of the Indian Ocean port and tourist city of Mombasa is expected to produce 330,000 tonnes of ilmenite a year, about 10 percent of world supply.

The mine will also churn out 80,000 tonnes of rutile per year, representing 14 percent of global output, and a further 30,000 tonnes of zircon. The minerals are used as pigment in paper, plastics, ceramics and titanium metal.

"We are in the final stages of testing the plant, and we shall soon be making a public announcement when we begin mining," external affairs manager Simon Wall told Reuters, adding that preparations were about 90 percent complete.

Mining and concentrate production will start soon and the first shipment of minerals is expected to take place before the end of the year, said project general manager Joe Schwarz.

Named Kwale Mineral Sand, the project is funded through a combination of debt and equity with lenders including commercial banks and development financial institutions, and has an estimated life span of between 11 and 14 years.

It is forecast to rake in gross sales of about 130 billion Kenyan shillings ($1.50 billion) over its lifespan and yield an estimated net present value of 39.5 billion shillings, at a time when east Africa's largest economy is seeking to derive a bigger share of earnings from its mining sector.

Kenya in August unexpectedly raised royalties payable on mineral production after a sector-wide review, although the country's mining sector remains a relatively small contributor to national output compared to horticulture and tourism.

Kenya also has gold and coal deposits, and a subsidiary of Canada-based minerals and metals firm Pacific Wildcat Resources is scouring the coastal region for niobium, which is used to make alloys for jet engines and to strengthen steel.

Wall said he expected the project would transform the local and national economy, mainly through taxes and royalties.

"The main challenges right now are to complete construction, ensure successful testing and commissioning of plant and equipment, train plant operators and achieve rapid ramp-up to full production," said Schwarz.

$1 = 86.7500 Kenyan shillings Writing by James Macharia; Editing by Mark Heinrich

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