Kenya increases mining royalties, revokes some licenses

August 7, 2013

In a move that came as a surprise to the mining companies operating there, Kenya increased royalties on minerals produced there and revoked certain mining licenses to get a bigger share of earnings from its mining sector on Aug. 5, Reuters reported.

Mining Secretary Najib Balala said the country had recently completed a review of its mining sector to find ways to ensure the country got a more favorable deal from its mineral resources. The country is home to deposits of titanium, gold and coal and its mining sector, while still small, also has promise.

Kenya's action follows measures in Tanzania, Africa’s fourth-largest gold producer, which passed new mining legislation in 2010 to raise royalty payments on gold exports to 4 percent of gross value from 3 percent of netback value.

The Tanzanian government has also said it would consider windfall taxes on mining companies if they reap huge profits from the commodities.
In Kenya, in addition to royalty increases, the government has revoked all mining licenses issued in the months before and after March's elections.

Balala said he was cancelling prospecting and mining permits issued from Jan 14 to May 15 this year, a transition period when some ministers from the old government quit their positions and parliament was dissolved.

Royalties on gold, of which Kenya is a relatively small producer, would increase to 5 percent of gross sales value from 2.5 - 3 percent, Balala said.

For rare earth, niobium and titanium ores, royalties would rise to 10 percent of gross sales value for from 3 percent previously. Royalty rates for other extracted minerals would vary between 1 percent and 12 percent, Reuters reported.

Drilling charges have also been hiked by at least tenfold, a government document detailing new mining charges showed.
“We want to ensure the country gains from the mineral potential,” Balala told a news conference.

The Kenya Chamber of Mines said industry players had not been consulted before the declaration and the body was examining the regulations governing the sector.

Kenya has more than 300 local and foreign firms prospecting for minerals or producing on a small scale, up from less than 30 two years ago, according to the Chamber of Mines.

The new measures do not affect the oil and gas sector, where a number of discoveries have led to a scramble by oil firms keen for a piece of the action. London-listed Tullow Oil last week said a new drilling success confirmed the commercial value of Kenyan fields.

 

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