Sh7.5bn plan raises mining prospects at Coast Cortec Mining Kenya, a Canadian firm, is planning to convert its special prospecting licence into a mining lease and invest Sh7.5 billion ($88 million) over a period of two decades as it gears to start mining niobium in Kwale District.

The money will be used to set up extraction facilities in Mrima Hill and build a niobium concentration plant within 20 kilometres of the mining facilities for the initial processing of the high-value metal.

Cortec also plans to build a smelter for Ferro Niobium – the final product of the rare earth metal – in Mombasa or another suitable industrial location within Kenya, which will require a separate environmental assessment study before it is approved by the National Environment Management Authority (Nema).

Part of the money – which the firm expects to invest over a 15 to 20-year period – will be used to restore the forest cover on the hill during the life of the project and decommission the project once mining ceases.

The disclosures are contained in a report which is required by Nema to issue a mining lease for the mining project and niobium concentration plant.

“The niobium processing plant would be established within 20 kilometres of Mrima Hill, making this the first plant of its kind in Kenya and the third or fourth largest producer of niobium in the world after Brazil and Canada,” says the company.

Pacific Wildcat Resources Corporation, a Toronto Stock Exchange (TSE) listed firm, has a right to acquire a 70 per cent indirect interest in Cortec, which it expects to settle later this month for about Sh2.9 billion payable in cash and scrip (an extra share in a business issued instead of a dividend).

This is according to a presentation to investors released last month and posted on Pacific Wildcat’s website.

The TSE listed firm, which in January said it had successfully raised about Sh497 million for local and Mozambique mining operations last month, announced that Cortec had discovered rare earth minerals in Kiruku Hill, three kilometres north east of the Mrima Hill project.

Pacific Wildcat’s president and chief executive officer Darren Townsend said that the results had confirmed that Kiruku Hill has the potential for rare earth minerals adding that planning was under way to undertake initial exploratory drilling at this year.

Should the project take off, Kenya’s mining sector which has been growing slowly will receive a much-needed boost by the high value metals and minerals.

The local mining sector – limited to soda ash, fluorspar, salt, diatomite, gold and gemstones – earned the country Sh14.82 billion in 2010 according to the Economic Survey 2011.

Cortec, which says that the Mrima Hill facilities will provide much-needed stimulus to Kwale’s and the country’s economy has been facing an uphill task of ironing out outstanding issues with the local communities in the area and between April and August last year had a series of meetings with the locals.

The company, which is prospecting in one of the poorest parts of Kenya, has disclosed in the report to Nema that issues that have raised contention include area residents’ fear of relocation, exposure to radioactive elements for those living around the proposed project area, destruction of the Mrima forest reserve and loss of the Kaya Mrima cultural shine.

Locals, who have long opposed the use of the opencast mining method as it requires the removal of trees, also felt that the number of jobs to be created is small.

The company has disclosed that it expects a maximum of 50 personnel within the mining area with a skilled to unskilled ratio of 1 to 10.

“There were notions of suspicion by the community about the details regarding the proposed project as well as ongoing prospecting,” notes the report adding that it was agreed that further deliberations be done with the local community to allay their fears and concerns prior to the commencement of the project.

However, according to the presentation to investors, Pacific Wildcat said that Cortec has been able to negotiate a memorandum of understanding with the local community on their concerns.

The setting up of the niobium project is expected to lead to many other businesses springing up at Mrima and its environs to directly support the project and also to meet the needs of the workers and their families.

New infrastructure including roads, electricity and water supply, among others is also expected benefit the local people and the project’s success is expected to diversify and increase the volume of mining in the country to attract more investment into the sector.

“Normally a project of the magnitude as that envisaged for Mrima will create investment chains with multiplier effect anywhere in the range of three times the size of the project.

This will significantly impact positively the economy at local, Coastal and national levels,” notes the report.

Royalties

The precious metals, whose value has been said to be in billions, will also earn the government mining royalties while exports of the final product could also earn the country much needed foreign exchange and contribute to reducing the country’s import bill.

Cortec intends to produce the high-grade niobium and concentrate near Mrima Hill then transport this material to Mombasa or other suitable industrial area within the country for further processing into Ferro Niobium which is the final product suitable for export as well as for use locally in the advanced steel industry.

Niobium, 83 per cent of which comes from Brazil is used in the manufacture of high performance steels such as in aircraft turbine blades, wind turbines, vehicles and ships.

The niobium deposit at Mrima Hill is said to be of a very high grade and ranks amongst the top six in the world.

dmugwe@ke.nationmedia.com

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