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New mining Act leaves royalties issue pending

Miners in the country will continue paying the old mineral royalties until a study is completed, despite the recent enforcement of a new mining law.

Mining Cabinet secretary Dan Kazungu yesterday said the ministry has contracted audit firm Deloitte, to conduct a study on new royalty percentages for different minerals found in the country.

The study is expected to be complete by end of July, Kazungu said, to pave way for Treasury and parliament approvals before it is passed into law.

“We want to get it right so that people don’t get excuses to smuggle minerals. We want something that is attractive and competitive to investors. We must have something that will not scare investors but make Kenya a mineral investment hub,” Kazungu told the Star in an interview.

This puts investors in a wait-and-see situation after a long battle with the government over royalties, with state keen on setting higher percentages to reap more from the sector.

The dispute was initiated by a legal notice issued by former Mining CS Najib Balala in August 2013, stating that royalty rates had been increased from below 2.5 per cent to over five per cent for most minerals.

Kazungu said the government will involve miners in the new royalty structure to be defined in the Mining Act.

Previous plans by the state to increase the royalties have been resisted by major firms like Base Resources which mines the Kwale mineral sands.

Yesterday, Base Titanium confirmed it is in talks with the ministry.

The Australian firm had last year agreed to revise the royalty, proposing a formula for doubling the rate to five per cent for the first five years of operation. “The talks are ongoing and we hope to reach a good outcome soon,” external affairs general manager Joe Schwarz told the Star on the phone.

President Uhuru Kenyatta assented to the Mining Act 2016 on May 6.

Kazungu said the new guidelines are the “most progressive mining laws in the continent”.

It outlines revenue sharing, giving 70 per cent to the national government, 20 per cent to counties and 10 per cent of mineral revenues to community where the mining operations occur.

Under the new law, the government will get a 10 per cent free carried interest while Kenyans will own 20 per cent of any locally listed mining company.

The Star



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