MAC: Mines and Communities

Canadian mining company uses UK subsidiary to sue Kenya

Published by MAC on 2015-06-22
Source: The East African (2015-06-22)

In yet another case of international arbitration involving mining companies, a Canadian mining company, Pacific Wildcat Resources, has used its UK subsidiaries to sue Kenya under the UK-Kenya bilateral investment treaty.

Canadian miner sues Kenya at US court for cancelling licence

By Kennedy Senelwa, TEA Special Correspondent

The East African

20 June 2015

Pacific Wildcat Resources, a Canadian mining firm, has instituted an international arbitration against Kenya for cancelling its licence for the exploration and development of minerals in Mrima Hills, Kwale County.

UK firms Cortec Pty Ltd and Stirling Capital, its subsidiaries, have jointly filed a request for arbitration against Kenya at the US-based International Centre for Settlement of Investment Disputes (ICSID).

In 2013, Kenya's Mining minister Najib Balala revoked the licences of Cortec Mining Kenya (CMK) and other mining firms on grounds that they were irregularly issued just before the General Election.

Pacific Wildcat, which fully owns Cortec Pty and Stirling, the majority shareholders of CMK, claims the Kenyan government unlawfully expropriated its investments and breached the UK-Kenya Bilateral Investment Treaty's obligation to treat them fairly and equitably.

The Toronto Stock Exchanged-listed firm will be represented by London-based law firm Clifford Chance.

CMK chairman Don O’Sullivan said they were surprised at how quickly the climate for foreign investment in Kenya’s mining sector deteriorated after elections in 2013.

“We have not been compensated for the expropriation of our subsidiaries' investments in Kenya and we see arbitration in the international arena as the only avenue left for us to be given a fair hearing and a chance to recover our considerable losses,” he added.

Following the cancellation of its licences to mine nobium and rare earth at the Coast, CMK subsequently challenged the revocation in the Kenyan courts but, after a legal battle that lasted almost two years, the High Court of Kenya upheld the Mining minister’s actions.

In July 2013, Cortec announced it found nobium and rare earth deposits worth $100 billion and estimated to be at least 47.8 million tons and 48.7 million tons respectively.


Outrage as Kenya revokes mining licences over breach of conditions

By Kennedy Senelwa, TEA Special Correspondent

The East African

16 May 2015 

Mining Ministry has revoked licences of individuals and companies, prompting London Stock Exchange-listed Red Rock Resources Plc to issue a warning that the exercise is causing uncertainty in the business environment.

Mining Cabinet Secretary Najib Balala said some licences were cancelled on account of expiry. Mr Balala added that some licences had been surrendered while others were in breach of Mining Act and the licence conditions.

The ministry has benchmarked on South Africa and Australia, which have 5 per cent royalty with a long mining history.

The cancellation of 65 prospecting and mining licences in Kenya has created uncertainty in the nascent industry with the sector's players warning that the move will erode investor confidence.

The Mining Ministry has revoked licences of individuals and companies, prompting London Stock Exchange-listed Red Rock Resources Plc to issue a warning that the exercise is causing uncertainty in the business environment.

The ministry also wants Base Resources Ltd of Australia to pay higher titanium royalties than initially agreed on, with the authorities raising concerns over the sanctity of contracts signed with the government.

Documents seen by The EastAfrican show the 2.5 per cent royalty over the first five years of production was contained in the gazetted rate at the time special mining lease No 23 was issued and Base started exports in February last year.

The Mining Ministry and Base on February 12, 2014 held the initial meeting where an agreement was signed to enter into negotiations to revise the royalty provisions contained in the special mining lease. The ministry has benchmarked on South Africa and Australia, which have 5 per cent royalty with a long mining history.

In Mozambique, Senegal and Sierra Leone, royalty for titanium is 3 per cent. Some investors have threatened to sue the government if efforts to resolve the problem fail.

Mining Cabinet Secretary Najib Balala said some licences were cancelled on account of expiry. Mr Balala added that some licences had been surrendered while others were in breach of Mining Act and the licence conditions.

“Henceforth, any mining or prospecting activities by these persons or companies over the areas that are subject of the revoked licence shall be illegal,” he said in Kenya Gazette Notice No. 3264 of May 8, 2015.

The ministry on March 24 last year wrote a letter to Base stating the royalty should start at 5 per cent and increase annually to 10 per cent. Base next day responded with a proposal of 3 per cent to 5 per cent over 5 years.

The licences revoked include those of Cortec Mining Kenya Ltd that, which is seeking minerals in Samburu, Swenson and Sirmonet Mineral Kenya Ltd, for gemstones in Kwale and Yongtai Mining Company Ltd; for industrial minerals in Kitui.

The list also has Balham Trading Company Ltd that was exploring for gypsum in Tana River; Ololunga Mining and Industrial Ltd with an interest in bauxite in Nandi and AQ Kenya Gold Ltd, interested in gold, nickel and iron ore in Turkana.

Standard & Mutual, a mining consultancy firm said the cancellations had the potential of making Kenya appear as an unstable investment destination before the full potential of its mining industry was tapped.

“The law allows the Cabinet Secretary to cancel licences but how the issue is handled matters, as Kenya is competing for investment with other countries and investors require a predictable environment,” said Cliff Otega, Standard & Mutual’s director of mining and metals.

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