“This transaction is extremely important for Tiomin and removes the cloud of uncertainty that has driven the shares to cash value. Jinchuan is a very strong partner and we are confident that the project will be under way as soon as possible provided that we close satisfactorily,” says Tiomin president and CEO Robert Jackson.

Jinchuan’s investment will entitle it to a 70% interest in TKL and, through its shareholding, the project. Under the terms of the MoU, Jinchuan will procure all financing, on normal commercial terms, to develop Kwale.

Jinchuan will provide or arrange on commercially acceptable terms the balance of the financing required by TKL for the construction, development and daily opera- tion of Kwale.

On commencement of commercial production, all net cash flow generated by Kwale will be used to repay the outstanding loans provided by Jinchuan.

The transaction is subject to certain conditions, including definitive documentation, which is expected to close by no later than November 1, this year.

Since declaring force majeure to the government of Kenya, Tiomin has considered various alternatives to finance and develop Kwale. The proposed transaction optimises the rate of return to Tiomin’s shareholders and restores significant value to an asset that investors have assumed has zero value.

Tiomin finance director Jim O’Neill tells Mining Weekly that the major challenge has been a lack of urgency by the Kenyan government to meet its obligations regarding access to land, infrastructure improvements and various licensing issues, as well as resolving the issue of resettlement of the communities to be affected by the project.

Kwale is expected to produce 330 000 t/y of ilmenite, 75 000 t of rutile and 40 000 t of zircon a year, generating over $40-million in pretax operating cash flow (excluding capitalised financing costs) for the first six years over an expected mine life of about 11 years.

He adds that the postelection violence and disruptions in Kenya have also had a negative impact on international investment sentiment towards Kenya.

“The political disruption clearly delayed an already slow process. “However, the Kenyan government is now making progress on its tasks, which should improve Tiomin’s ability to get other potential investors interested in the project again,” says O’Neill.

He reiterates that the company believes that Kwale is a viable project and that there are obvious risks associated with any new mine and a construction timeline of 18 months.

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