ASX-listed mineral sands developer Base Resources reports that it is on sched- ule to start production at its $300-mil-lion Kwale mineral sands project, in Kenya, about 50 km south of Mombasa, before year-end.

“Construction at the Kwale project is more than 85% complete, with the production and shipment of a high-value assemblage of rutile, ilmenite and zircon minerals on schedule for the latter half of 2013,” Base Resources MD Tim Carstens tells Mining Weekly.

He says that the successful commissioning of the project will be a first – not only for the company but also for Kenya’s fledgling resources sector.

“Kwale represents the first major foreign direct investment in Kenya’s resources sector and, as such, is of strategic significance for Base Resources and Kenya,” emphasises Carstens.

Further, he expects the project will boost the Kenyan economy by $300-million through taxes and royalties over its 13-year mine life, providing significant economic growth and social development in the area, as well as a strong foundation from which to build Kenya’s mineral sector into a growing contributor of the national economy.

Carstens highlights that even prior to the start of production, the benefits of the project are already evident in the areas of local economic development, job creation and infrastructure development.

“Base Resources is committed to supporting long-term, sustainable economic development for the local communities. Working with local small, medium-sized and microenterprises, the Kwale project has injected about $80-million into the Kenyan economy through the procurement of goods and services from local vendors.”

Carstens says the project created about 2 000 positions at peak construction and will have a permanent workforce of about 350 during normal production.

He adds that the company is aiming for its permanent workforce to initially comprise about 70% local employees from surrounding communities, of which 90% will be Kenyans.

“We developed a focused local employment programme that sets a high benchmark for local recruitment best practice. As part of this programme, more than 11 000 job seekers from the local communities have been registered and their skills assessed,” Carstens asserts.

The company has invested significantly in the required supporting infrastructure for the project, including an 8 km sealed road linking the mine to the coastal highway, a 14 km 132 kV power transmission line, an eight-million-cubic-metre-capacity dam and a dedicated product receiving, storage and shiploading facility at Likoni port, in Mombasa, Kenya’s second-largest city.

In addition, Carstens says Base Resources is contributing to the community through funding local infrastructure projects, with more than $1-million already invested in education, local access roads, health facilities and water supply.

Challenges

“While the process has not always been plain sailing, the Kwale project has, on the whole, enjoyed strong support from the government of Kenya,” Carstens recounts.

In October 2012, when Kenya introduced a 35% local equity participation regulation, the company’s share price dropped by more than 50%.

However, he says Base Resources clarified the matter with Kenya’s attorney general, Githu Muigai, who, in January 2013, confirmed Base Resources’ legal interpretation of the matter, which was that the equity participation regulation could not be applied retrospectively to the company’s special mining lease.

Moreover, Carstens explains that the regulation does not apply to the Kwale project; the company nonetheless remains committed to encouraging local equity participation.

“The way to do this without eroding shareholder value and discouraging future investment in Kenya’s resources sector is for would-be local investors to buy shares in the company. When the Nairobi Securities Exchange listing rules allow it, Base Resources will pursue a local listing to further facilitate local equity participation,” he states.

Additionally, there is the outstanding matter of the cancellation of three exploration licences, held by TSX-listed Tiomin Resources, which are subject to an option agreement with Base Resources.

The exploration licences cover the Kilifi project, near the Goshi river, the Mambrui project, located north of the town of Malindi, and the Vipingo project, all situated along the coastline north of Mombasa, on which Base Resources has been conducting drilling, metallurgical testwork and evaluations for more than a year.

Carstens notes that Base Resources is pur- suing its rights to continue with these activities through legal arbitration and is expecting a positive outcome.

“Base Resources has established its credentials in Kenya and has built up an experienced team in the country. “Owing to our record in the mineral sands environment, it would make sense for us to pursue other advanced mineral sands exploration projects,” he concludes.