The fledgling titanium mining industry in Kenya has hit a new snag following the cancellation of some of the licences held by Australian company Base Resources.

Environment and Mineral Resources Minister Chirau Ali Mwakwere revoked three of the four licences held by the company on the basis of nonperformance.

The cancelled licences cover an area of 113 km2 in Kilifi, Mambrui and Vipingu, where Base Resources has been conducting drilling and metallurgical testwork and evaluation over the last 18 months.

Mwakwere says he revoked the licences because the company had contravened Kenyan law, which requires prospecting companies to submit detailed quarterly progress reports to the commissioner of mines.

Prospecting companies are also required to submit detailed expenditure statements.

Base Resources, which is also undertaking another titanium mining project in Kwale, has vowed to contest the cancellation of the licences in court.

“The company is taking the appropriate legal action to protect its rights,” says MD Tim Carstens.

He is adamant that the company is in full compliance with the terms of the licences and that it has submitted all the required quarterly activity reports.

“Further, the company had these three licences successfully renewed in 2011 and 2012 . . . and sees no legal basis for the Government Gazette notice purporting to cancel the licences,” he says.

While the revocation of the licences does not affect the Kwale project, which is covered by a 21-year special mining lease, it adds to the many controversies, turns and twists surrounding the nascent titanium mining industry in the East African nation.

Bases Resources, which is listed on the ASX, entered Kenya in 2010 after acquiring the licences from Canadian firm Tiomin Resources, which had been granted the mining rights way back in 1998 but could not undertake the project owing to financial difficulties, environmental concerns and compensation for landowners, besides other issues.

Base Resources is gearing up to embark on commercial operation of the Kwale project, which is estimated to be holding about 15% of the world’s titanium resources, representing some 3.2-billion tons of titanium.

The company expects to produce an annual average of 330 000 t of ilmenite, about 10% of the world’s supply; 77 000 t of rutile, which represents 14% of global output; and 37 000 t of zircon.

On the acreage of the three cancelled licences, tests had established that the blocks contained about 950-million tons of mineral sands such as rutile, zircon and ilmenite.

The cancellation of the licences, which also affected other companies – both local and international – comes at a time when Kenya is carrying out extensive reforms of the mining sector to make it a critical driver of economic growth.

Currently, mineral commodities account for a paltry 1% of the gross domestic product, but the country is targeting at least 10% over the next three years. In 2011, Kenya, East Africa’s largest economy, earned $215-million from the mining sector, compared with $176-million in 2010.

Among the reforms being proposed is a requirement that foreign companies licensed to undertake prospecting and mining activities cede at least 35% of their shareholding to locals.

There are also plans to establish a Kenya Mining Investment Corporation, which will oversee the promotion of new investments in the mining sector, and a Kenya Geology, Minerals and Mining Authority, which will be responsible for the regulation of activities in the sector.