Kenya strikes gold with issuance of license

November 23, 2011
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, NAIROBI, Kenya, Nov 23 – The Kenya government has issued its first mining lease commercialising gold exploration in the country after years of prospecting.

The 21-year lease issued to Kilimopesa Gold Limited, a subsidiary of Goldplat (a gold dealer listed at the London Stock Exchange), will see the company put up a mine plant in Lolgorian, Transmara County to process gold for export.

Minister for Environment and Mineral Resources John Michuki said the government recognises the importance of mining as one of the potential drivers of industrialisation that needed to be developed further to make it more attractive to investors.

“The government appreciates the need for geological research and exploration as a means of identifying and assessing the country’s mineral potential,” Michuki said.

Issuance of the mining lease is expected to open Kenya to more applications, especially at this time when demand for gold is at an historic high.

Already, close to a dozen gold exploration firms have set up camp in the country, opening up a prospecting enterprise for Kenyan businessmen hoping to enter into joint ventures in mining. Canadian firm Africa Queens Mines recently acquired a license to prospect for gold in Western Kenya raising stakes in an industry that has caught the attention of multinational firms keen on exploiting precious metal deposits in the region.

Michuki however cautioned that firms seeking to carry out exploration in the country must come out with tangible feasibility studies or risk having their licenses revoked.

“The gold industry is one that is full of intrigues because gold – like any other precious metals – evokes emotions and very high expectations,” the minister said.

Kilimopesa has been exploring in the area since July 2007 and has so far sunk $6 million (Sh540 million) into the mine and the plant and is expected to near double its investment as it seeks to expand its operations.

Kilimopesa Chief Executive officer Mark Austin said empirical studies at the mine, which is currently sunk 60 meters, shows it has the potential for 130,000 ounces of gold, but said their estimates put the reserves at one million ounces of gold as they dig deeper.

The award of the lease will give Kenya a larger foothold of the international gold market that it has in the past decades fed through small-scale mining. The value of gold from the Kilimopesa mines could top Sh60 billion a year in foreign currency at the prevailing prices or more if the surge in gold prices continues, placing the metal among the top revenue earners.

Austin said that the mine is expected to start smelting early next year with a capacity of producing five kilogram gold bullions a month.

The government and Kilimopesa have come up with a revenue sharing agreement where of the royalties charged 80 percent will go to the central government, 15 percent to the county government and five percent to local residents.

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