Tiomin loses Chinese funding for Kwale titanium project
Published by MAC on 2010-01-19Source: Business Daily Africa
Last year China's State-controlled Jinchuan supposedly rode to the rescue of cash-strapped Tiomin in Kenya. See http://www.minesandcommunities.org/article.php?a=9476
However, Jinchuan has now finally withdrawn from the deal, leaving Tiomin again struggling with its debt - and this much-opposed project once more on the shelf.
Tiomin now abandons Kwale titanium project
Business Daily Africa
30 December 2009
Tiomin Resources has moved to cut losses after suffering setbacks in starting mining operations at the coastal town of Kwale.
The company has said the withdrawal in September of an offer by China's metals producer Jinchuan Group to invest in the mineral sands project, citing corruption and lack of disclosure on the deal, had prompted the firm to write off the project.
"The termination of the Investment Agreement has resulted in a temporary impairment to the Kwale Mineral Sands Project and thus the decision to write off the project," Tiomin said in a statement.
State-controlled Jinchuan had signed an agreement in July 2008 to pay Sh1.8 billion to buy 70 per cent of Tiomin Kenya, a wholly owned subsidiary of Canadian firm Tiomin Resources which holds the licence to prospect the metal deposits in Kwale.
But the Chinese firm pulled out on Tuesday, on the deadline for releasing the money.
In the deal, the Chinese firm was to dig an average of 330,000 tonnes of titanium-bearing ilmenite, 77,000 tonnes of rutile and 37,000 tonnes of zircon a year for 11 years.
The metal is used in making alloy aeroplane parts, gas turbine engines, paints and in medical human implants such as hip replacements and heart pacemakers.
By writing off the project, Tiomin has effectively charged the amount spent on the project to the profit and loss account, effectively devaluing it in the hope of attracting interest from investors.
However, this would also dash Kenya's hopes of generating wealth from the mining project that would have employed more than 1,000 people as potential investors would not take it up as a going concern.
But the company said despite the losses resulting from the inactive Kwale project, it was still in a strong cash position to jump-start the project.
Cash position
"We continue to seek a company-making transaction consistent with our strategy of marrying our strong cash position with producing or near producing assets or particularly good quality late stage exploration properties," said company CEO Robert Jackson.
The latest loss came at the end of the firm's third quarter in which the company posted an equivalent of Sh2.2 billion loss.
Tiomin Resources reported a loss equivalent of Sh577 million for the year ended December 2008. The company made a Sh501 million loss in 2007.
The Canadian firm was issued with a license more than 10 years ago to explore titanium at the Coast but as years go by it is increasingly appearing that the dream to generate wealth for Kenya from the vast titanium deposits may not be realized.
The Canadian miner has not been able to start mining the Kwale and Kilifi titanium fields because of lack of funds.
The company also claims the government has not fulfilled the promise to remove people occupying the land intended for the project.
Shareholders' explosive boardroom battles for the control of the Canadian firm have also diverted attention from the Kwale project. (Business Daily Africa)