The Trading Floor

[Arctec]

Tiomin Kenyan titanium mining project might after all be a white elephant
By: Frank Jomo
Posted: '14-FEB-07 09:00' GMT © Mineweb 1997-2006



MALAWI (Mineweb.com) -- The collapse of Toronto listed Tiomin Resources’ titanium project in Kenya might be nigh following reports that the company has halted development of the Kwale mineral sands project.

A brief statement by the company says the project will be on hold for the next seven months. This is owing to the fact that delays and rising costs forced the project's lenders to withdraw the US$155 million debt facility that was in place for the Project. The company however added that it expected that strong product prices (for zircon and rutile) and reduced capital spending will revive lender interest at the appropriate time.

“Tiomin anticipates completing the resettlement of the farmers displaced by the Project by the end of the first quarter,” reads the brief statement. “ The Company will work towards the evaluation of substantial technical and contractual cost saving measures to improve the economics of the Kwale Project.”

The development comes hard on the heel of an announcement by ATW Venture Corporation that it will not execute the formal agreement it had with Tiomin to acquire an option to purchase up to a 50 percent interest in the company’s Kenyan mineral sand projects.

The latest development come at a time when the Kenyan government has exempted the company from paying Sh5.8 billion (US$ 84 million) in Value Added Tax on assorted imported mining equipment, according to the East African Standard.

But the exemption according to the paper has not come cheap. The country’s Finance Minister Amos Kimunya has warned Tiomin that if it breached any of the terms of a special mining lease the Kenyan government granted it in February 2005, the tax would be payable.

But announcing the suspension of the project, the company said it still remained in Force Majeure with the government – which is a legal term that implies that Tiomin is exonerated from any liabilities that may arise as a result of frustration of the contract
by factors beyond its control like natural disasters.

Tiomin signed an agreement with Standard Chartered Bank, WestDLB AG, Caterpillar Financial Australia Ltd and African Development Bank to fund the project in Kenya which was the largest Foreign Direct Investment (FDI) the country had in the past twenty years. The realization of that FDI now hangs in limbo.