Tiomin lands Kwale license

The government of Kenya has granted Tiomin Resources (TIO-T) a 21-year mining license for its long-stalled Kwale titanium-sands project, near Mombasa. The license allows for the mining of ilmenite, rutile, and zircon.

At last count, Kwale was home to an audited mineral resource of 254 million tonnes of mineralized sand running 1.7% ilmenite, 0.4% rutile, and 0.2% zircon. Of the total resource, 38 million tonnes are classified as measured resources and 216 million tonnes as indicated. The resource is contained in three adjacent deposits — the North, Central, and South dunes. The Central dune contains the highest concentration of heavy minerals.

Initially, plans call for the mining 10 million tonnes annually to produce 330,000 tonnes of ilmenite, 77,000 tonnes of rutile and 37,000 tonnes of zircon in each of the first six years. The production figures represent 6%, 18% and 3% of global annual output, respectively.

In late 2003, Australian-based Ausenco reviewed Tiomin’s feasibility study at Kwale, and confirmed, among other things, the project’s estimated capital cost of US$120 million, excluding working capital and contingencies. Ausenco also suggested relocating the processing plant next to the wet concentrator, while eliminating the ilmenite-roasting and zircon-leaching circuits.

The review also identified significant reductions in plant costs with fewer stages of high-tension electrostatic and magnetic separation for both rutile and zircon, replacement of shaking tables with spirals in the zircon wet circuit, and a scaled down plant.

The operation is projected to generate around $80 million in annual revenue and $47 million in pre-tax operating cash flow over the first six years. Excluding financing charges, pay back of initial US$120 million capital investment in 3.4 years. Kwale’s total mine life is pegged at 13 years.

The feasibility study excludes some 116 million tonnes of indicated resource in the North dune. Looking further ahead, Tiomin plans develop three other deposits along the coast with a total resource of more than 950 million tonnes of indicated and 1.9 billion tonnes of inferred mineral sands once Kwale is in production.

Kwale has been embroiled in controversy since its discovery in 1996; local residents have voiced concerns over its environmental effects, compensation and resettlement. In late June, the Kenyan government set aside some 11,000 acres of land encompassing the collapsed Ramisi sugar factory for the resettlement of affected residents. Authorities will also assess compensation for the loss of crops, trees and infrastructure. Tiomin has agreed to pay compensation of US$1,009 per acre.

Earlier this spring, Tiomin acquired a 3-acre parcel of land on the southern side of Mombasa Harbour where it plans to build a ship-loading facility for production from Kwale, 50 km to the south. Tiomin had intended to build a similar facility at Shimoni but changed its plans to soothe the environmental concerns of local residents. The government had previously approved the proposed port facility at Shimoni. Mombasa Harbour is the second-largest port on the eastern coast of Africa.

Negotiations with the government aimed at a finalizing the project’s fiscal/investment agreement are expected to wrap up in the coming weeks.