Kenyan approval of the environmental management plan for Tiomin Resources‘ (TIO-T) Kwale titanium-sands project, southwest of Mombasa sent the company’s shares soaring more than 42% in early trade in Toronto on Jan. 21.
Tiomin says the approval eliminates the final environmental hurdle standing in the way of construction at Kwale. As part of the approval, Tiomin needs to present an action plan covering mitigation measures for the project before mining can begin.
In mid-December, after years of study, the Kenyan government granted Tiomin a 16-year mining lease for Kwale. The lease, which can be renewed for a further 10 years, gives Tiomin exclusive right to mine and process Kwale’s heavy mineral sands. The lease is set to become official on April 24, after it faces a 90-day period of public scrutiny.
The government has also given the go-ahead for a port facility at Shimoni.
Kwale is home to a resource of 200 million tonnes of mineral sands grading 2% ilmenite, 0.5% rutile and 0.3% zircon. Plans call for an open-pit mine capable of producing 300,000 tonnes ilmenite, 38,000 tonnes zircon and 75,000 tonnes rutile annually for six years. The mineral concentrates are separated from the sands via gravity, electrostatic and magnetic separation.
The deposit comprises 2 large Pliocene aeolian dunes and covers an area of 4.5 sq. km situated some 10 km inland from the coast.
Kwale’s feasibility study pegs cash flow at US$40 million per year for the first 6 years resulting in a payback period of 3 years. Kwale’s total mine life is pegged at 13 years. The project’s capital cost is estimated at US$120 million.
Looking forward, Tiomin plans to sequentially develop the Kilifi and Mambrui titanium-bearing mineral sands deposits nearby to the northeast. The company has also outlined extensive mineralization on the Vipingo exploration license in the same area.
The project has faced criticism from local environmental groups who commissioned a separate environmental study that argued that the project could end up destroying surface and groundwater flow patterns and possibly contaminate a major aquifer.
In early 2002, a lawsuit launched by three local landowners looking to quash the project was dismissed.
Tiomin must also address the relocation of two towns with about 5,000 residents.
Meanwhile, the company is negotiating to expand the lease to cover 15% of the mineralization found on the defunct Ramisi sugar cane plantation.
The company is trying to arrange long-term sales agreements to support project financing and is in discussions with engineering companies concerning the design and construction of the mine and mill.
Earlier this month, Tiomin wrapped up a fully subscribed private placement of 20 million common shares at 21 apiece for proceeds of $4.2 million. Tiomin now has about 88.8 million shares issued and outstanding.
Under a recently renegotiated loan facility with Resource Capital Fund, Tiomin will use US$1.36 million from the financing to pay down a US$2-million loan facility from RCF. Also under the revised deal, RCF has extended until Sept. 1, the maturity date of the balance of the loan. The extended loan bears interest at a rate of London Inter-bank Offer rate plus 4%.
As part of this new deal, RCF was issued warrants good for 3.7 million Tiomin shares at 27 per share until the end of 2003.
With the loan reduced, RCF’s Brian Dolan resigned as a director of Tiomin.
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