Kenyans buy 1pc stake in Australia mining company

Workers at multi billion Base Titanium factory which is under construction in Kwale County. Photo/Gideon maundu 

By John Gachiri

In Summary

• Kenyans take up shares worth Sh170 million in titanium company Base Resources.

Kenyans have bought shares worth about Sh170 million or one per cent of Australian titanium mining firm Base Resources, following the company’s efforts encouraging local investors to buy its stock.

Managing director Tim Carstens said on Wednesday large institutional investors such as asset managers and pension funds have bought shares worth the equivalent of one per cent in the parent company of the firm, which is mining titanium in Kwale County.

Base Resources last year said it was working with stockbrokers to find ways of easing purchase of its shares by Kenyans following gazettment of a new law that required all mining companies to be at least 35 per cent locally owned.

“A couple of large funds bought the shares on the London Stock Exchange and the Australia Stock Exchange,” said Mr Carstens at a press briefing on Wednesday.

Base Resources could not give the number and identities of the local firms that have bought into the miner, saying the company is only under obligation to disclose the identities of significant shareholders or owners who have more than a five per cent stake.

New Cabinet secretary for Mining, Najib Balala, said the ministry was in talks with investors in the sector that could see the 35 per cent requirement changed.

Base Resources has 560 million issued shares which, at a closing price of Australian dollars 0.37 (Sh30) gives it a market capitalisation of about Sh17 billion.

(Read: Titanium miner’s parent firm woos Kenyan investors)

Greater local ownership, from both institutional and individual investors, is expected as investors get a better understanding of the extractive industry, which is not only new but complex.

“This is a process which is going to take some time,” said Andre DeSimone, executive director at Kestrel Capital, adding that the brokerage and investment banking fraternity would be required to learn valuation of companies in the new and complex industry.

Kestrel Capital already has a footing in the industry having earlier been the lead broker in a private placement deal that saw Kenyan investors buy $500,000-worth of shares in Stockport Exploration, a Canadian firm exploring gold in Western Kenya.

Stockport also appointed TransCentury chairman Zeph Mbugua to its board (see article). Base Resources has no plans to list on the Nairobi Securities Exchange (NSE).

The Retirement Benefits Authority allows pension funds room for investing up to 15 per cent of their holdings in foreign-listed firms.

Mr Carstens said that as investors become more comfortable with how the industry operates, more Kenyans could have bigger ownership in mining firms by buying their shares.

The government has however, been more assertive and is experimenting with different proposals that would see more local participation in ownership of the mining firm.

Proposals by the industry handed to Mr Balala suggested the government could get a 10 per cent stake in mining firms, similar to an ownership model used in Ghana. The minister has opened debate on the new proposal to stakeholders.

Mr Carstens said it is too early to comment on the viability of the proposal but said any ownership law should not be at the expense of making Kenya’s mining industry’s competitive, citing Zimbabwe as a country with vast resources but struggles to get investment.

The mining ministry has already prepared the Geology Minerals and Mining Bill 2012.