Kilimapesa Goldmine Director Mark Austine. FILE PHOTO | NMG
Summary
- Goldplat, which operates in Kenya through its subsidiary Kilimapesa Gold, said the dispute has been simmering since October 2017, when the Ministry of Mining notified it of an application by an unnamed company to explore for gold in the same area.
- The firm, in a trading update, told its London Stock Exchange (LSE) investors that it is prepared to sue the Kenyan government if any part of its exploration zone is hived off without compensation.
- The company says the status of the controversial exploration application remains unclear despite its clear objection and numerous meetings with Mining secretary John Munyes and other government officials.
London-based Goldplat Plc is fighting an application by a rival
mining firm to explore for gold in its Kenyan turf of Migori that is
estimated to have reserves worth Sh16.9 billion.
Goldplat,
which operates in Kenya through its subsidiary Kilimapesa Gold, said
the dispute has been simmering since October 2017, when the Ministry of
Mining notified it of an application by an unnamed company to explore
for gold in the same area.
Goldplat, in a trading
update, told its London Stock Exchange (LSE) investors that it is
prepared to sue the Kenyan government if any part of its exploration
zone is hived off without compensation.
"The area in dispute contains roughly 140,000 ounces of gold in
resource, or approximately 20 per cent of the total resource for
Kilimapesa," Goldplat said, adding that "no exploration will be
undertaken until this issue has been resolved and confirmation has been
received that no part of the initial exploration licence has been taken
away without compensation."
Goldplat says the status of
the controversial exploration application remains unclear despite its
clear objection and numerous meetings with Mining secretary John Munyes
and other government officials.
Gold prices
$/ounce
Gold prices this year have averaged $1283 per ounce in the global market.
Goldplat’s operations
in South Western Kenya include the Kilimapesa Hill – an area not
targeted by the rival mining firm — where it is currently mining gold
reserves estimated at 532,000 ounces and valued at Sh64.4 billion based
on the commodity’s current global market price of $1,200 (Sh120,000) an
ounce.
The dispute comes at a time when Goldplat is
also awaiting a decision on its application for an exploration licence
that will allow it to expand its operations beyond the Kilimapesa Hill.
The
rival application risks spooking prospective investors who Goldplat has
approached to inject new capital in Kilimapesa in exchange for an
unspecified stake in the Kenyan operation.
Goldplat says the expected proceeds will enable it to share the
burden of providing new capital required to turn around the fortunes of
the loss-making subsidiary.
"But if efforts to find a
partner to invest in the mine and the exploration licence are
successful, the requirement for any more capital input by the Group will
be removed," the company said.
Goldplat has further
disclosed that its board approved the search for an investment partner
for Kilimapesa to enable existing shareholders realise value from the
operation without having to invest additional capital. "Discussions have
begun with a number of interested parties and operational focus remains
on achieving profitable production."
Kilimapesa has
been making losses mainly arising from production hiccups, cost overruns
and slow investment in new equipment, weighing down its parent
company’s consolidated earnings. The Kenyan operation reported a net
loss of £892,000 (Sh118.3 million) in the year ended June, an
improvement from net losses of £1.1 million (Sh146 million) the year
before.
The firm narrowed its losses after production
jumped 50 per cent to 5,112 ounces, all of which were sold in the review
period resulting in higher revenue.
Value of gold mined in Kenya
(Sh Bn)
2014
2015
2016
2017
Gold valued at Sh1.5billion was mined in Kenya last year. Migori's gold deposit is estimated Sh16.9 billion.
"Kilimapesa reported an increase in revenue of 54 per cent from
£3.1 million (Sh418 million) as a result of more ounces produced on the
back of increased processing capacity in Plant 2," Goldplat said. "The
increase in revenue did not translate into increased profits due to
lower than expected grades and higher than expected costs," the miner
added.
The multinational says it will continue to
invest in the mine to boost production and improve efficiencies as it
seeks to turn a profit.
Its capital expenditure at
Kilimapesa stood at £489,000 (Sh64.8 million) in the year ended June,
with the amount used to buy a ball mill and power generators among other
equipment. The price of gold per ounce has dropped 11.8 per cent from a
peak of $1,362 (Sh136,200) in January to yesterday’s $1,200
(Sh120,000), piling pressure on miners of the precious metal.
Gold
producers recorded a boom in September 2011 when the commodity’s price
touched highs of $1,833 (Sh188,000) per ounce as investors rushed to buy
the metal as a safe haven in the aftermath of the global financial
crisis, which eroded the value of currency-based assets.
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