REPUBLIC OF KENYA

PROMOTION OF EXTRACTIVE AND MINERAL PROCESSING

INDUSTRIES IN THE EAC

KENYA STATUS

BRIEF OUTLINE

1. INTRODUCTION

This Report has been prepared in connection with a project being undertaken

jointly by the EACS and COMSEC on the promotion and development of

extractive mineral industries and mineral processing industries in the EAC. The

Report presents information of mineral resources and utilisation potential in

Kenya and the applicable laws and regulations, and other arrangements for

investment in these industries.

Although minerals and their products play an important role in Kenya’s

economy, the mineral sector contributes only about 1% to the GDP, which is

rather low compared to the available potential

2.0 Mineral Resources and Utilisation Potential

2.1 Background

Kenya is well endowed with bulk mineral resources, some of which are already

being exploited by private companies and some are yet to be prospected and

exploited.

Minerals found in Kenya include inter alia soda ash, fluorite, diatomite, carbon

dioxide, gold, iron ore, lead, vermiculite, Kyanite, manganese, titanium, silica

sands, gemstones and precious minerals, gypsum and limestone.

2.2 Mineral Products

2.2.1 Soda ash is produced from the mineral trona that occurs at Lake Magadi

which is situated within the Great Rift Valley. The commodity is produced by

the Magadi Soda Company Limited in one of the biggest known natural sources

of trona in the world. The bulk of the soda ash is exported but a good deal of the

commodity is used in various local industries.

Trona occurs together with common salt and Lake Magadi is also a major

source of crude salt.

2.2.2 Fluorspar is mined to the east of the town of Eldoret within the Rift

Valley. The Kenya Fluorspar Company Limited operates the mine. The mine

produces acid grade Fluorspar of which the bulk is for export.

The production of fluorspar was 130,100 tons in 2008 but decreased to 5,500

tonnes in 2009 due to a decline in the world market.

2.2.3 Diatomite is produced about 130 kms to the north west of Nairobi, but it

is known to occur in a number of localities within the Rift Valley. The

commodity is produced for both export and local markets. Its potential is high.

2.2.4 Vermiculite is mined in the northern central part of the Rift Valley

Province within the pre-Cambrian rocks of Mozambique belt.

2.2.5 Limestone and Lime Products are produced for the manufacture of

cement and other industrial products. Cement and construction industries take

the bulk of the limestone mined and quarried. Limestones, marbles and

dolomites widely occur in the country and huge deposits of the commodities are

known to exist. Along the coastal belt, Bamburi Portland Cement Company

Limited exploits kunkar and crystalline limestone mainly coral reefs in the

vicinity.

Currently, five cement factories; Athi River, Bamburi, National, Mombasa and

East Africa Portland produce over 1.5 million tonnes of cement to meet local

needs.

Natural Carbon dioxide associated with the rift system, is currently being

extracted from Kereita , about 50 kms north west of Nairobi by Carbacid (CO2

Mfg) Limited and marketed for industrial purposes within the East African

region.

Other Industrial Minerals exploited include gypsum which is mined in Tana

River in the Coastal belt, Kajiado near Nairobi and in Turkana in North Western

Kenya. The Gypsum mined is supplied to local cement plants and some is

exported to Uganda

Gemstones: Kenya boasts of a wide range of coloured and ornamental stones,

which are mined in the country. These include mainly in order of importance,

ruby, tsavorite, sapphire, corundum various types of garnet, peridot,

tourmaline, aquamarine, Zoisite and rhodolite.

Gemstones and gold are mainly for the export market though small-scale

processing takes place locally to manufacture various ornamental products.

Most of the precious minerals produced undergo some degree of processing to

conform to some specific market requirements. The commonest forms of

processing are size reduction, drying, concentration and grading.

To a certain extent these forms of processing ultimately add value to the mineral

products which in turn enhance revenue earnings, create jobs and promote

import substitution of various products.

Between 1999 and 2003, Ruby was the leading gemstone produced in Kenya

Lead was being produced from galena, which was being mined in small

quantities in the coastal belt, where it was smelted together with scrap lead to

manufacturer lead batteries.

Gold is known to occur in a number of places in gold bearing greenstone rocks

of Nyanzian Craton in Western Kenya. Areas with alluvial gold are being

harvested by local miners through conventional panning in the northern part of

the country.

Titanium is known to occur in large quantities at the coastal area. Mining of the

mineral is expected to commence soon.

Iron Ore Deposits are found in the form of oxides: Magnetite (Fe3O4), hematite

(Fe2O3), goethite, limonite: carbonates-siderite and anchorites.

There are four main types of iron ore deposits being worked on namely:

magnetite, titanomagnetite, massive hematite and pisolitic ironstone deposits.

Considerable deposits occur in:

• Marmante in the greater Tharaka district,

• Ikutha in Kitui now mutomo district,

• Migori in South Nyanza

• Wanjala in Taita district

• Ishiara in Mbeere District

• Baragoi in Samburu District

• Bukura south west of Kakamega

• Uyoma in Bondo District

• Maturu in Lugari District

• Malakisi in Bungoma District

• Ruri in Suba District

• Homa Hills at Homa Bay

• Mfangano Island in Suba District

These deposits occur as bands among the regionally metamorphosed sediments

and also within sedimentary rocks. There are others associated with carbonatite

complexes as is the case in Homa, Central Nyanza where they occur as

segregations with lengths and widths of about 400m and 200m respectively.

Banded Iron formation is found on Samia hills in Busia district where it is

associated with volcanic rocks. It has been smelted in early days by the local

communities to make implements for various uses.

Summary of iron ore deposits Resources

Location Type Quantity Quality

Marimante Iron Ore

Deposit

Approximately 108

mile NE of Nairobi

in Meru District

(38o 57’ E 0 10’ S)

Titaniferous

magnetite (Ilmenite)

Area extend float

material over 200ft

traced for strike

distance 0.5 miles

Grab sample

assay yield

40-50 % iron

and 5-15%

Tio2

Mraru Ridge Iron

Deposit

Mraru Ridge, 1.8

Km SSW of Ndile

Shopping Center 3o

21’ S and 38 o

28’ E

sheet 189/4

Magnetite Not known Fe2O3 66.98%

and 8.7%

TiO2

Wanjala Magnetite

Ore Deposit

Taita District at

location 38 o

10’ E

Magnetite Main occurrence

750m long by 3m

thick on average

Float lateral estimate

59-63 % iron

and 3 o 15’ S).

50m and thickness

0.3-1.5 m

Ikutha Iron Ore

Deposit

7 Km south of

Ikutha shopping

center, Kitui District

approximately 38 o

11’ E and 2 o 8’ S).

Magnetite veins

Ore reserve estimate

80,000 tonnes of

66% Fe2O3 magnetite

concentrate and

31,000 tonnes of 35

% P2O5 apatite

58.7 %

Fe2O3and 7.6

% P2O5

Bukura Iron Ore

Deposit

15 kilometers south-

west of Kakamega

Pyrite veins

This lode is

estimated to contain

17 million tonnes of

ore down to a depth

of 90 metres and it is

likely the reserves

may exceed this

figure since lateral

extensions are known

to exist.

Not done

Ndere Island

In Kisumu District

the whole of the

Ndere Island in the

Winam Gulf

Banded limonite

ironstones

Many of the

ironstone bands are 5

metres thick, but

some, less persistent

range from 15 to 60

metres in thickness

Not done

At Mrima Hill

South of Mombasa

Goethite (limonite)

and magnetite

3 and 15 million

tonnes of Fe2O3.

10 to over

50% Fe2O3.

Uyoma Peninsular,

northern shores

Lake Victoria

Titaniferous

magnetite

(Ilmenite)(containing

13% TiO2) beach

sands

The tonnage present

is not known but

appears to be large

and sufficient to

warrant further

investigation

Magnetite

concentrations

of up to 90%

are known to

occur.

2.3 An overview of legal and financial framework for Mining Investment

in Kenya

2.3.1 Mineral Resources Development

All mineral exploration, exploitation and trading activities in Kenya are

currently regulated under the auspices of the Mining Act Cap. 306 of the Laws

of Kenya. This act, promulgated in 1940, has since been reviewed on two

occasions, which is 1972 and 1987 to try to match it to contemporary

international mining practice. However, it has still been found to be wanting.

As such a full review was undertaken recently, to enable it meet current and

future challenges of Mineral Resources Development in the country. This

reviewed draft mineral law is supposed to provide for lesser discretionary

powers to the licensing authorities, and hence provide for greater security of

tenure. It also aims to provide for greater environmental protection, as

embodied in the Environmental Management and Coordination Act No. 8 of

1999 (EMCA), from the undesirable effects of mining activities on the

environment. Together with the review of the Mining Act, the Government of

Kenya is also in the process of formulating a National Minerals and Mining

Policy. This draft policy aims to provide for a written declaration of the

framework of principles and policies that will guide the reform of the mining

sector.

2.3.2 Property and Land Use Laws

The Kenya Constitution provides a guarantee against expropriation of private

property. Expropriation may only occur either for security interest or public

purpose, where upon fair and prompt compensation is guaranteed.

2.3.3 Foreign Investment Codes

Under the Foreign Investment Protection Act (FIPA), foreign investors can

repatriate capital and profits. To be eligible for FIPA guarantees, investors are

required to obtain a certificate of Approved Enterprises from the Ministry of

Finance. The Act also protects foreign investment against expropriation.

Kenya is also a member of the Multilateral Investment Guarantee Agency

(MIGA).

2.3.4 Trade Law, Export and Import Regulations

A trade license is required for anybody who wants to undertake any business

within the country. However, the key reforms that the Government has carried

out have lead to:

- Abolishment of export and import licensing except for a few items listed in

the Imports, Exports and Essential Supplies Act (Cap. 502);

- Revocation of all export duties;

- Rationalization and reduction of import tariffs.

2.3.5 Dispute Resolution

The laws of the country have provisions for dispute resolution. In mining, the

Mining Act Cap 306 of the Laws of Kenya has provisions for solving mining

disputes. Kenya is also a member of the International Centre for the Settlement

of Investment Disputes (ICSID).

2.3.6 Mining and Related Operations

All un-extracted minerals under or upon any land, as per the Mining Act, are

vested in the Government subject to any rights which, under the Act, have been

granted to any other person.

The following five types of licences can be granted:-

1. Mining Location;

2. Exclusive Prospecting Licence (EPL);

3. Special Licence;

4. Mining Lease;

5. Special Mining Lease.

2.3.6.1 Mining locations are mostly granted to small-scale miners. The

conditions attached to their grant are less onerous than in the case of other titles.

A location consists of a block of not more than ten claims. A claim is an area

of:

(a) 20,000m2 (or 200 metres x 100 metres) in the case of precious metals (gold,

silver etc) and precious stones (ruby, emerald, opal etc)

(b) 50,000m2 (or 250 metres x 200m) for all other minerals (copper, lead,

graphite, barite etc).

2.3.6.2 An Exclusive Prospecting Licence or Special Licence is granted

over an area selected by the applicant who has a valid Prospecting Right, has

deposited a sum of KShs. 2,000/= with the Provincial Commissioner of the

Province in the area over which the application made is situated, has written

consents from relevant local authorities, has consents from land owners, etc.

2.3.6.3 A Mining Lease or a Special Mining Lease is granted for the

exploitation of a mineral deposit, which has been discovered following

successful prospecting and exploration under the first three types of licences.

2.3.7 Taxation

Taxation issues are covered in the Income Tax Act and VAT Act. The

maximum rate of income tax is 30%. The highest rate of VAT is 16% and

lowest is 12%. Imported goods are charged import duties. Some goods are zero

rated or tax exempted entirely.

2.3.8 Royalties

The law provides that royalties are paid for all minerals. The rates of royalties

are negotiable within the commonwealth countries’ rates. The proposed

legislation will specify rates for different classes of minerals.

2. 4 Mineral Availability and Supply

2.1 Mineral Resources (Mineral Potential)

Key parameters (Table and Map)

Table 1 Mineral production from 2005 to 2009

QUANTITY AND VALUE ( IN KSHS ) OF THE MINERAL PRODUCTION FOR THE PERIOD 2005 TO 2009

2005 2006 2007 2008 2009

MINERAL Unit Quantity Value Quantity Value Quantity Value Quantity Value Quantity Value

Soda Ash MT 360,161 3,782,249,000 374,210 4,532,391,000 386,578 4,769,457,000 502,846 8,881,714,000 404,904

6,085,430,000

Fluorspar MT 109,594 1,061,908,000 132,030 1,155,794,000 85,115 995,867,000 130,100 1,949,194,287 5,500

122,540,000

Crushed Refined Soda MT 640,291 3,287,710,000 662,939 4,317,757,000 843,043 5,448,046,000 865,788 6,974,924,000 948,076

13,202,957,000

Salt (from Magadi) MT 26,595 110,382,000 35,024 164,438,000 11,596 58,068,000 24,345 139,171,000 24,125

154,730,000

Carbon Dioxide MT 8,723 63,310,000 9,359 66,730,000 11,028 78,630,000 22,030 117,884,660 15,711

84,071,080*

Diatomite MT 243 9,865,000 185 7,735,000 201 8,859,000 72 3,483,917 239

14,482,508

Gold GMS 616 653,339,000 432 583,865,000 3,023 3,922,892,000 339,923 592,890,948 1,055,070

2,283,686,205

Gemstones GMS 5,035 101,501,000 5,044 94,046,000 8927 110,975,000 20,933,983 178,606,352 474,992,600

158,162,279

Grand Total 9,060,459,000 10,922,756,000 15,392,794,000 18,837,869,164

22,021,987,992

Table 2 QUANTITY AND VALUE( IN KSHS) OF THE MINERAL EXPORT FOR THE PERIOD 2005 TO 2009

2005 2006 2007 2008 2009

MINERAL UNIT Quantity Value(Kshs) Quantity Value (Kshs) Quantity Value (Kshs) Quantity Value (Kshs) Quantity Value (Kshs)

Soda Ash MT 321,429 3,858,117,000 316,077 4,026,646,000 307,289 3,937,130,000 389,100 7,214,146,000 365,358 5,086,583,000

Gold GMS 616,156 653,398,888 432,371 583,864,799 3,023,325 3,922,891,880 339,923 592,890,948 1,055,070 2,283,686,205

Fluorspar MT 109,594 1,061,907,940 132,030 1,155,794,760 85,115 995,867,000 130,100 1,949,194,287 5,500 122,540,000

Diatomite MT 243 9,865, 390 185 7,734,573 201 8,858,820 72 3,483,917 239 14,482,508

Crushed Refined Soda MT 3,293 24,017,000 5,085 35,736,000 54,695 430,391,000 38,280 321,140,000

16,331 140,929,000

Salt (Magadi) MT 72 1,300,800 837 6,627,600 2,109 15,505,000 1,106 12,574,000

592 6,655,000

Carbon Dioxide MT 5,048 118,664,603 5,645 127,875,238 22,030 117,884,660

5,834 129,413,044

Gemstones GMS 68,404,514 340,157,980 50,439,006 240,467,344 119,286,901 199,135,181 20,933,983 178,606,352 474,992,600 158,162,279

Other Minerals MT 58,260 179,594,065 95,012 90,020,643 218,043 409,491,000 67,486 63,745,187

23,109 43,841,005

TOTAL 6,128,359,063 6,265,865,322 10,047,145,119 10,453,665,351 7,986,292,041

Summary of the Mineral resources

Mineral Type Location Land Ownership Quantity

(Tonnes)

Remarks

Iron ore Marimante Private / Communal Not quantified

but estimated

in millions

Small scale exploitation

and evaluation going on

Kitui Private / Trust land Not quantified

but estimated

in millions

Considerable

exploitation and

evaluation going on

Wanjala Trust land Not quantified

but estimated

in millions

Exploitation and

evaluation going on

Migori Private Not quantified

but estimated

in millions

Exploitation and

evaluation going on

Manganese Baringo Private / Communal Not quantified

but estimated

in thousands

Discovered recently,

further investigations

being planned

Kilifi Private / communal Not quantified

but estimated

in thousands

Evaluation going on

Garnierite

(Nickel Silicate)

Telot, West

Pokot

Private / communal Estimated 5.3

Million

Evaluation going on

Sphalerite (Zinc

Ore)

Kilifi Private / Communal Estimated

0.2million

Not proven

Migori Private / Communal Inferred

1.5million

Not proven

Titanium Coastal Kenya Private / Communal Estimated 3.1

billions

Full potential not

determined and

exploitation to start

soon

Limestone Various parts Trust/ communal,

private

Vast,

estimated in

billions

Full potential not

determined

Gypsum Various parts,

mostly North

eastern, Coastal

, Rift valley,

Eastern parts

Trust/ communal,

private

Vast,

estimated in

billions,

regenerates

The deposits ,

renewable, regenerates

themselves

Trona Lake Magadi, Trust. communal Vast also

estimated in

billions

Regenerates itself and

exploitation has been

going on for long.

Major mining operation

in the Country

Diatomite Gilgil, Naivasha Private Estimated at

thousands

Being exploited

Clay Various parts Trust/ communal,

private

Estimated at

billions

Being exploited and

evaluated

Glass Sands Coast, Eastern Private Estimated at

billions

Being exploited at the

coast

PART II (not considered as yet)

APPLICABLE LAWS AND REGULATIONS

LEGISLATIVE AND ADMINISTRATIVE FRAMEWORK

5.1 Applicable policy and guidelines

Mining Act Cap 306

Trading in Unwrought Precious Metals Act, cap 309

Diamond Industry protection Act, Cap 310

Environmental Management and Coordination Act, EMCA 1999

Vision 2030

Below is a list of policies and guidelines (national, regional, sub-regional

level) applicable to the activities related to mineral exploration,

processing, development and production; mineral export and import and

fiscal incentive schemes in the mineral sector in Kenya.

5.2 Applicable legislation

Below are list of laws, regulations, orders and other legal instruments

(national, regional, sub-regional level) applicable to the activities related

to mineral exploration, processing, development and production; mineral

exports and imports and fiscal incentive schemes in the mineral sector in

Kenya.

5.3 Applicable Agreements, Contracts, Licences, Permits, Forms

Below are list of agreements, contracts, licences, permits, forms and other

legal instruments (national, regional, sub-regional level) applicable to the

activities related to mineral exploration, processing, development and

production; mineral exports and imports and fiscal incentive schemes in

the mineral sector in Kenya.

PART III

3.0 Challenges and Constraints for Investment and Development

of the Extractive and Processing Industries

3.1 Access to land to for mineral exploration and mining

Land is owned either by State in trust, privately or communally on

freehold or leasehold terms. The intricacies involved in its access depend

on who owns it. Trust lands may not pose major challenges but private

and communal ones may despite, the fact that, minerals are vested in the

State.

3.2 Conflict between land rights and mineral rights

This is intertwined with access to land, only that in this case there is an

element of competing land uses. It is only in cases where public interest is

at stake that the state may compulsorily acquire land and avail it for

mineral resources development or any other use beneficial to greater

public, otherwise a mineral developers are required to seek consents the

owner(s)

3.3 Population Density

Areas with high population densities often pose challenges related to land

rights, ownership and compensation. At times exploration or mining

companies have to deal with a large number of people whose consent

must be sought. The Central, western and coastal parts of Kenya have the

largest rural populations. However, as can be seen in the following map,

large mineralized parts of the country have low population densities To

address issues related to land acquisition or leasing, the Government has

put in place a putting in framework to assist in the leasing and acquisition

of land for exploration and mining.

3.4 Mineral Occurrences is Game Parks and Reserves

Game parks and reserves pose a challenge to mining and mineral

processing because they are usually categorized as environmentally

sensitive areas. Consent has to be sought from the relevant authorities and

comprehensive Environmental Impact Assessment is required prior to any

consent being issued. The following map shows various parts of the

country that are gazetted as game parks or game reserves

3.5 Mineral Occurrences in Forest Reserves

Forest reserves are also designated as environmentally sensitive areas.

Some of them like the Mau Forest in central Kenya are water catchment

zones. Others such as the Kakamega Forest in western Kenya are

protected nature reserves. The following satellite image shows forested

areas, some of which are gazetted forest reserves. Consent from the

relevant Government authorities is required prior to any exploration or

mining activities

3.6 Environmental Conservation

Investors in Kenya are required to comply with environmental standards.

Developers of all projects are, therefore, required to carry out

Environmental Impact Assessments (EIA) prior to project

implementation. Companies are required to submit their EIA assessment

reports to the National Environment Management Authority (NEMA),

which is the principal regulatory agency, for verification by the

environment auditors before they can receive an Environmental Impact

Assessment license.

3.7 Availability of Energy

Kenya’s total installed power generating capacity is around 1200 MW, of

which hydropower contributes 71%, oil 22%, and geo-thermal the rest.

The Rural Electrification Mineral Zones Programme (REP) was

introduced in 1973 to promote access for low-income homes, and is

funded by a mix of external (loans) and internal revenue. A few other

independent power producers have been established in the country thus

increasing the generating capacity. The provision of electric power in

areas with mineral resources will encourage mining and processing.

3.8 Inadequacy of mineral and geological data

Most of the geological work done in most parts of the country has been at

reconnaissance level. It focus mainly on rock identification and

understanding o f general stratigraphy. due to the cost involved mineral

evaluation on many mineral occurences has not been done. This has been

lest to the private prospectors and government left to to provide primary

geological data

3.9 Capital for investment in the mineral sector

Minerals and mining industry is a high risk ventures requiring vast capital

outlays and with no immediate registration of benefits. Therefore, most of

the credit providers shy away from the industry preferring instead to deal

with ones with low risks and faster returns.

3.10 Regulation of small-scale mining activities

Small scale mining is undertaken in haphazard manner and most of

those engaged in the industry treat it as a part time vocation thus

making it difficult to regulate their activities and keep track of the

operations.

3.11 Mineral processing for value addition

Most of minerals, especially non industrial ones, produced in the

country are used locally and / or exported without being value added

owing inadequate capacity to so. There are deliberate efforts to

promote carrying out of value addition of the minerals before being

exported in order to maximize benefits accruing from development

of mineral resources. Industrial minerals produced are used directly

in industries to produce various products which include cement ,

ceramics, slabs, etc

3.12 Mineral promotion and marketing

The mineral potential in the country has not sufficiently promote

owing to inadequate appropriate information which could stimulate

interest in the industry. The kind of information available on mineral

potential is scant and does not answer to the needs of the investors.

3.13 Inadequate legal framework

This may not be an issue once the proposed legislative and

institutional frameworks are operationalized. The proposed measures

have been tailored to address the problems that had bedevilled the

industry for a long time with a view to re-engineering the regulatory

regime and revamp and stimulate interest in the industry