Titanium company seeks money for exploration

Last Updated 14 years ago by Kenya Engineer

Australian firm Base Resources has launched an underwritten share offer that aims to raise Sh3.41 billion to finance operations at its titanium mine in Kwale and boost working capital.

The mining company is seeking to raise Sh2.1 billion through the placement of 61.62 million new shares to institutional and highly experienced investors, and another Sh1.3 billion through an entitlement offer of 38.3 million shares to existing shareholders.The share offer is taking place at the Australian Securities Exchange (ASX).

“The funds raised from the offer will be put into the development of Base’s Kwale mineral sands project in Kenya, provide additional working capital and pay the costs of the offer,” Tim Carstens, managing director of Base Resources.

The announcement of the offer comes barely a week after the company said it had raised the capital cost of its Kenyan titanium project by 14 per cent following design improvements and rising labour costs. The firm said it projects to spend Sh22.96 billion in addition to Sh1.9 billion in unspecified contingencies.

 “While much of the increase in capital cost can be attributed to design improvements and scope changes during the design phase, a significant proportion is related to expenses on labour”,said Carstens.
He said the firm was pursuing various financing options to accommodate the increased capital cost.

“These alternatives include extended or additional debt facilities, an equity raising, the reallocation of internal funding, or some combination thereof,” he said.

When completed, the project south of Mombasa is expected to produce 330,000 tonnes of limonite a year, about 10 per cent of the world’s supply, another 80,000 tonnes of retile per year, which represents 14 per cent of global output, and a further 40,000 tonnes of zircon.

In May 2011, the Australian firm increased its ore reserve estimates for the Kenyan project by 20 per cent after a feasibility study. The miner said it now projects 140.6 million tonnes of viable ore reserves at Kwale.

Rutile, which is composed of titanium dioxide, is an important pigment for industrial, domestic and artistic applications. Zircon is mainly used in the ceramics industry while limonite is related to titanium.

The Kwale project, which was first started in 2006 by Canada’s Tiomin, ran into difficulties when financing fell through.

An attempt to transfer the ownership to China’s Jingchuan also failed, before Base Resources stepped in.The project has also been delayed by a series of setbacks including demonstrations by environmental groups, disputes with local farmers over compensation for land and drawn-out talks with the government.

Base Resources said it plans to start drawing down its Sh14.1 billion debt facility with a syndicate of six lenders towards the end of this year as part of the Kwale financing package.Mr Carsten said the project remains on schedule for completion in September, next year.

The recent discovery of large reserves of gold in western Kenya continues to attract foreign interest with several international mining giants either moving to grow their output or buy into existing businesses.

The coastal strip especially around Kwale has also caught the attention of international firms following the discovery of rare minerals such as niobium and titanium that is an important pigment for industrial, domestic and artistic applications.Several international firms are also angling for stakes in coal mining on the Mui basin in Machakos County.