Renewed hope as Kenya eyes billions in mining

After more than five years, mostly marked by decline, Kenya’s mining industry is showing the first real signs of a turnaround.

The sector, which had been in a free fall since 2022 posted a 10 per cent growth in the first quarter of this year, a sharp contrast to the successive contractions.

The recovery has been fuelled by renewed prospecting activity, the revival of old projects and fresh investor interest following the government’s partial lifting of the 2019 moratorium on the issuance of new mining and mineral prospecting licences.

Prior to these results, since the fourth quarter of 2022, the sector had been contracting (negative growth rates), except for the third quarter of 2023 when it grew by a paltry of 0.8 per cent. 

It was particularly bad in 2024, when over the first quarter, the sector contracted by 16 per cent and again by 12 per cent over the third quarter. In all, the sector contracted by 9.2 per cent in 2024. It had registered a near-similar decline in 2023, contracting by 6.5 per cent.

This is in comparison to growth seen in earlier years, which had peaked in 2021, growing by 18 per cent on account of the production of titanium, which also peaked during the year. 

The subsequent decline has been on account of the November 2019 moratorium on the issuance of new mining and prospecting licences by the government, whose impact was catching up with the industry.

The State had at the time said the stoppage was necessary to clean up the sector that was characterised by speculators and even criminal elements.

The sector has also taken a beating following the closure of the Kwale titanium mines after the mine’s end of life in December 2024. Titanium mining in Kwale by Base Titanium has been a key project that supported the sector’s growth over the last decade, at some point accounting for more than 70 per cent of the sector’s earnings.

Base Titanium has in the past explained its frustration in its attempt to get licences to prospect in Kwale, but also in other areas around Lamu and Tana River. 

While there is no project that is likely to replace titanium mining, there are efforts to revive fluorspar mining in Elgeyo Marakwet County, which has partly fuelled the growth this year. 

Reviving the industry

The Kerio Valley project, which was key in the country’s mining sector, shut down in 2016 at the time run by Kenya Fluorspar Company. It sank with some of the area towns and trading centres. Other than the direct and indirect jobs, which different reports put at between 2,000 and 4,000, the Kenya Fluorspar Company supported schools, health facilities, provided water and even built some of the roads.

Sofax Fluorspar Kenya, the firm that has gotten a 25-year mining licence, has made progress in reviving the project, contributing to the growth of the sector.

In May this year, Sofax presented a 15 per cent share certificate to the National Mining Corporation (Namico), which it termed a landmark and significant milestone in the mining sector. 

The Mining Act of 2016 requires large-scale miners to cede at least 10 per cent to the government at no financial consideration, which is held by Namico.

In addition to the free carried interest, the government has a right to purchase an additional interest in the mining company at market rates.

Another firm Marula Mining has also made progress with its Kilifi manganese processing plant and recently announced the completion of the “wet commissioning” of the plant and is now inching closer to full-scale production at the site.

Another development that has projected the country’s mining sector positively is the joint venture between Australian firms RareX and Iluka Resources, which in April this year announced they had applied for a prospecting licence for Mrima Hill. The area is said to be rich in rare earth and niobium.

Mrima Hill has in the past been associated with Cortec Mining Kenya, whose local partner was the late Jacob Juma.

RareX recently raised $2 million (Sh260 million) that it said would be used to advance its mining operations in Australia, but also in Kenya, where it is “prosecuting the initiative in consortium with Iluka Resources to procure the Mrima Hill rare earth and niobium project in Kenya”. 

Mining Cabinet Secretary Ali Hassan Joho said at a recent mining forum that Kenya has, over the last few years, been laying the ground for investors to come into the sector with ease.

The work included the clean up of the mining cadastre, a nationwide airborne geophysical survey to map mineral deposits and other reforms in the sector.

He believes these reforms will give players ease in getting to the next phase, which is production.

“We have concluded our aerial survey. The next point of action is production. A lot of companies have done prospecting. What I see Kenya doing in the next few months, a few years is production,” the CS told participants at South Africa’s Mining Indaba, the annual gathering that brings together sector players. 

He noted that among the projects that are tending towards production are Shanta Gold’s project in Western Kenya. And while Base has had difficulties in getting prospecting licences outside of the exhausted mine, Joho said that the firm “has prospected around the area and in Northern Kenya for titanium”.

Joho added that the government is keen on value addition in the sector, which is among the areas of reform and had informed the moratorium.

“We have categorised what we need for value addition. For instance, we have now made it clear that if you want to invest in copper mining, you must be ready to set up processing up to at least copper concentrate and eventually, if we can, cathode and possibly tap,” said Joho.

While the CS exudes confidence that numerous projects are tending towards production, there are concerns that the moratorium had the effect of slowing down prospecting activities in the sector.

Since the industry went for years without searching for mineral resources, the lifting of the moratorium might mean going for several years before any major mining project can come online.

Other factors at play include the designation of some minerals as strategic and can only be exploited by the National Mining Corporation (Namico), which can also get into partnerships with private sector players. 

Kenya’s untapped potential

An analysis of Kenya’s mining sector by law firm Bowman’s showed that the sector holds immense, albeit largely untapped potential. Kenya, the analysis added, stands at the cusp of greatness considering the growing demand for critical minerals, which Kenya has recently designated as critical, which can only be mined when private sector players involve Namico - the State’s exclusive entity for overseeing the extraction of all strategic minerals.

“The global demand for strategic minerals, critical for powering electric vehicles, renewable energy technologies and advanced defence systems, is experiencing unprecedented growth. Nations worldwide are securing supply chains for these vital resources, recognising their profound geopolitical and economic significance,” said Bowmans.

“Against this backdrop, Kenya’s mining sector emerges as a significant, yet largely untapped, frontier. Kenya is endowed with substantial deposits of these critical minerals, positioning it as a potentially key player in meeting global demand.”

The analysts at Bowmans however, noted there may be legal, commercial and operational difficulties that may arise as sector players engage the mining corporation. 

“A significant challenge lies in the fact that the Mining Act, while it allows for private sector participation, it does not explicitly outline the process for selecting or appointing a private entity or finalising an agreement. This regulatory gap may create uncertainty and potential delays in formalising partnerships with the corporation,” said the analysis.

It added that the issuance of licences for mining of critical minerals could be a complex and time-consuming process. This is on account of the corporation being charged with the licensing process, but also mandated with partnerships – through joint ventures of special purpose vehicles – in the exploitation of critical minerals. 

“This necessitates the negotiation and finalisation of a comprehensive joint venture or shareholders’ agreement with the Namico, which may be a complex and time-consuming process,” said Bowmans, while adding that there is the additional approval required from the Cabinet Secretary.

“For Namico to seek private sector participation, the cabinet secretary must first determine that it lacks the necessary technical, financial, or other capacity to effectively explore, mine, refine, smelt, process, or market a strategic mineral. This determination, along with the authorisation for private sector involvement, requires explicit cabinet approval, which may prove to be a lengthy process,” said Bowmans.

The State-run Mining Corporation is also a new entity that might take time to scale up its operational and technical capacity. This, the analysts at Bowmans noted, may affect the pace at which projects are initiated or implemented. 

There have also been concerns that artisanal miners could miss out on what is expected to be a mining boom in the coming years. 

The Kenya Chamber of Mines and the Artisanal and Small Scale Miners Association of Kenya have recently said industry players still face difficulties in obtaining licences. The two lobbies said that while the lifting of the moratorium on mining licences was initially a breath of fresh air for the sector, it has not been followed by necessary policy changes and actions.

“The processing of permits and licences has been excruciatingly slow and costly for investors. Without these permits, the sector has no future,” the two groups said in a joint statement.