Gold producer optimistic on Kenya’s prospects
Andrew Bell, chief executive and chairman of London-listed mineral exploration company Red Rock Resources (RRR), tells How we made it in Africa’s Dinfin Mulupi about the firm’s gold production prospects in Kenya and its planned investment in the region.
Tell us about your interests in Kenya
We directly and indirectly own Mid Migori Mining Company, a Kenyan mineral exploration company, which has prospecting licences and is currently exploring gold in Migori near the Tanzanian border. We have applied for a mining licence for the tailings, which were left over from an old mine that operated between the 1930s and 1960s. When we get that licence, we will put up a plant to treat 1.4 million tonnes of tailings, which is a lot. We will probably be doing about 250,000 tonnes a year or more. The reason the gold is in the tailings is because it did not come out easily in the years the plant was operating, but with modern technology, we think we can recover gold, and with the gold price being high, it’s worth trying to do it. That means we would extract 40,000 or 50,000 ounces of gold, which is worth about US$100 million. That will pay for a lot of work like rehabilitating the tailings afterwards.
We will then start a mine to extract gold from the deposits that we found at Migori. We could go into production a year or two from now. We want to start with the tailings, then going into large-scale gold production will be the next thing.
Kenya is not a leading gold mining destination on the continent. What are the prospects?
I think Kenya can be a reasonable, middle-sized gold producer. Kenya needs to open gold mines one by one. Tanzania started with a socialist economy that discouraged private enterprises of all kinds and was quite hostile to business. They turned this around and one mine after another got approved. It should be far easier here (Kenya), because they have got a pro-business government and [the] remains of some good laws and they are now modernising them.
Are you exploring and investing in other African countries?
We have discovered uranium in Malawi through an associate and we also have interest in rare earths in the country. In the next one week or two we will begin exploring agro-minerals in Sudan through an associate. Sudan has had very little exploration. The mineral potential of Sudan is huge.
East Africa has made significant mineral discoveries in the last few years. What does the region need to become a hub?
Since 2000 we have had a period where everyone has been investing in minerals. I think the boom is going to slow down a bit because there is going to be competition for mineral investment. Countries therefore have to provide a favourable environment. I am sure that Kenya is going to be a reasonable market because of [its] good infrastructure, educated workforce, good air links and nice climate.
When it comes to oil, it is in the early stages of development in Kenya, but the world demand for oil exploration is still so huge that the amount of money that will be thrown [into] that is very great, but it is not a competitive environment. Companies are desperately trying to get more licences. I don’t think you will see that for mineral licences. It’s a slower, longer process. But the beauty of oil is: you drill oil, you get oil. Six months later you can be sitting back in your office collecting cheques.
Countries like South Africa have had a difficult year in mining with workers’ unrest. What do you make of that as an investor?
There have been bad examples and good examples. Botswana has cemented its position as the most successful country in Southern Africa in terms of economic growth, transparency, investor friendly laws and yet the government still gets its share. Anyone would be well advised to copy Botswana. On the other hand there have been examples like Zimbabwe where you have a combination of very harsh conditions and legal uncertainty that discourages investors. If you look at the last year, Tanzania and Ghana are great success stories that have been incredibly successful in mining investment and development. The only thing I would caution any government at the moment is don’t assume the mining conditions of the last five years of Chinese super boom, and prices just going up and up, are going to persist.