Kenya has for the second time won a Ksh200 billion case against Cortec Mining Kenya Limited and Stirling Capital Limited over revocation of their license in 2013.
The two wanted the International Centre for Settlement of Investment Disputes (ICSID) to overturn a 2018 tribunal decision, which found the license was a protected investment.
The firms had been granted license to mine niobium and rare earth minerals at Mrima Hills in Kwale County but it was later cancelled by the government, forcing Cortec to challenge the revocation.
Cortes, a Canadian company that used political connections and boardroom manoeuvres to get an exclusive mining license for US$62.4 billion worth of minerals in Kwale County had lost its attempt to bulldoze the government to reinstate the permit — ending what had turned out to be the biggest auction of Kenya’s natural resources in history.
The case by the Canadian company exposed what had gone behind the scenes in the quest for an exclusive licence.
Cortec Mining Kenya (CMK) Limited, whose local face was controversial tenderpreneur Jacob Juma, had sued the government at the International Centre for Settlement of Investment Disputes arising out of a mining project at Mrima Hill said to contain one of the world’s largest undeveloped niobium and rare earth deposits.
Mr Juma, who was later killed in May 2016 by unknown people, was — according to the government — brought into the Canadian company’s board “to circumvent the legal obstacles and procure a mining license illegally” during the transition between President Kibaki and Jubilee government.
On the day that Kenyans were focused on the start of an election petition between Jubilee’s Uhuru Kenyatta and former Prime Minister Raila Odinga against the March 4 election of Mr Kenyatta, the license was handed over to Cortec, giving away Kenya’s most lucrative mineral field to a Canadian firm. In return, for his effort, Mr Juma was given 30 percent shareholding in the firm in a classic case of high level corruption.
In order to show the Canadian firm that he had connections in high places, Mr Juma organised to see the new President at State House, Mombasa — where he had taken rest after a tortuous campaign and court battle.
On April, 26, 2013, 17 days after President Kenyatta was sworn-in for his first term, the Canadian directors of Cortec were driven to State House Mombasa for a “courtesy call” — or what Isaiya Kabira, the outgoing head of Presidential Press termed as a “sales pitch”.
While Mr Kenyatta told the group that his government would support a vibrant mining industry, the Canadians took that to be an approval.
But later Mining Cabinet Secretary Najib Balala not only cancelled various mining licenses issued during the transition period but on August 23, 2013, he formed a task force headed by Mr Mohammed Nyaoga to look at all the licenses.
Some of the companies whose licenses were cancelled include Saharco Group International Company Ltd, Yongtai Mining Company Ltd, Pan African Chemicals Ltd, Laholmes Machinery, African Uranium Kenya Ltd and Bisil Mining Company Ltd.
Eight licenses were classified as non-compliant having been granted without complying with requirements of the Mining Act and regulations. Another 46 licenses were listed as non-performing and expired for being in breach of the conditions of issuance.
But rather than present its case, Cortec initiated discussions with Deputy President William Ruto aimed at a political resolution of the dispute over SML 351. CMK also commenced judicial review proceedings in the Nairobi High Court, and its lawyer Havi & Co Advocates said the company would not participate in the proceedings.
At the political front, Jacob Juma was not lucky and the High Court also ruled that a mining license could not be validly issued before an Environmental Impact Assessment approval had been issued. .
The mining companies had argued they spent six years and millions of dollars in exploration and development, and their investment in the mine was effectively nationalized when in 2013, the then mining minister, Najib Balala, unexpectedly raised royalties on minerals and revoked certain licenses.
At the time, Balala said the move was to ensure Kenya got a bigger share of earnings from its nascent mining sector.
In 2018, the investor-state arbitral tribunal dismissed the case and ordered the companies to pay costs of around $3.5 million to the government, compared with the $6.5 million it was seeking.
Initial drilling at the Mrima Hill project had suggested more than 100 million tonnes of niobium and 30 million tonnes of rare earth minerals, the ruling said.
The ICSID upheld the decision saying the companies failed to prove that the ruling will have negative consequences on the mining sector.
“For the foregoing reasons the committee unanimously decided that the application for annulment of the Award of 22 October 2018 rendered in Cortec Mining Kenya Limited, Cortec (Pty) Limited and Stirling Capital Limited VS Republic OF Kenya is dismissed,” said ICSID in a ruling delivered on March 19.
The two firms had appealed against the award saying was inconsistent with the terms of a 2013 agreement between UK and Kenya for the promotion and protection of investments, and that it was rendered in disregard of key evidence they presented before the tribunal.
Kenya on its part argued that there was nothing to overturn and the case was an attempt to appeal against the findings of the tribunal, issued in 2018.
Mineral Rights Board—which advices the government on granting mineral rights—reckons Kenya now has possession of the world fifth largest rare earth mines.
Mr Stephen Kuria, the chair of the board, said that the State will consider seeking other firms to mine the minerals.
“This are decisions that the State is not going to arrive at soon. We need to do a valuation and quantify the value of minerals we have on ground,” he said yesterday.
Niobium is a component in high-strength steels and rare earths are a group of 17 elements used in consumer electronics and magnets for electric vehicle motors.