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Legal Alert | Mining Act | National Mining Corporation Regulations

 

The Mining Act of 2016 and the recently gazetted Mining (National Mining Corporation) Regulations of 2017 (NMC Regulations) established the National Mining Corporation (the NMC).  The NMC is mandated, either on its own or in association with any other person or company, to undertake the exploration and mining of all strategic minerals or deposits in Kenya. In this email we examine the immediate impact of the NMC Regulations.

(a) Constitution of the NMC

The NMC will be managed by a Board comprising of:

  • a Chairman, appointed by the President;
  • the Principal Secretary responsible for Mining;
  • the Principal Secretary responsible for the National Treasury;
  • the Principal Secretary responsible for Trade; and
  • three other persons, not being employees of the NMC, appointed by the Cabinet Secretary (the CS).

The day to day administration and management of the affairs of the NMC will be undertaken by the Chief Executive Officer (the CEO).

The qualifications listed in the NMC Regulations, in our view, appear to be well balanced incorporating knowledge, experience and expertise into the Board. However, as we understand it, the NMC is yet to be established.

The new Act, Regulations and Guidelines will apply to the NMC on the same basis as any other applicant or holder of a mineral right.

(b) Functions of the NMC

The new Act entitles the National Government to a 10% free carried interest in large scale mining operations. The free carried shares are to be held by the NMC. However, under the State Participation Regulations, the CS may appoint any person or statutory body to act as its agent for the exercise of any of the rights of the State as a shareholder. Presumably the CS will appoint the NMC or this may create confusion in relation to the exercise of the National Government’s rights as a shareholder.

Other functions of the NMC include:

  • engaging in any operations relating to any additional interest that the National Government may acquire as agreed with the holder of a mining licence at a fair market value; and
  • acquiring any interest in or entering into a joint venture, farm-in agreement or any other arrangement with a holder of a prospecting licence for the purpose of conducting prospecting operations.

(c) Rights of the NMC as a Shareholder

The National Government through the NMC shall have the right to:

  • transfer, assign or sell its stake in the holder of a mining licence;
  • receive notice of, attend, vote and speak at general meetings;
  • appoint a director(s) proportionate to its shareholding to the board. This right will presumably be exercised in accordance with the provisions of the Companies Act, 2015 in that the right to appoint will have to conform to the articles of association of the mining licence holder and the appointed director will remain liable in respect of his fiduciary duties to the mining license holder; and
  • participate in any dividends that are declared equal to the percentage of its equity share.

Under the NMC Regulations the National Government does not, however, have rights to manage or participate in the day to day operations of the holder of the mining licence.

(d) Obligations of the Licence Holder

A mining licence holder will be required to undertake the necessary actions towards the issuance of the free carried shares to the NMC and the issuance of a share certificate in this regard.

It is important to note that the CS and the mining licence holder shall agree on the timeframe for the issuance of the shares but in any event, the period should not be more than one year.

If you have any questions regarding this legal alert or require more information on the impact of these new laws, please contact Dominic Rebelo.

 
Dominic Rebelo
Partner
djr@africalegalnetwork.com

The content of this alert is intended to be of general use only and should not be relied upon without seeking specific legal advice on any matter.