Canada's Tiomin Resources Inc. is confident that its partner China's Jinchuan Group Ltd. will reach an agreement soon with Kenyan officials to build a $200 million titanium mine on the Indian Ocean coast.

Tiomin and Jinchuan signed a memorandum of understanding in July that Jinchuan would invest $25 million for a 70 percent interest once it had completed due diligence on the Kwale Mineral Sands project.

The final deal was supposed to be signed by Nov. 1 but the Chinese firm has said it is still carrying out the due diligence, citing bureaucratic delays by Kenya's government.

"The government still needs to complete a couple of bureaucratic steps involving various permits and licences. We believe that we are close to resolving those issues now, and hopefully we can move forward in the next month or so," Joe Schwarz, Tiomin Kenya's general manager, said in an interview.

"Jinchuan has a couple of concerns relating to existing agreements between Tiomin and the government which they want clarified, and I believe that once those steps have been taken to their satisfaction, they'll be ready to move forward."

Kenyan government officials and representatives of Jinchuan, China's biggest nickel producer, could not immediately be reached for comment.

Tiomin has been studying sites in the country since 1996 and says Kwale, 40 km (25 miles) south of Mombasa, would be one of the cheapest titanium and zirconium producers in the world.

Tiomin hopes to mine an average of 330,000 tonnes of titanium-bearing ilmenite, 77,000 tonnes of rutile and 37,000 tonnes of zircon a year.

More than 94 percent of the titanium produced in the world is used in pigment production.

Titanium dioxide is a pure white, highly refractive, non-toxic substance used in paint and other coatings, paper, plastics and cosmetics and for titanium metal.

New sector for Kenya

But plans for Kwale have been repeatedly held up by delays including demonstrations by environmental groups, disputes with local farmers over land and drawn out talks with the government.

In early 2006, Tiomin raised $46 million in equity capital to develop the project and an additional $155 million in debt financing.

But work was delayed by an ultimately unsuccessful court challenge by seven farmers demanding more compensation, plus delays acquiring some necessary permits and licences.

"We couldn't give access (to the site) to the contractors, we couldn't spend the equity finance in the time allocated so we couldn't draw down on the debt finance," Tiomin's Schwarz said. "The syndicate of banks and lenders basically pulled the plug."

A judge eventually resolved the land issues in favour of the company, which had spent $7 million resettling several hundred households and the bureaucratic steps continued, albeit slowly, while Tiomin sought alternative investors.

Jinchuan initially took a 9.9 percent stake in the Kwale project in April 2006 for $6.47 million and raised its shareholding to 20 percent for $9.52 million a year later.

Schwarz said the success of Kwale and of sites it hopes to develop next at Kilifi and Mambrui in Kenya would be a big boost to a largely overlooked sector of east Africa's largest economy, which has long focused on agriculture and tourism.

Mineral exports account for only about 0.5 percent of the nation's gross domestic product and the sector is still governed by a Mining Act written by legislators 68 years ago.

"If this project is successful, it will propel Kenya as a whole into the large-scale modern mining sector, and hopefully be the first of other larger-scale projects in the future." – Daily Nation