Kenya: 'Gold Rush' Sparks New Demand for Bank Loans
The "mining and quarrying" sector recorded the highest growth of new loan accounts opened in January and February, according to data from the Central Bank of Kenya.
Loan accounts opened by mineral prospectors went up 26.6 per cent in January and February to 1,294, marking a sharp increase after stagnating since December 2009.
Mr Moses Masibo, the acting commissioner of mines at the Ministry of Environment and Natural Resources said the shift in the sector is attributable to discovery of gold deposits in Western Kenya and the North Rift, and iron ore in Eastern region.
"We have seen a rise in the number of investors seeking prospecting licenses especially with the discovery of gold and iron ore," said Mr Masibo, adding that a bank account was a regulatory requirement before licensing.
The financial services sector recorded the second highest growth of new loan accounts increasing by 19.6 per cent to 35,490 followed by the building and construction sector accounts which went up by 9.5 per cent.
Trade and tourism, restaurant and hotels sectors recorded declines of 10.6 per cent and 2.5 per cent respectively.
CBK defines a loan account as one through which a commercial bank would extend a bank loan to its customer.
Data from the Kenya National Bureau of Statistics indicates that gold and soda ash were the biggest mineral exports in 2009, earning the country Sh2.2 billion and Sh6 billion respectively.
Mr Masibo said gold has been an attraction for several multi-nationals since mid last year including Goldpat Plc that is now moving into commercial exploitation of the precious mineral through its subsidiary Kilima Pesa in Trans Mara.
"Most of the international applicants have set up their mining operations in the Lake Victoria basin because it is rich in gemstones and gold," said the mines commissioner.
Recent surveys by both the government and private companies have revealed there are large amounts of gold deposits around Migori and Kakamega in western Kenya.
The scale of investment required to enter mineral exploration is an indication that the sector could turn out to be the next frontier that commercial banks will be exploring to grow their loan books.
Moses Njuya, the chief executive of a local precious mineral exploration firm---HQ-Y Enterprises,-- is keen on commercial exploration of gold, zinc and copper after securing an exploration certificate covering over 1000 km-square area in Turkana.
"The first samples have tested positive for zinc and copper but we are still weighing our chances of striking gold," says Mr Njuya who says he would either seek a strategic partner or a bank loan to take on commercial mining of gold.
"In a month's time, we would be knowing our chances of mining gold in the Moroto area," he added, revealing that mineral exploration is a multi-billion business that often requires partnering with experienced mining companies.
More than a dozen international mining firms have intensified their activities in the Lake Victoria Basin which mining experts say might experience a real gold rush in the next 10 years.
The firms include Aviva Corporation of Australia, Afri Ore Ltd, East Africa Pure Gold Ltd, Covenant Mining Ltd, Karebe Gold Mining Ltd, Gold Rim Exploitation (K) Ltd and Abba Mining Company.
The arrival last year of South African investment bank, Absa Capital, for talks with Kenya's capital markets regulator the Capital markets Authority, on the prospects of establishing gold-backed exchange traded funds at the Nairobi Stock Exchange is the strongest signal yet of the heightened international interest in the precious mineral.
Canadian firm Africa Queens Mines is also said to be setting up for gold exploration in the Northern shores of Lake Victoria.
The decline in international investor confidence in equity and currency markets has made gold a secure investment pushing its prices in the global markets to record highs, currently at about Sh3.6 million per kilogramme or Sh100,000 an ounce.
But it is value of gold exports that is bound to jump the highest owing to the increased international prices and output given the number of new entrants who are now going commercial.
The Nyanzian rocks in western Kenya have numerous historical gold mines and is an extension of the same gold bearing belt in neighbouring Tanzania. Some 70 known gold occurrences occur within the Nyanzian rocks which underlie the Ndori/Siaya greenstone belt in western Kenya.
- Kansai Mining Corporation (Canadian) is exploring the Migori Greenstone Belt in south-western Kenya. Previous work has indicated 4 orebodies with a combined resource of 764 000 oz of gold.
- International Gold Exploration AB (Swedish) is exploring the Lolgorien, Akala, Rongo, Secerr and Turcana areas in western and south-western Kenya. In July, 2007, Goldplat plc signed a joint venture agreement with International Gold Exploration AB to develop the gold potential of ten targets totalling approximately 14 sq km selected by Goldplat within the Lolgorien licence area in the historically producing Migori Archaean Greenstone Belt in western Kenya.
- AfriOre (TSX:AFO; AIM:AFO) has a 100% interest in the 1,514 sq km Siaya Special Prospecting Licence (“SPL”) area and has a right to acquire 100% interest in the 1,319 sq km Ndori SPL for US$1 million from San Martin Mining Research and Investment Company Limited, the holder of the SPL. AfriOre is involved in early stage exploration on the Masumbi target, where an extensive zone of gold mineralization, initially identified in a widespread trenching operation, was confirmed in a follow-up exploration program which included gold geochemical soil sampling, ground based magnetic surveys and rotary percussion drilling.