London-based Goldplat Plc is fighting an application by a rival mining firm to explore for gold in its Kenyan turf of Migori that is estimated to have reserves worth Sh16.9 billion.
Goldplat, which operates in Kenya through its subsidiary Kilimapesa Gold, said the dispute has been simmering since October 2017, when the Ministry of Mining notified it of an application by an unnamed company to explore for gold in the same area.
Goldplat, in a trading update, told its London Stock Exchange (LSE) investors that it is prepared to sue the Kenyan government if any part of its exploration zone is hived off without compensation.
Goldplat says the status of the controversial exploration application remains unclear despite its clear objection and numerous meetings with Mining secretary John Munyes and other government officials.
Goldplat’s operations in South Western Kenya include the Kilimapesa Hill – an area not targeted by the rival mining firm — where it is currently mining gold reserves estimated at 532,000 ounces and valued at Sh64.4 billion based on the commodity’s current global market price of $1,200 (Sh120,000) an ounce.
The dispute comes at a time when Goldplat is also awaiting a decision on its application for an exploration licence that will allow it to expand its operations beyond the Kilimapesa Hill.
The rival application risks spooking prospective investors who Goldplat has approached to inject new capital in Kilimapesa in exchange for an unspecified stake in the Kenyan operation.
Goldplat says the expected proceeds will enable it to share the burden of providing new capital required to turn around the fortunes of the loss-making subsidiary.
Goldplat has further disclosed that its board approved the search for an investment partner for Kilimapesa to enable existing shareholders realise value from the operation without having to invest additional capital. “Discussions have begun with a number of interested parties and operational focus remains on achieving profitable production.”
Kilimapesa has been making losses mainly arising from production hiccups, cost overruns and slow investment in new equipment, weighing down its parent company’s consolidated earnings. The Kenyan operation reported a net loss of £892,000 (Sh118.3 million) in the year ended June, an improvement from net losses of £1.1 million (Sh146 million) the year before.