Kenya pursues extraction of EFIC minerals
In a significant move for the Kenyan mining sector, the Australian Export Finance and Insurance Corporation (EFIC) has provided political risk insurance (PRI) for a total debt of US$80 million to a syndicate of commercial lenders for the Kwale mineral sands project. This project, with an estimated capital cost of US$178 million, is set to be completed by late 2008.
Ausenco International, a global engineering and project management company, has been appointed to project manage the design and construction of the Kwale project from its Queensland base. This marks a significant role for Ausenco in Africa, where they will oversee key elements of the engineering, procurement, and construction management (EPCM) contract.
The Kwale project, which represents the largest foreign direct investment in Kenya's mining sector, has attracted the attention of EFIC due to its potential for local employment and economic growth, as stated by Angus Armour, managing director of EFIC.
EFIC's involvement in the Kwale project began in 2004, when discussions with the project's developer, Tiomin, commenced. By April 2006, EFIC was formally engaged, and intensive negotiations with the lenders - Standard Chartered Bank, WestLB, and Caterpillar Financial - were fast-tracked to close in August.
EFIC's PRI policy will cover these lenders against political risks that could affect the Kwale project, providing a crucial safety net for the project's success. EFIC worked closely with Tiomin's financial adviser, Barclays Capital, in assessing the Kwale project, given their significant experience in the mining sector.
EFIC's role in the Kwale project underscores its general function as Australia's export credit agency. EFIC provides financial support in the form of loans, guarantees, and insurance to help Australian businesses succeed in international markets, including infrastructure projects, resource extraction, and other ventures. In the context of international projects, EFIC's services are essential for managing risks associated with foreign investments. They help Australian companies secure funding for projects that might otherwise be difficult to finance due to lack of collateral or high political risks.
As Australia's involvement in African projects increases, particularly in the resources sector, the role of EFIC in mitigating risks becomes increasingly important. This is reflected in the growing number of Australian companies seeking opportunities in Africa, with a corresponding recognition of the risks involved and the role of EFIC in managing those risks.
EFIC has a history of supporting resource projects in various regions, including Papua New Guinea, Asia, and Latin America, and working with commercial banks in these regions. As Australia continues to expand its presence in Africa, it is expected that EFIC will play a critical role in facilitating investment and ensuring the success of projects like the Kwale mineral sands project.
In the context of its role as Australia's export credit agency, EFIC's involvement in the Kwale mineral sands project signifies a significant step towards supporting digital trade and finance within Africa's mining sector. Given EFIC's expertise in risk management, their provision of political risk insurance for the project also opens opportunities for growth and employment in the digital trade and industry of Kenya.
