By: OrePulse

Kenmare Resources has reached a 20-year extension of the agreement governing its mineral sands exports from the Moma operation in Mozambique, resolving a long-running dispute with the government over royalties, value-added tax and customs duties.

Mozambique's Council of Ministers has approved the extension of the Implementation Agreement, which will run to 2044, the company said in a stock exchange statement. Kenmare said it received formal notice of the approval on October 29. The dispute had centered on the royalty rate applied to Moma's output as well as on value-added tax and customs-duty arrangements sought by the company for the operation.

Under the new terms, the royalty Kenmare pays on gross revenue from Moma will rise in stages: from the current 1 percent to 3 percent for 2025 through 2029, to 4 percent for 2030 through 2034, and to 5 percent for the final decade of the agreement, through 2044. Kenmare chief executive Tom Hickey said the final royalty terms represented "a slight increase" on what the company had previously disclosed, when royalties had been expected to reach a maximum of 3.5 percent.

A new 20 percent withholding tax will also apply to services provided to Moma from outside Mozambique, once an amending addendum to the agreement is signed. Hickey estimated the additional cost at about $3 million a year.

In exchange for the extended export terms, Kenmare has committed to invest at least $200 million in plant and infrastructure at Moma over the course of the extension, plus a further $50 million on social projects. Hickey said most of the $200 million represents routine maintenance capital expenditure rather than new spending, and that the company does not expect the commitment to change its existing investment plans materially.

The agreement also gives Mozambique the option to buy up to 20 percent of Moma's annual mineral sands production for local processing, at market prices, typically with two years' notice to Kenmare.

The dispute dates back to the expiry of the original 20-year authorization under the Implementation Agreement in December 2024, after which Kenmare continued operating under the existing terms while negotiations proceeded. At the half-year stage, Kenmare had accrued about $7.2 million in royalties under a 2.5 percent rate; under the new 3 percent rate, the company said the equivalent figure would rise to just under $10 million.

Kenmare's mining concession, which is separate from the Implementation Agreement, runs until August 2029. Gareth Clifton, the company's Mozambique manager, said the terms for renewing that concession are now "far clearer," though Kenmare must give a year's notice to seek a 15-year renewal once the current concession period ends.

The remaining procedural steps are to sign an amending addendum and submit it to Mozambique's Administrative Court. Hickey said these steps are administrative in nature and "do not reopen terms" of the agreement already reached between the company and the government. He added that revisiting any part of the settlement now "would not be a smart idea," given the long-term certainty the extension provides for planning at Moma.

Separately, Kenmare said talks with Abu Dhabi-based International Resources Holdings over a possible all-cash takeover of the company are continuing. Hickey said no other party had disclosed an interest in acquiring Kenmare.

Moma is among the world's largest mineral sands operations, producing heavy mineral sands feedstock, including ilmenite and zircon concentrates, for the titanium dioxide and zirconium industries. Kenmare said the resolution of the royalty, tax and customs dispute removes a source of uncertainty that had surrounded the operation's long-term fiscal and investment terms, and gives both the company and the Mozambican government a fixed framework running through 2044.