London-listed Kenmare Resources says it may have to initiate international arbitration proceedings to resolve matters with the Mozambican government on terms related to processing and export activities at the Moma titanium minerals mine, in Mozambique.

This follows Mozambique’s Tax Authority imposing updated terms on Kenmare’s activities despite an updated Implementation Agreement not having been concluded yet.

“We are very concerned by the Mozambique Tax Authority’s recent attempt to impose terms that have not been mutually agreed with Kenmare.

“This action contrasts with the outcome of a meeting with various Ministers and other government representatives in February where it was agreed the parties would work together to conclude negotiations by March 20,” Kenmare MD Tom Hickey explains, adding that the company is seeking urgent clarification from government.

The Implementation Agreement between Kenmare and the Mozambique government grants certain rights and concessions to Kenmare’s subsidiary, Kenmare Moma Processing Limited (KMPL) in connection with processing and export activities from the Moma mine.

Mining operations at Moma are conducted under a separate regulatory framework that is not impacted in any way by the Implementation Agreement process.

Kenmare applied for renewal of the Implementation Agreement in September 2022 and has been engaged in the renewal process and negotiations with government ever since.

On the basis of ensuring a productive working relationship, when the original rights under the Implementation Agreement expired in December 2024, government provided written confirmations to enable KMPL to continue operating on historical terms while the parties continued negotiations.

Kenmare confirms it had proposed certain modifications to the investment regime applicable to KMPL as part of the renewal of the Implementation Agreement notwithstanding the company’s right to such an extension.

The company’s proposal at the time provided for an increase in the royalty rate from 1% to 2.5%; the application of withholding tax on payments to non-Mozambican suppliers providing services out of country (including inter-company services provided to KMPL by Kenmare); and further capital investments and contributions to community development projects by the Kenmare Moma Development Association during the 20-year extension period.

This proposal was subsequently revised in April 2025 to include a phased increase in the royalty rate from 2.5% in 2025 to 3.5% over the course of the 20-year agreement.

“Our April 2025 proposal to the Mozambique government included several concessions significantly beyond our contractual entitlements, reflecting our commitment to an equitable distribution of value from Moma and substantial ongoing investment in our operations and in Moma’s host communities.

“We are hopeful of a positive outcome for both sides in the near term. After almost four decades of deeply collaborative partnership with local communities and the government of Mozambique, we would be disappointed to have to resort to arbitration to asset our contractual rights, however, we may be compelled to do so if we cannot reach a timely agreement,” Hickey states.

THE ISSUE

At a meeting of the Mozambican Council of Ministers in July 2025, the council adopted an internal resolution setting out terms for renewal. These terms were not agreed with Kenmare and differ significantly from those which Kenmare is contractually entitled and from those proposed by Kenmare – and “would be economically and operationally detrimental to Kenmare’s interests”.

Upon being made aware of this, Kenmare protested to government representatives in the strongest terms and understood from continued engagement with the government since then that the terms of the Internal Resolution would not be imposed while negotiations between the parties were still ongoing.

While granting KMPL a 20-year extension, the terms of the Internal Resolution include an accelerated schedule for the increase in the royalty rate from 2.5% to 3.5% (in 0.5% increments, reaching 3.5% in 2031); they revoke the Industrial Free Zone (IFZ) status that has historically applied to Moma Processing’s operations; and they limit exemptions from customs duties and import value-added tax (VAT) to certain capital equipment and their accompanying spare parts and accessories.

The loss of the IFZ status implies that VAT would be applicable to certain transactions by KMPL that have historically been exempt. These could include the purchase of heavy mineral concentrate by KMPL from Kenmare’s mining company, Kenmare Moma Mining (Mauritius), and other major inputs, including fuel and electricity.

While it is expected that this VAT would be recoverable, it would impose working capital requirements to fund a period of uncertain duration between payment and reimbursement of the VAT.

The loss of IFZ status may also restrict KMPL’s ability to operate offshore bank accounts and may result in additional taxes being due, including corporation tax on KMPL’s profits.

While some or all of these potential implications may not have been intended, or may not ultimately be implemented, no clarity of application or confirmation of intent has to date been provided by the Mozambican government to Kenmare, the company confirms.  

In aggregate, a loss of IFZ status could be materially detrimental to the group’s economic interests or liquidity relative to its rights to renew under its historical terms, or relative to Kenmare’s proposal for updated renewal terms.

Kenmare understands that Mozambican customs officials were instructed by the Tax Authority in late January 2026 to restrict exemptions from VAT and customs duties on imports by KMPL, consistent with the Internal Resolution and contrary to the provisions of the Implementation Agreement.

At a meeting with senior government representatives on February 19, Kenmare queried the intent and actions of the Tax Authority. In that meeting, it was agreed that the parties would work together to resolve any outstanding issues and to agree final terms for the Implementation Agreement renewal within a 30-day window, running until March 20.

Kenmare welcomed this development and has been actively engaged with these representatives since that meeting, including responding to requests for minor adjustments to its most recent proposal to facilitate an agreement within the agreed timeframe.

However, in early March the Mozambique Tax Authority requested that KMPL pay a royalty rate of 2.5%, in accordance with the Internal Resolution, instead of the 1% currently provided for under the Implementation Agreement.

While this rate is consistent with that included in Kenmare’s proposal and has been accrued by Kenmare in its financial accounts, KMPL has not paid the higher royalty rate pending formal completion of the Implementation Agreement renewal process with the government on agreed terms.

Kenmare is seeking to engage urgently with the government, both on the position regarding implementation of the Internal Resolution and to conclude an agreement for the renewal of the Implementation Agreement terms within the proposed 30-day window.