SHARES in Kenmare Resources fell 7.5% on Monday after it said Mozambique had unilaterally sought to impose regulatory changes that could have negative tax consequences for its Moma heavy minerals mine.
Mozambique and Kenmare have been negotiating an extension of an ‘Implementation Agreement’ since around September 2022. The IA sets down a number of processing and export regulations, specifically affecting items such as royalties and tax exemptions.
In an effort to expedite the extension Kenmare offered certain modifications such as an increase in the royalty to 2.5% from 1% currently, and a withholding tax equivalent to $4m a year in benefits (or 0.5% royalty tax increase).
In late January, however, the Tax Authority in Mozambique instructed custom officials to impose new regulations which had been formulated in July 2025 following a meeting of the Mozambican Council of Ministers.
These changes included an accelerated 3.5% royalty (by 2031) and revoked Moma as an ‘Industrial Free Zone’, steps that did not have Kenmare’s approval.
“If they were to be implemented in whole or in part, they could be quite damaging to us,” said Tom Hickey, MD and CEO of Kenmare in a conference call this morning. The accelerated, higher royalty for instance would amount to an extra 1% of revenue, or “a few million dollars” of additional royalty versus Kenmare’s own proposal.
The combined worse case scenario of Moma losing its industrial free zone status would amount to between $25 to $40m per year, said Kenmare CFO James McCullough.
There was no risk of default on the company’s debt facilities in terms of newly negotiated liquidity convenants with lenders, he said.
Kenmare shipped 947,900 tons of heavy mineral concentrates in 2025 from Moma, which is situated in northern Mozambique. The minerals, such as ilmenite, are used in the manufacture of paint pigments and ceramics. Shipments for 2026 are estimated to be about 1.1 million tons.
Legal action
“Something’s changed. We don’t know whether that’s isolated within the tax authority or represents a more general government stance, but I’m sure we’ll find out. Hopefully this is more a speed bump than a roadblock. That’s certainly the way we’re looking at it.”
While the Tax Authority’s new stance appears to have circumvented the government’s own controls, it nonetheless brings the prospect of international arbitration closer.
Hickey said, however, legal action was “the last resort … We believe it’s not the government’s preference”.
The next milestone is March 20 which is the date targeted by Kenmare and the Mozambican government for a final agreement on the renewal of the IA. “I don’t think it would be a disaster if it took a few days or a little longer,” added Hickey.
Kenmare is also due to post its full year results on March 25.
