KSh 8.1 Trillion on Paper, 8% in Royalty: Following Mrima Hill's Rare Earths MoneyKSh 8.1 Trillion on Paper, 8% in Royalty: Following Mrima Hill's Rare Earths Money

That is the royalty rate Kenyan law sets for rare earth elements, and it is charged on what the minerals sell for, not on what geologists say sits in the hill.

With Mining Cabinet Secretary Hassan Ali Joho promising to name a winner within weeks, this explainer follows a shilling of Mrima Hill money from the rock in Kwale to the magnet in a car factory, and shows where Kenya gets paid along the way.

A trillion-shilling figure that nobody will ever bank

Start with the headline number. The KSh 8.1 trillion estimate attached to the deposit since the tender opened is an in-ground value: roughly, the tonnes of contained minerals multiplied by today's prices. It is a useful way to say "this is big". It is not revenue, it is not profit and it is certainly not money owed to the Treasury.

To turn it into cash, a company has to dig, crush and concentrate the ore, then pay for processing, transport, power, wages, waste handling and the loans that funded all of it, over a mine life measured in decades. Prices will move many times in between.

Here is a quick reality check, on Mwenendo's arithmetic. Even if every gram in that estimate were mined and sold at today's prices, an 8% royalty would raise about KSh 648B ($5B) over the whole life of the mine. That is serious money, but it is 8 shillings in every 100 of the headline, spread across many years.

The 8% rule, and the line that matters most

The rate comes from the Mining (Royalty Collection and Management) Regulations, 2024, which list "rare earth elements and radioactive minerals" at 8% of gross value. That is the highest rate on the schedule, above coal at 7% and well above gold at 3%. Niobium, the other prize at Mrima Hill, is not named in the schedule; if it is treated as an "other metallic ore", the rate would be 5%.

One phrase in those regulations deserves more attention than the rate itself. Regulation 5 says royalties are based on the full market value of the mineral "in its most processed and marketable form", taking into account any enhancement that raises its value, and it disallows deductions except those the law allows.

In plain terms: Kenya taxes the gross sales value, before the miner's costs, at the most valuable stage the product reaches before it is sold. Our reading is that where the processing happens therefore decides how big the royalty base is.

Following one year of sales through the gate

A worked example makes this concrete. The figures below are illustrative, not forecasts and not anyone's bid.

Suppose the Mrima Hill mine sells rare earth concentrate worth KSh 25.94B ($200M) in a year. At 8%, the royalty is KSh 2.08B ($16M). Under Section 183 of the Mining Act, 2016, as Mwenendo's editorial on the tender set out, that money splits three ways:

• National government (70%): KSh 1.45B ($11.2M)
• Kwale County (20%): KSh 415.04M ($3.2M)
• The host community (10%): KSh 207.52M ($1.6M)

Now suppose the same rock is separated into oxides in Kenya and sold at twice the value, KSh 51.88B ($400M). Nothing about the hill has changed, yet the royalty doubles to KSh 4.15B ($32M), and the community's share rises to KSh 415.04M ($3.2M) a year.

The doubling is our assumption to show the mechanism; the real uplift depends on grades, prices and the plant. But the direction is the point. Ship concentrate, and Kenya taxes concentrate. Process at home, and Kenya taxes a more valuable product, collects more payroll tax and keeps more of the jobs.

The 10% the State gets without paying

Royalties are the first cheque. The second is ownership. Section 48 of the Mining Act gives the State a 10% free carried interest in large-scale mining and strategic mineral operations: a 10% stake the government does not pay for.

The catch is timing. A shareholding pays only when the company declares dividends, and a new mine usually spends years repaying the money it borrowed to build itself before it declares any. So the carried interest is a back-loaded payment, valuable over the long run and close to zero in the early years.

The third cheque is corporate income tax, charged on profit rather than sales, at Kenya's 30% resident rate before allowances. Profit is where accounting choices, such as the price at which a mine sells to its own overseas refinery, can quietly shrink the bill. That is one reason royalties, levied on gross value, are the revenue Kenya can count on.

The real money sits in the refinery and the magnet

Rare earths are not used as rocks. They are separated into individual oxides, turned into metals and alloys, then made into the permanent magnets inside electric car motors, wind turbines and phones. Each step is worth more than the last.

That chain runs through one country. According to the International Energy Agency, China accounted for 60% of mined production of magnet rare earths in 2024, but 91% of refined output and 94% of sintered permanent magnets. Mining is the step the world can do in many places; refining and magnet-making are where the bargaining power and margins sit.

This is why the bids differ in ways that matter. Mwenendo has reported that five consortia remain, and published proposals already diverge: one plans to process some minerals at an existing refinery in Australia, while another has promised processing in Kenya. On the royalty rule above, those two promises would produce very different cheques from the same hill.

Three tests for the Mrima Hill award

When the Ministry of Mining names a winner, a reader can test the deal with three questions the regulations make answerable.

First, the stage of export: concentrate, separated oxide or metal. That sets the royalty base. Second, the processing timetable, with dates and penalties, because a refinery promised for "later" is a concentrate export now. Third, the value placed on the State's 10% carried interest and when it is expected to pay.

Kenya has been here before with natural resources. The Turkana oil terms let the driller recover its costs before the State shares much, and the Magadi soda ash shutdown shows how fast mineral income can stop. Mrima Hill's in-ground value will make the speeches. The stage of export will make the money.