Shares in Base Resources have shot up after the mineral sands miner convinced the Kenyan Government not to enforce new nationalist laws on it requiring local ownership.
The Australian company's share price has been decimated in recent months in response to the Kenyan Government's 35 per cent local equity participation regulation.
Now Attorney-General Githu Muigai has told Base Resources that its Kwale Mineral Sands Project will not be subject to the law after Base resisted it on the grounds that its mining licence was issued before the law existed.
The company's share price nearly halved from 43 cents when its market capitalisation was A$240 million ($301.3 million) after the Government announced the new law in October.
Base Resources believes it has made an enemy in Kenya's Environment and Resources Minister, Chirau Ali Mwakwere, after he revoked three of its mining licences in other areas in the country.
The company's managing director, Tim Carstens, was confident of getting the licences back, saying he believed Mwakwere had been angered by Base's actions over the direct equity laws.
But lawyers had advised there was no legal basis for the requirements.
Resources nationalism - whether by direct equity or higher mining taxes - is being increasingly pursued by Governments globally, including in Africa, as tensions rise with mining companies opposed to restrictions on their earnings.
Carstens said that while he supported the Kenyan Government's desire to use mining to drag its economy out of poverty, he thought the Environment Minister was "getting ahead of himself".
Kenya did not currently have a mining industry or a history of one, and there wasn't the money or appetite there to sell 35 per cent of the project to local investors, he said.
"There simply isn't $150 million in Kenya to put into it, it would be completely impossible to implement and would benefit the privileged few which I am not prepared to participate in," he said.
Carstens wanted more Kenyan investors on the company's registry and would be conducting a roadshow there next month, but it would take more time to deepen its capital pools and understanding of mining.
He described resources nationalism as a problem and due to a perception that the industry was making super profits, which he said was not occurring most years.
"The debate is valuable: how do you balance the dual needs of enticing foreign investment in a naked industry where you don't have expertise to develop it yourself, and balance it against making sure the Kenyan people get maximum benefit from exploitation of their minerals," he said.
The $300 million project is due to make its first bulk shipments in November.
The company says the project is still robust, despite heavy falls in prices for mineral sands which are used variously in ceramic tiles and to make titanium dioxide for pigments for paints, plastics and paper.