Titanium royalties down 54% as Base winds up Kwale operations

Australian mining company-Base Titanium paid the Kenyan government $6.77 million (Sh872.5 million) in royalties for the financial year ended June 2024, as mineral sales dropped by 50 per cent.

This is on the back of reduced production and sales which have come with mineral exhaustion at the licensed Kwale mining sites, with operations set to end in December this year.

The spending on royalties by the company is a 54 per cent drop compared to the $14.6 million (Sh1.9 billion) paid in a similar period last year.

Base started with a royalty rate of 2.5 per cent which it paid for seven years, as per the terms of Base's Special Mining Lease, before it was increased to five per cent, with the company accounting for up to 65 per cent of Kenya’s mineral exports.

During the period under review, sales revenue decreased 50 per cent to $135.1 million (Sh17.4 billion) compared to $271.4 million (Sh34.9 billion) the previous financial year, as lower production limited sales volumes, with a total of 200,530 tonnes sold in the reporting period. This is compared to 406,023 tonnes in the year to June 2023.

“Softening product markets resulted in reductions in average achieved prices of four per cent for rutile, nine per cent for ilmenite and 14 per cent for zircon compared to the prior year,” parent company Base Resources said on Monday.

The company reported a $12 million (Sh1.5 billion) net profit for the period, down from $17.9 million (Sh2.3 billion) the previous year.

Base Titanium distributed $$40 million (Sh5.2 billion) of surplus cash, via dividend, to the Group’s ultimate parent entity, Base Resources.

The dividend distribution by Base Titanium incurred Kenyan dividend withholding tax at a rate of 15 per cent, totalling $6 million (Sh772.5 million), which has been recorded as an income tax expense, thus contributing to a net loss after tax of $1.6 million (Sh206 million) for the Group, its financial indicate.

This compared to a loss of $4.8 million(Sh618 million) the previous year.

“Cash flow from operations was $45.4 million for FY24 (prior period:$117.6 million), with lower sales volumes contributing to a $103.6 million decrease in receipts from customers, offset by a $13.6 million decrease in operating expenditure and $17.9 million reduction in taxes paid,” Base said in its financial statement.

In the year to June, the Kwale project paid $9.8 million (Sh1.3 billion) as income tax to the Kenyan government.

Base whose capital expenditure on its project to date is to the tune of $370 million (Sh47.6 billion-current exchange rate) entered Kenya’s mineral sector in 2010, with operations in Kwale commencing in 2013.

The first shipment of minerals from its Mombasa port facility was made in February 2014.

While operations at Kwale are set to end in December, the firm has been keen to continue with exploration activities in the country and possible future investment in mining activities.

It is eying at least eight exploration licenses for areas in Kwale-Taita Taveta border, Tana River and Lamu. Four have so far been approved and are undergoing public participation.

This allows feedback from the community, before the Cabinet Secretary, with advice from the Mineral Rights Board, approves the licenses.

Base Titanium general manager External Affairs, Simon Wall, said the company remains compliant to the country’s mining laws.

“Base respects the licence application process and believes the opportunity for the public to participate is an important step. We look forward to working with the ministry to address any issues raised by the public in relation to Base prospecting license applications,” Wall told the Star on the telephone.