Kenya set for higher titanium royalties as global prices double

Kenya is set to reap higher royalties from the export of titanium following a doubling of the price of the mineral in the past seven months.

Base Resources Limited, which mines the titanium ore in Kwale, said yesterday the improved price signals better prospects for the country in terms of royalty fees.

In 2015, the firm paid royalties amounting to Sh260.7 million and this is expected to rise as operations increase in 2017.

“Royalties are paid based on sales and the improved market conditions for ilmenite will be good news for Kenya as it means there will be more royalties from the revenues we make from the sales,” said Base Titanium external affairs manager Simon Wall.

The Australian mining firm in an operational update said it had hit a new production high of three million tonnes between September and December 2016.

The Kwale-based miner exports ilmenite, which is an ore of titanium (titanium-iron oxide) that is used in the manufacture of paints, plastics, paper, sunscreen, cosmetics and fabric pigmentation.

READ: Titanium cements position as Kenya’s top mineral earner

The firm projects increased demand for the product with further rise in prices as it continues to secure forward sales currently stretching to next month.

The mineral which was trading at a low of Sh6,000 per tonne ($60) in June now retails at about Sh14,000 per tonne ($140), an more than 130 per cent growth. Kenya exports most of its ilmenite to China.

Base, which produced 117,000 metric tonnes of the product in the last quarter of the year has an annual average of about 450,000 metric tonnes.

The increase in total production was attributed to the recent commissioning of a new 400 metric tonnes per hour hydraulic mining unit.

The firm is, however, yet to get a long-standing Sh1.8 billion value added tax (VAT) refund claim from the Kenya Revenue Authority (KRA).

The Australian mining firm said talks were underway with the Treasury and the KRA to speed up the refund which had been pending since January 2015.

Base managing director Tim Carstens said the backlog needed to be cleared faster to save the firm from cash flow challenges as it gears up for expansion.

“Refund backlog is not unusual in the African environment but the focus is now to have the backlog cleared and ensure that it does not impact negatively on our cash flow. It is quite unpredictable though,” he said.

“The VAT claims are proceeding through the Kenya Revenue Authority process, with a number of operational period claims, totalling about $1.5 million, settled during the quarter.”

The refunds claims relate to the construction of the Kwale project and the period since operations commenced to December 2016.