Base Resources in talks with Balala to double minerals royalty payouts

The government is set to get higher royalty payments from Australian mining firm Base Resources.

The Kwale rutile, zircon and ilmenite exporter said it was in talks with the Mining ministry to double royalty payments from 2.5 per cent of sales.

Base Resources has been under pressure from the government and the Senate to raise the payment negotiated under the Narc administration in 2004.

“We are having ongoing discussion to increase the royalties to five per cent of sales volumes,” said Base Resources chief executive Tim Cartsens.

At five per cent Kenya would earn royalty payments at the same rate as South Africa and Australia.

The miner began work at its Kwale-based Mineral Sands Projects in October 2011 and made its first exports in February 2014.

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Base Resources annual report for 2014 says the company paid $1.875 million (Sh187.5 million) in royalty.

Doubling the level of royalties will result in the government earning more than the $225 million (Sh22.5 billion) it expects to make over the 13 years of the mine’s operations.

Mining secretary Najib Balala, however, said Base Resources should even be paying a higher percentage of royalties since the location of its Kwale-based operations gives the mining firm a sweetheart deal when compared to similar mines in Australia.

“They should be paying at least 10 per cent,” Mr Balala told the Business Daily in an interview last week.

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The Kwale-based mine is 50 kilometres from the Mombasa-based port facility while similar mines in Australia are as far as 600 kilometres away from the nearest coastline, making local operations less costly.

Mr Balala said the fact that the government had given Base Resources free access to the port facility in Mombasa, makes a 10 per cent royalty fee fair.

The revised Mining Bill which is before the Senate also proposes that royalties from the sale of rare earth, niobium and titanium ores be increased to 10 per cent of gross sales from 2.5 per cent.

The government is also proposing new laws that will require mining firms to commit to spend a certain amount on the mining sites or have their licences revoked, a policy that is meant to stop speculation by license holders.

Mr Balala said earlier the ministry is targeting to have the mining sector account for up to three per cent of gross domestic product from the current one per cent.

Kenya’s mining sector is still at its infancy. Gold and rare earth minerals are the other deposits that have been found but are yet to be exploited.