US firm buys Kwale miner’s parent in Sh31bn deal

Base Titanium factory in Kwale County. 

Photo credit: File | Nation Media Group

Kwale titanium miner Base Titanium’s Australian parent firm is set to be acquired by an American mineral resources firm Energy Fuels in a Sh31.8 billion (375 million Australian dollars) cash-and-stock deal.

The deal will give the American firm effective control over the Kenyan operation from September, a few months before the Kwale-based miner’s closure at the end of the year, but with the potential to resume production in future.

Base Resources, the Perth-based Australian company, told its shareholders that the buyout offer prices the company’s shares at A$0.302 (Sh25.60) each, representing a 188 percent premium on the trading price of A$0.105 (Sh8.90) on April 19 at the Australian Securities Exchange.

Base’s shareholders will receive 0.026 Energy Fuels common shares plus a special dividend of A$0.065 (Sh5.51) per share in the transaction, which is expected to close by the end of August 2024.

The shareholders will hold approximately 16.4 percent of the combined group after the deal, giving Energy Fuels the majority 83.6 percent stake.

The company’s move to bring in a strategic partner comes ahead of its shift in focus to Madagascar’s Toliara titanium mining operation, and the closure of the Kenyan operation whose viable ore has been depleted.

“The combined group will retain Base Resources’ leadership team, who will continue to oversee the development and operation of the Toliara Project and the completion of operations and closure of Kwale Operations,” the Australian multinational said in a statement.

Base acquired the Kwale project in 2010 from Canada’s Vaaldiam Resources (formerly known as Tiomin Resources) for $3 million —Sh395 million at current exchange rates— and has been paying royalties and taxes since 2014 when shipment of titanium minerals ilmenite, rutile and zircon started.

In the year ending June 2023, the company paid the government a total of $43.71 million (Sh5.8 billion) in royalties and taxes, down from $64.8 million (Sh8.5 billion) in the preceding year.

The 2023 financial year payout comprised $19.1 million in corporate income tax, $14.8 million in mineral royalties, and $2.5 million in withholding taxes on non-government royalties and services. The company also paid $18.7 million in utilities and other service charges to State corporations and county governments.

For the six months to December 2023, royalties stood at $3.7 million (Sh488 million), halving from $7.3 million (Sh961 million) in the six months to December 2022 on account of falling ore production. The venture has also been profitable for the Australian multinational, which has earned billions of shillings in dividends, including an $84 million (Sh11 billion) payout in the year ended June 2023.

Base will, however, shut the Kwale operation at the end of this year, saying that there are not enough titanium resources in new areas it has been exploring to sustain the operations beyond December.

The Kwale-based miner has set aside Sh1 billion ($7.7 million) to compensate hundreds of workers set to be laid off as it winds down local operations by the end of this year.

The company made the redundancy provision in its financials for the six months ended December 2023, indicating that it is on course to close down the Kwale operation upon the depletion of commercially viable ore.

As per the latest Base Resources annual report, the Kenyan subsidiary had a total of 1,746 employees and contractors on its books by June 2023.

The 2023 annual report did not break down the split between employees and contractors, but an earlier one covering the year to June 2022 has stated that the firm had 888 employees on its books, out of whom 870 were Kenyans drawn mostly from Kwale and Mombasa counties.

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