Economy

How Base Titanium injected Sh16.5bn into the economy

titanium

Base Titanium factory in Kwale County where the minerals are processed. PHOTO | KEVIN ODIT | NMG

Kwale miner Base Titanium injected Sh16.5 billion into the Kenyan economy through royalties, taxes and supplier purchases in the year ending June 2022, new disclosures by its Australian parent Base Resources show.

Base Resources says in its inaugural sustainability report that the Kenyan unit spent Sh7 billion ($57.61 million) in payments to local suppliers, with this amount representing 71 percent of the company’s total procurement spend in the period.

Mining royalty payments to the government stood at Sh3.67 billion ($30.07 million), while corporate and withholding taxes — payable on dividends to the parent and other services — amounted to Sh3.27 billion ($26.8 million).

READ: Base Titanium pays Sh10.7bn to parent firm

Base Titanium also spent Sh2.21 billion ($18.1 million) on utilities and other services rendered by State corporations, the sustainability report states, while other payments relating to permits, licence fees, customs duty and other entry fees totalled Sh322 million ($2.64 million).

The company’s employees paid Sh644 million ($5.28 million in payroll taxes in the period.

This is the first time the titanium miner is offering a breakdown of its overall cash injection into the local economy beyond taxes and royalties, as part of the environmental, social and governance (ESG) reporting framework that is represented through sustainability reports.

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The local procurement was mainly from suppliers in Mombasa and Kwale, which accounted for 30 percent and 28 percent respectively of all goods and services the company took up from the local market.

“We apply a similar approach to selecting suppliers as we do with employment, using the ‘fencing system’ under which preference is sequentially given to suppliers within Kwale County, Mombasa County and then rest of Kenya, before international suppliers,” said Base Resources in the sustainability report.

Base Resources took over the Kwale operation from Canada’s Tiomin Resources in 2010 for $3 million — Sh366 million at current exchange rates — and has been paying royalties and taxes since 2014, when shipment of the titanium minerals ilmenite, rutile and zircon started.

The company pays income tax at the rate of 30 percent, dividend withholding tax at 15 percent and royalties as a fraction of the value of the titanium exports.

The miner’s sales jumped 39.8 percent to Sh33.3 billion in the year ended June, reflecting the impact of the average price of the minerals rising by 32.9 percent to $621 (Sh75,780) per tonne.

The royalty rate payable to government was doubled to five percent of titanium sales last year as part of an agreement that saw Base Titanium get a larger mining area while the government kept value-added tax (VAT) refunds that were due to the miner.

By agreeing to forfeit the VAT claim of $16 million (Sh1.95 billion) arising from the construction of its mining infrastructure, Base Titanium got the right to extend its mining operations beyond the original boundary drawn on its special mining licence, which covered 1,661 hectares.

Mining at the new site, known as Bumamani or Northern concession area, will commence in March next year after land access arrangements are finalised, and will allow the firm to extend the entire operation’s life by 13 months to December 2014.

READ: Kwale-based titanium miner spends Sh1 billion on new site

The new mining area is expected to yield up to 17.9 million tonnes of titanium ore, out of which the firm expects to get 42,000 tonnes of rutile, 171,000 tonnes of ilmenite and 20,000 tonnes of zircon.

Base Titanium started its mining activity in Kwale in 2013 at the Central Dune — whose minerals were exhausted in 2019 — and later shifted its operations to the South Dune where it is currently producing titanium products and where it expects production to continue until May 2024.

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