On December 31, 2024, Kwale miner Base Titanium will formally shut down its mining activity in Kenya, bringing to a close a decade-long operation that has generated more than Sh36 billion for the Kenya government in taxes and royalties.
The closure following the depletion of commercially viable ore also means the loss of 1,500 jobs and the average of Sh2 billion that the employees were earning annually from the operation.
The focus will, thereafter, shift to the ongoing restoration work on the mining site, as well as clearance of the remaining stock of unsold products.Under a pact with the government, the reforestation work at the mining site has to go through two rainy seasons before being certified.“We have been able to do our rehabilitation and land restoration work as we go, so many parts of the mine site are either rehabilitated or close to being done,” said Simon Wall, General Manager, External Affairs at Base Titanium.
“On the clearance of remaining stock, we are still trying to organise the sale of the last sweep-up of the factory floor. Sales will go through to February or early March, but will probably be pretty insignificant stocks.”
Base acquired the Kwale project in 2010 from Canada’s Vaaldiam Resources (formerly known as Tiomin Resources) for $3 million—Sh388 million at the current exchange rate— after the latter failed to progress the operation to production in 14 years of holding the concession.
Ahead of the sale, Tiomin made a last-ditch effort to advance the operation by raising capital from China’s Jichuan Group, but the latter called off the proposed investment of Sh1.8 billion for a 70 percent stake in the business over alleged lack of transparency by the Canadian firm. The company made the first shipment of titanium ore in 2014, helping Kenya join the list of notable titanium producers in the world that is led by China, South Africa, and Australia.
That year also marked the start of royalty payments to the government, initially at a rate of 2.5 percent of the value of titanium exports, before doubling to five percent from 2021.
The higher rate was agreed upon in a deal that saw the government expand the company’s mining area beyond the original boundary drawn on its special mining licence which covered 1,661 hectares.Base also agreed to forego a value-added tax (VAT) refund claim of Sh1.7 billion arising from the construction of its mining infrastructure.
It was this expansion of the mining area that allowed the company to extend the life of the operation to the end of 2024, having previously projected that the operation would shut down in October 2022.Over the 10-year period to June 2024, the company paid the government a cumulative Sh17.4 billion in royalties, while also forking out Sh12.3 billion in income taxes to the exchequer.
From 2021, Base Titanium started paying dividends to its Australian parent Base Resources, which yielded some Sh5.3 billion to the Kenya government in the form of withholding taxes on these payouts. For employees, wages peaked in 2023 (calendar year) at Sh2.76 billion, as per filings made available by the company. The firm thereafter made a provision of $7.7 million (Sh995 million) on its books to cater for redundancy costs for the Kenyan operation.
“We have a unionised workforce with a collective bargaining agreement in place. We have a package, which will give them service pay of 22 days for every year worked, as compared to the legal minimum of 15 days, and redundancy pay of 28 days,” said Mr Wall.
Following the closure of the Kenya operation, Base Resources will shift its attention to a new titanium mining prospect in Madagascar known as the Toliara project.Ahead of the move, Base Resources has been taken over by US mineral resources firm Energy Fuels in a cash-and-stock deal valued at 375 million Australian dollars (Sh30.2 billion).
The deal, which was concluded in October, gave Base Resources shareholders a minority stake of 16.4 percent in the combined entity, while Energy Fuels holds a majority 83.6 percent stake. The exit of Base Resources came even as Kenya targets to improve its gains from mineral wealth across the country.
Though mining activity has been present in the country for over 50 years, productivity has remained low, with large-scale operations limited to soda ash, mineral sands, and from 2013 Titanium ores in Kwale.The country is also believed to hold significant deposits of copper, niobium, manganese, and rare earth minerals which largely remain under-exploited, dwarfing the mining sector’s contribution to the national economic output.
For example, the Mining Ministry has lowered the royalty charges for gold miners, hoping to attract bigger investments into the nascent industry.In new regulations by the Ministry, miners will now pay a three percent royalty on the gross value of extracted gold, down from three percent previously.
The State is also now keen on passing mineral wealth to host communities in line with the law. Section 183 of the Mining Act, 2016 provides that any holder of a mineral right shall pay royalties to the State in respect of the various mineral classes won under the mineral right. The revenues arising from mineral royalties would then be shared amongst the national government, beneficiary counties, and communities.
The National Treasury has, for instance, marked a Sh1.05 billion payout in minerals royalties to 23 counties in the financial year that started July 2024, as part of a revenue revenue-sharing scheme between the national government, beneficiary devolved units, and communities.
The share of mineral royalties would be part of the Sh54.7 billion total additional allocations (conditional and unconditional) to counties during the coming financial year.
