Base Titanium is projecting a drop in production at its Kwale operation by nearly half in the financial year starting July, signalling reduced royalties for the Treasury.
Disclosures by its Australia-based parent firm Base Resources say the fall in mineral volumes is mainly due to the depletion of the South Dune, which is expected to shut in March 2024, and the subsequent disruptions as the equipment is moved to other mining sites in the operation.
The Perth-based company said its forward-looking projections show that volumes of ilmenite—the most abundant titanium mineral in Kwale—will come in at between 130,000-160,000 tonnes in the 2024 financial year, compared to a projection of 260,000 to 310,000 in the year ending June 2023.
Rutile volumes are projected at 35,000 to 41,000 tonnes, down from 62,000 to 73,000 this year, while the mines are expected to yield between 13,000-16,000 tonnes of zircon next year, down from 22,000 to 27,000 tonnes this year.
“The 2024 financial year production guidance is lower than the 2023 guidance due to…lower heavy mineral grades – the remaining sections of the South Dune and the areas of the North Dune and Bumamani ore bodies proposed to be mined are estimated to have lower heavy mineral (HM) grades than the grades historically mined at Kwale operations,” said Base Resources in its update.
“Mining availability – a shutdown of half the mining operation is anticipated to occur in March 2024 for the relocation of the South Dune hydraulic mining units and slurry collection hopper to the Bumamani orebody.”
The decline in output, even with higher prices in the global market, will impact the royalties negatively, Base Titanium’s corporate taxes and withholding tax on dividend payout to the parent firm.
In the year ending June 2022, Base paid the Treasury $30.07 million (Sh4.2 billion) in royalties, and $26.8 million (Sh3.8 billion) in corporate and withholding taxes, the latter being payable on dividends to the parent and other services.
Base Titanium also spent $18.1 million (Sh2.5 billion) on utilities and other services rendered by State corporations, while other payments relating to permits, licence fees, customs duty and other entry fees totalled $2.64 million (Sh370 million).
The company paid a total of $32.1 million (Sh4.4 billion) in royalties and taxes in the 12 months to June 2021.
The rise in royalties and taxes was due to a jump in sales by 39.8 percent to Sh33.3 billion in the year ended June 2022, reflecting the impact of the average price of the minerals rising by 32.9 percent to $621 (Sh87,213) per tonne.
Base Resources took over the Kwale operation from Canada’s Tiomin Resources in 2010 for $3 million — Sh421 million at current exchange rates — and has been paying royalties and taxes since 2014 when shipment of 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 percentage of the value of the titanium exports.
The royalty rate payable to the 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.
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 whose ore will be depleted in March next year.
Production will then be concentrated on the North Dunes, extending the life of the operation to late 2024.
