The government earnings from the Kwale titanium mine run by Australian-owned Base Titanium nearly halved in the six months to December 2023 on reduced production as the operation winds down to its planned closure at the end of this year.
Financial filings by Base Resources, the Perth-based parent of Base Titanium, indicate that the company paid the government a total of Sh2.09 billion ($14.61 million) in royalties and taxes in the period, down from Sh3.94 billion ($27.6 million) in the corresponding period in 2022.
Withholding taxes on a dividend paid by the Kenyan subsidiary to its parent accounted for the largest share of the government’s earnings from Base Titanium in the period, at Sh856.8 million ($6 million). Base Titanium paid the parent a total of $40 million in dividends in the period, which attracted a withholding tax of 15 percent.
A year earlier, the withholding taxes stood at Sh1.16 billion ($8.1 million), due on a dividend of $54 million.
Corporate income tax, which had provided the biggest source of revenue for the government from Base in 2022 at Sh1.74 billion ($12.2 million), fell by 60 percent in 2023 to Sh702.6 million ($4.92 million) as the company’s taxable revenue shrunk.
Royalties meanwhile fell by 50 percent to Sh527 million ($3.7 million) on lower volumes, even as global prices of exported products remained stable at $682 per tonne compared to $681 per tonne a year earlier.
“Sales revenue decreased 42 percent to $73.1 million for the reporting period (comparative period: $126.6 million) as lower production limited sales volumes, with a total of 107 kilotonnes sold in the reporting period (comparative period: 186kt),” said Base Resources in its financial report for the six months to December 2023.
The Kwale operations recorded a net profit after tax of $7.9 million (Sh1.13 billion), which represented a six-fold drop from $56.7 million (Sh8.1 billion) in the six months to December 2022. At a group level, the firm made a net loss of $1.5 million, attributed to the effect of the withholding tax paid on its dividend compared to a net profit of $44.6 million in the first half of 2022.
Base Resources took over the Kwale operation from Canada’s Tiomin Resources in 2010 for $3 million (Sh428.4 million at current exchange rates) and has been paying royalties and taxes since 2014 when shipment of ilmenite, rutile and zircon started.
The operation is set to close at the end of this year, however, upon the depletion of commercially viable ore and failure by the company to identify suitable deposits in adjacent exploration sites.
