Base Titanium Reports Significant Drop in Royalties as Kwale Operations Wind Down

Base Titanium, the Australian mining firm, has reported a dramatic decrease in its revenues and royalties for the financial year ending June 2024. The company’s operations in Kenya’s Kwale County are set to conclude in December, leading to a 54% drop in royalty payments and a significant decline in overall sales revenue.

In its latest financial statement, Base Titanium disclosed that it paid the Kenyan government $6.77 million (Sh872.5 million) in royalties, a steep decline from the $14.6 million (Sh1.9 billion) paid in the previous financial year. This reduction is attributed to decreased production and sales due to mineral exhaustion at its licensed Kwale mining sites. The company’s royalty payments have fallen by 54%, reflecting a sharp downturn in mineral sales and production.

Sales revenue for the period plummeted by 50% to $135.1 million (Sh17.4 billion), compared to $271.4 million (Sh34.9 billion) the previous year. This significant drop is linked to reduced production volumes and a downturn in global mineral prices. Base Titanium sold 200,530 tonnes of minerals during the period, a substantial decrease from the 406,023 tonnes sold in the year to June 2023. The softening of product markets led to a reduction in average achieved prices, with rutile prices falling by 4%, ilmenite by 9%, and zircon by 14% compared to the previous year.

Despite the downturn in revenues, Base Titanium reported a net profit of $12 million (Sh1.5 billion) for the period, a decrease from $17.9 million (Sh2.3 billion) in the prior year. The company’s financial performance was impacted by a dividend distribution of $40 million (Sh5.2 billion) to its parent entity, Base Resources. This distribution incurred a Kenyan dividend withholding tax of 15%, totaling $6 million (Sh772.5 million). This tax expense contributed to a net loss after tax of $1.6 million (Sh206 million) for the group, a notable improvement from a loss of $4.8 million (Sh618 million) the previous year.

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Base Titanium’s operational cash flow for FY24 was $45.4 million, significantly lower than the $117.6 million reported in the prior period. The decrease in receipts from customers amounted to $103.6 million, although this was partially offset by reduced operating expenditure and lower taxes paid. The Kwale project also contributed $9.8 million (Sh1.3 billion) in income tax to the Kenyan government during the reporting period.

Having entered Kenya’s mineral sector in 2010 and commencing operations in Kwale in 2013, Base Titanium has invested approximately $370 million (Sh47.6 billion) in the project. The company’s first mineral shipment from its Mombasa port facility occurred in February 2014.

As Kwale operations draw to a close, Base Titanium is actively pursuing new exploration opportunities within Kenya. The company is eyeing at least eight exploration licenses in regions including the Kwale-Taita Taveta border, Tana River, and Lamu. Four of these licenses have already been approved and are undergoing public participation processes. This process involves community feedback before final approval by the Cabinet Secretary, advised by the Mineral Rights Board.

Simon Wall, Base Titanium’s General Manager of External Affairs, emphasized the company’s commitment to complying with Kenya’s mining laws and respecting the license application process. Wall expressed confidence in addressing any public concerns raised during the consultation phase and reiterated the company’s dedication to future mining investments in Kenya.

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Despite the challenges faced in Kwale, Base Titanium remains optimistic about its prospects in Kenya’s mineral sector and is poised to explore new opportunities as it transitions out of its current operations.