Kenyan companies earned nearly three-quarters of the payments by Base Titanium to suppliers contracted to the mining operations in Kwale County in the year ended June, latest disclosures show.
The mineral sands company, owned by Australia’s Base Resources, spent $57.6 million (about Sh6.91 billion) or 71 percent of its supplies budget on domestic firms, according to a presentation by the multinational’s managing director Tim Carstens.
The expenditure represents a 7.86 percent growth over $53.4 million (Sh6.4 billion) payments to Kenyan businesses for materials, equipment and services in the prior year.
This implies Base Titanium spent about $81.1 million on suppliers in the year through June 2022, a growth of 16.9 percent over $69.4 million a year earlier.
The presentation, dubbed Africa Down Under, however, shows the share of the suppliers’ budget going to local firms in the review period dropped from 77 percent the year before.
Base Titanium has been producing and exporting ilmenite, rutile and zircon in Kwale from October 2013 when it started mining.
Titanium minerals are important pigments for industrial, domestic, and artistic applications. It is also a choice material for joint replacement, tooth implants, and body piercing.
During the year ended June, the miner’s sales jumped 39.8 percent to Sh33.3 billion, reflecting the impact of the average price of the minerals rising by 32.9 percent to $621 (Sh74,426) per tonne.
The Kwale operation has become more profitable, helped by steady production and a surge in the price of the titanium minerals ilmenite, rutile and zircon in the global markets.
“Higher product prices and disciplined cost control delivered record Kwale operations [earnings for the year ended June],” Base Resources said in the financial performance report.
The Perth-based firm pocketed a record dividend of Sh10.7 billion from the Kwale project in the review period, a growth of 50 percent over Sh7.1 billion the year before.
“During the reporting period, the group’s Kenyan subsidiary and owner and operator of Kwale Operations, Base Titanium, distributed $90 million (Sh10.7 billion) of surplus cash, via dividend, to the group’s ultimate parent entity, Base Resources,” the Australian multinational said.
The Kenyan government was also one of the major beneficiaries of the titanium sales boom, collecting a total of Sh6 billion in the form of taxes and royalties. The dividend attracted a withholding tax of $13.5 million (Sh1.62 billion) in the review period, up from $9 million (Sh1.1 billion) that was deducted on the previous payout.
Mining royalties paid to the government also increased to $18 million (Sh2.16 billion) from $13.8 million (Sh1.65 billion).
The royalty rate 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.
The deal announced in October 2021 gave the company the right to extend its mining operations beyond the original boundary drawn on its special mining licence, which covered 1,661 hectares.