Government earns Sh400 million in royalties from titanium

KWALE, KENYA: The Government has pocketed Sh400 million over the 12 months to June in royalties from the sale of mineral sands extracted in Kwale County, Base Titanium has said.

Base Titanium, which has been extracting and exporting minerals in the coastal region, said it had paid $4 million over the last one year.

The firm remits 2.5 per cent of its revenues from the sale of mineral sands such as zircon, rutile and ilmenite to Government as royalties.

The mineral sands are the primary sources of titanium oxide and used as a base pigment in paint and manufacture of ceramics as well as production of titanium.

Joe Schwarz general manager external affairs and development at Base Titanium said there are expectations that prices of the mineral sands would go up in the coming months, which would push up the amount paid to Government. Growth in prices is expected to be driven by demand from China.
"The amount of royalties that goes to the Government will go up with increase in prices," said Schwarz during a quarterly briefing on the firm's activities in Kwale.

"There are increasing signs of an emerging supply deficit and there is an expectation that mainstream contracted rutile prices will experience upward momentum through the second half of 2017. Spot prices of rutile increased sharply through the quarter (to June), with prices in China increasing by over 30 per cent."

He added that prices of the other mineral sands ilmenite and zircon are also expected to go up in the half to December 2017.

There have been proposals to increase the royalties remitted to Government, from the current 2.5 per cent to between five and 10 per cent.

Despite the amount paid to Government in royalties, the Kenya Revenue Authority is holding close to Sh2 billion in unpaid tax refunds to Base Titanium.

"Base Resources has refund claims for VAT paid in Kenya, relating to both construction of the Kwale project and the period since the operations commenced, totalling approximately US$1.9 million at June 30, 2017," said Base Titanium, the Kenyan operation of Australian firm Base Resources, in its quarterly report for June.

"These claims are proceeding through KRA's processes, with operational period claims, totalling approximately US$0.3 million settled during the quarter. Base Resources is continuing to engage with the Kenyan Treasury and KRA, seeking to expedite the remainder of the refund."

Schwarz added that the firm has been getting regular payments from KRA but the amount has not been substantial to settle the refunds claimed by Base Titanium.

He added that the money owed by the Kenyan tax authority had in the past seen the firm experience cash flow crisis but it has since sorted out the challenge internally.

"There was a time we had some cash flow challenges but we are in a good position at the moment," said Schwarz.