State on the spot over mining deal

Base Titanium External Affairs Manager Simon Wall explains how mining activities are carried out in the firm during site visit in Diani,Kwale. [David Njaaga,Standard]

Delay in reviewing royalties paid by Australian mining firm Base Titanium continues to deny the Kenyan Government additional revenue, running into billions of shillings.

Base Titanium has only been paying 2.5 per cent as royalties under the terms of its five-year special mining licence, which was supposed to be reviewed after three years.

However, five years on, talks for a review have dragged on, ensuring that the firm continues to enjoy the concessional terms until October when the time expires for negotiating the royalty under the 21 year special license

“The royalty raise proposal to the Government from two and a half per cent to five per cent is sitting with the ministry and we are waiting for the final agreements before we start making those final payments,” said Base Titanium External Affairs Manager Simon Wall (above).

Original rate

Base Titanium agreed to revise the royalty rate and negotiations were entered into in February 2014.

The firm proposed a formula for doubling the rate to five per cent for the first five years of operation, but with a deferral mechanism for the first three years to protect cash flows necessary to service its Sh20 billion debt.

The offer was tabled in September 2014, but Base said it had not received approval from the Mining ministry and, therefore, continues to pay royalties at the original rate of 2.5 per cent.

In the last quarter, the mining firm has reduced its debt exposure by Sh2.7 billion which puts its overall loan at Sh3.3 billion.

Mr Wall said given their past record, they are set to clear the debt by the end of the year.

“I imagine the debt will be cleared by the end of the year, maybe next year. We do have four and a half years, ” said Mr Wall.

The company has also hit at the Government over late payments of Value Added Tax refunds.