Kwale miner Base Titanium has set aside Sh1.1 billion ($7.7 million) to compensate hundreds of workers set to be laid off as it winds down its Kenyan operation by the end of this year.
The company made the redundancy provision in its financials for the six months ended December 2023, indicating that it is on course to close down the Kwale operation upon the depletion of commercially viable ore.
Base Resources, the Australian parent of Base Titanium, will then focus on a new operation in Madagascar where it expects to make its first titanium shipment by August 2027.
As per the latest Base resources annual report, the Kenyan subsidiary had a total of 1,746 employees and contractors on its books by June 2023.
The 2023 annual report did not break down the split between employees and contractors, but an earlier one covering the year to June 2022 stated that the firm had 888 employees on its books, out of whom 870 were Kenyans drawn mostly from Kwale and Mombasa counties.
“Following the October 2023 announcement that Kwale operations mining is expected to end in December 2024, when existing Kwale ore reserves are fully depleted as per the current mine plan, a provision for the redundancy of the workforce has been raised,” said Base Re sources in a presentation on its financials for the half year to December 2023.
Overall, the company has set aside $49.2 million to fund the retirement of the Kenyan operation. The expenses include redundancy costs, post-mining land rehabilitation and setting up agriculture projects.
“Planning for closure started many years ago and, in some important respects, ahead of original development… a major post mining land use project identified four complementary options, with feasibility studies underway: large-scale agriculture, sustainable conservation, industrial training, tailings utilisation,” said Base Resources.
Base Resources took over the Kwale operation from Canada’s Tiomin Resources in 2010 for $3 million (Sh431.6 million at current exchange rates) and has been paying royalties and taxes since 2014 when shipment of ilmenite, rutile and zircon started.
In the year ending June 2023, the company paid the government $43.71 million (Sh7 billion) in royalties and taxes, down from $64.8 million (Sh10.4 billion) the prior year.
The payout in the 2023 financial year comprised of $19.1 million in corporate income tax, $14.8 million in mineral royalties, and $2.5 million in withholding taxes on non-government royalties and services.
The company also paid $18.7 million in utilities and other service charges to State corporations and county governments.
For the six months to December 2023, royalties stood at $3.7 million (Sh532 million), halving from $7.3 million (Sh1.05 billion) in the six months to December 2022 on account of falling ore production. Revenue in the period also fell significantly to $73.1 million (Sh10.5 billion) from $126.6 million (Sh18.2 billion) in the corresponding period in 2022.
The venture has also been profitable for the Australian multinational, which has earned billions of shillings in dividends, including an $84 million (Sh13.5 billion) payout in the year ended June 2023.
By CHARLES MWANIKI