Firm to lay off over 1,600 staff amid permit standoff

Tuesday, July 18th, 2023 02:45 | By
Operations at the Base Titanium Mining Plant in Kwale County in this photo taken on 29th June 2022.
Operations at the Base Titanium Mining Plant in Kwale County in this photo taken on 29th June 2022. Photo by Kevin Odit.

Kwale-based Base Titanium will lay off 1,633 staff by the end of 2024 as it winds up operations in the country over the depletion of minerals deposits and the government’s failure to renew permits for further explorations.

Employees set to be hit hard are 76 per cent or 1,241, which comprises those in management, semi-skilled and trainees based in Kwale County, 23 per cent staff drawn from other parts of the country  and only one per cent expatriates.

The firm projects the volumes of minerals ilmenite, Rutile, and zircon in its South, North Dune, and Bumanani minefields in Kwale to deplete completely by late 2024, just a year before its mining license expires in 2025.

The volume of ilmenite, the most abundant mineral, is for instance, expected to decline by more than half to up to 160,000 tonnes in the 2024 financial year from about 310,000 tonnes in the year that ended June 2023.

Mineral deposits

Base paid Treasury in the year ending June 2022 some $30.07 million (Sh4.25 billion) in royalties (in the current exchange rate), and $26.8 million (Sh3.8 billion) in corporate, withholding taxes and other services. While the firm is already exploring other mineral deposits in the adjacent sites, it will abandon the mission beyond 2025 unless the government moves to lift the 2019 freeze on issuing new licenses.

“No more mining life extension will see the end of at least 1,600 direct jobs as well as community spending, and government revenues,” Base Titanium’s General Manager of External Affairs, Simon Wall, said yesterday during a mining forum.

The firm’s new exploration interests are in Kwale’s Kuranze areas and other parts of Lamu in a bid to extend the mining life that started in 2013.

“If exploration discovers minerals it will be a race against time to secure a mining license and undertake resettlement and compensation which will require strong support from national government and local leaders,” added Wall.

Should the extension of operations in Kenya fail, it will take the Perth-based company between 12 and 24 months to entirely rehabilitate mining areas and up to 20 years to de-risk tailings storage facility, a long financial obligation that will eat its coffers.

Decommissioning of defunct hydraulic infrastructure will take between 6 and 12 months after mining finishes.  Last year, the Australian-based mineral sand miner committed $28.1 million (Sh3.96 billion) in the Bumanani project, extending its business in the area by 13 months to November 2024. Titanium is already preparing to shift base to neighbouring Tanzania’s sites of Umba South where exploration exercises have shown good prospects of rutile and graphite deposits.

The decline in output in Kenya will impact the royalties negatively despite the minerals fetching good returns on the global scene. Base Titanium has paid the 10 per cent royalty share to the local community amounting to Sh175 million in the 2023 financial year.

In 2022, the royalty rate payable to the government was doubled to five per cent of titanium sales. The royalties are shared between the national government, county government, and local community at a rate of 70 per cent, 20 per cent, and 10 per cent, respectively.

Withholding tax

The government also stands to lose an estimated Sh28 billion in taxes over the mining life. The company pays income tax at the rate of 30 per cent, dividend withholding tax at 15 per cent and royalties as a percentage of the value of the titanium exports.

Kenya has severally indicated it will lift the mining rights moratorium issued during Uhuru Kenyatta’s regime but nothing has materialised. An online cadaster is expected to be operationalised before fresh licensing commences.

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