Base to remain in Kenya despite Kwale mines closure, acquisition

Base Titanium will not exit Kenya after shutting down Kwale operations later in December, the firm now says, giving hope to possible future mining activities in the country.

This, even as parent company–Base Resources is acquired by American mineral resources firm–Energy Fuels, in a cash-and-stock deal valued at about $240 million (Sh32.4 billion).

Mining at Kwale operations is expected to end in December this year when ore reserves are fully depleted.

This will bring to an end about 11 years of mining activities in Kenya, since 2013 when mining activities begun. The first shipment of minerals was made in February 2014.

The firm’s investment in Kenya however begun in 2010 with a capital expenditure on its project to date being in excess of $380 million (Sh51 billion-current exchange rate).

Base is determined to remain in Kenya beyond December with an exploration team in place, management has affirmed, despite closure of the mining site and the acquisition.

Energy Fuels is a US-based uranium and critical minerals produce and the deal is said to be strategic  in creating “a global critical minerals business.”

According to management, the deal will not affect Base’s future plans and will remain active with no major changes, including company name, as it pursues future possible investments in the country where it hopes to have explorations at the Kenyan coast.

“We will maintain an exploration team and rehabilitation of the Kwale site,” general manager External Affairs, Simon Wall, told the Star.

The company’s exploration and future investment decisions will however be determined by the government’s actions on the issuance licenses.

While the moratorium on the issuance of prospecting and mining licenses in the country was lifted in October last year, ending a four-year ban, no major licensing activities have taken place as royalty sharing remains a headache despite a formula being in place.

The Mining Act 2016 provides for a royalty-sharing framework for national government (70%), county government (20%) and local communities 10 per cent.

Base, which has been Kenya’s biggest mineral exporter since its entry into the country, has eight prospecting licence applications.

“Despite last quarter’s announcement that the moratorium on issuance of mining rights for all construction and industrial minerals was lifted, including for heavy mineral sands, no prospecting licences have been issued,” the firm said yesterday, during its quarterly investor briefing for the quarter ended March 2024.

Management said it continues to engage with Kenya’s State Department for Mining with a view to progressing its eight prospecting licenses applications in the Kwale, Kuranze and Lamu regions, most of which were lodged prior to the decision to implement the moratorium in 2019.

Last year, Mining, Blue Economy and Maritime Affairs CS Salim Mvurya appointed a 15-member multi-agency team, to establish how communities will benefit from minerals within their regions.

The Mineral Royalty Committee was expected to address grey areas in the sharing of the 10 per cent mining proceeds to local communities.

While there is clarity on what goes to the national government, the Mining Act has not had a clear framework for counties and the community shares.

The ministry is currently running a compliance checks on all licenses and permits for anybody handling minerals to determine compliance with Mining Act 2016.

Base accounts for 65 per cent of Kenya's mineral exports. In the 2023 financial year, it paid about Sh2billion in mineral royalties to the government.

In the year ending June 2022, Base paid Treasury $30.07 million (about 4.1 billion) in royalties, and $26.8 million (Sh3.6 billion) in corporate and withholding taxes.

The Lamu, Tana River explorations are however long-term plans, as it would take between five to 10 years, if not longer, to establish the existence of adequate resources before making heavy investment.