KRA refunds Base Resources $2m VAT for set-up of titanium plant

Kenya has paid Base Resources Ltd about $2 million in tax refund arising from the construction of a titanium processing plant on the Coastline.

The Kenya Revenue Authority owes Base Resources a refund of $25 million that the firm paid as VAT for procurement of goods and services when the Kwale Mineral Sands Project was being developed.

In 2013, Kenya reduced tax exemptions to increase government revenue and slow down VAT refund accumulations.

READ: Base pursuing $25m tax refund

Base Resources acquired Kwale project from Tiomin Resources of Canada in 2010. The Australian Stock Exchange-listed company is required by bourse rules to make public disclosures of money it receives and pays.

Base Resources spent about $300 million to build the titanium processing plant and a berth at Likoni to handle minerals for export before production started in December 2013.

“These claims are proceeding through the KRA process, with a number of operational period claims totalling approximately $2 million settled in early July,” said Tim Cartsens, the CEO of Base Resources.

The firm has asked the Treasury to expedite payment of the remaining tax refunds. Discussions are being held with the Kwale County government and national government to withdraw the export levy imposed by the local authority.

Last year, Base Resources disputed the constitutional validity of a Ksh5,000 ($50) per tonne levy on exports of ilmenite and rutile, among other minerals, from the Kwale project through the berth at Likoni, which has a storage capacity of 60,000 tonnes.

The firm argued Kwale County government did not have the legislative authority under the Constitution to impose the levy as all rights to manage and administer minerals are exclusively reserved for the national government.

Mr Cartsens said cash operating costs inclusive of royalties for the quarter ended July 2015 were $13.5 million in March they were $14.2 million. Sales of ilmenite stood at 121,727 tonnes, rutile at 25,382 tonnes, and zircon at 7,621 tonnes.

Costs per tonne of rutile, ilmenite and zircon produced were considerably lower, at $97, than the $111 incurred in the prior quarter due to lower total costs and higher production volumes in the three months ended June this year.

Base Resources produced 206,123 tonnes of heavy minerals concentrate, slightly down from 206,324 tonnes in the previous quarter. Operating costs in the coming quarter are expected to increase due to mid-life servicing of the mobile mining fleet.

The Kwale operation of the Australian firm in the year ended June 30, produced 751,285 tonnes of heavy minerals concentrate containing 427,655 tonnes of ilmenite, 71,537 tonnes of rutile and 22,416 tonnes of zircon.

Mr Cartsens said the quantity of ore mined at Kwale rose from 2.2 million tonnes to 2.3 million tonnes in the quarter ended June, with 113,476 tonnes of ilmenite produced, 19,499 tonnes of rutile, and 6,484 tonnes of zircon.

He said bulk loading operations at the Likoni facility continued to run well, with more than 100,000 tonnes being despatched and sales continuing to be made from Base’s warehouse in China.

The firm’s strategy for securing the Chinese market entails offering product for immediate delivery and in smaller volumes through the warehouse based in China than could be justified for a shipment direct from Kenya.

“Base is tapping into smaller-scale customers not able to commit to large shipment volumes but is also able to offer prospective large new customers sample size volumes for testing,” said Mr Cartsens.

He said increased interest in securing ilmenite feedstock supply led to Base Resources signing new two new offtake contracts in China: One for a minimum of 60,000 tonnes per year for three years, and the other for 60,000 tonnes over one year.