Titanium firm nets Sh4.9bn profit from its Kwale mine

Australian mining firm Base Resources has posted a 13 percent jump in net profit from its operations in Kenya.

Its earnings rose to Sh4.96 billion in the year ended June 2019, underscoring the importance of Kenyan unit.

Profit from the Australian firm’s Kwale mine offset Sh25.7 million net loss from its Toliara project in south-west Madagascar and Sh881 million net loss from other operations. This helped Base Resources post Sh4.1 billion net profit up from Sh3.5 billion.

“Improved commodity prices and a continued focus on cost management has delivered a Kwale Operations EBITDA (Earnings before interest, tax, depreciation and amortization) for the reporting period of $120.3 million, a five percent increase over the comparative period,” said Base Resources in its latest investor update.

During the review period, sales revenue from Kwale titanium exports grew 5.4 percent from Sh20.5 billion to Sh21.7 billion, which when supported by reduced selling and distribution costs and a cut in finance costs helped grow net earnings.

The firm achieved an average price of product sold (rutile, ilmenite, zircon and zircon low grade) of $401 (Sh41,483) per tonne compared with $330 (Sh34,138) per tonne booked the previous year.

Higher average prices were realised for rutile and zircon, offsetting the lower prices for ilmenite that was witnessed during the period.

The improved sales resulted in higher earnings for the government which is paid royalties at the rate of 2.5 percent of the export values. Kenya earned Sh1.5 billion royalties up from Sh1.4 billion earned last year.

Operating expenses dropped from Sh1.18 billion to Sh1.1 billion. Also, net financing expenses-related to debt servicing costs dropped by 39 per cent to Sh1 billion, down from Sh1.64 billion.

In October last year, the Sh8 billion outstanding balance of the Kwale project debt facility was repaid using cash reserves and revolving credit facility, thereby cutting down on group debt.

“Early retirement of the Kwale project debt facility demonstrates the continued strong performance of Kwale operations and, together with the increased revolving credit facility, provides the group with additional funding flexibility and reduced debt servicing costs,” the group said.

It closed the period in net cash positive position for the first time following a Sh5.4 billion reduction in net debt from Sh3.4 billion at 30 June 2018, to a net cash position of Sh1.9 billion.