Base Resources denies Senate claim of underpaid taxes

Money Markets

Lands and Natural Resources Committee chairman Lenny Kivuti says the firm's Sh2.4 billion tax refund claim is unjustifiably large. PHOTO | FILE 

By JOHN GACHIRI

In Summary

• Base Resources told the Lands and Natural Resources Committee that it spent Sh26 billion to set up its Kwale mine.
• The Australian mining company is now claiming Sh2.4 billion tax refund from the Treasury.
• The firm expects to add Sh23 billion to government coffers over the mine’s 11-year lifespan.

Base Resources has denied accusations that it has been underpaying tax.

The Australian firm — which is currently mining zircon, ilmenite and rutile in Kwale County — was responding to statements made in the Senate to the effect that the government was getting a raw deal from the firm.

Lands and Natural Resources Committee chairman Lenny Kivuti said the Sh2.4 billion tax refund from the Treasury is unjustifiably large when compared with the royalties that the company has paid since it began exporting from the mine in 2014.

The refund is on Value Added Tax (VAT) incurred during the construction of the mine. In a statement, Base Resources said that the committee did not take into account the Sh26 billion spent on constructing the mine.

“Since the start of mining operations, Base has paid Sh226 million in royalties to the Government of Kenya via the Ministry of Mining. This makes Base the largest single contributor to government revenue from the mining sector.

Significant contribution

‘‘Without the significant capital investment, at which point the VAT refund claim was accrued, Base would not be in a position to make a meaningful and significant contribution to the Kenyan economy,” said the company in the statement.

The firm expects to add Sh23 billion to government coffers over the mine’s 11-year lifespan.

Base has previously said that it needs the VAT refund by June when it is expected to begin paying Sh20 billion in loans borrowed to partly finance the Kwale mineral sands project.

Falling prices of zircon and other minerals on the international market have made the VAT refund all the more critical if Base is to service the loan comfortably.

Exploration investment

Zircon’s price on the international market was $1,000 (Sh94,000) per tonne as at the end of 2014 which is less than half of the $2,500 (Sh235,600) per tonne price of mid-2012.

Analysts say that prices have to recover for Kenya’s nascent mineral sector to continue attracting large investments. “With the exception of Tanzania, East Africa Community (EAC) countries have very limited mining sectors.

‘‘In order for the sector to grow the region must focus on attracting as much quality exploration investment as possible.

‘‘This is currently difficult as mineral prices have slumped dramatically over the past two years and there is limited finance available for junior explorers working in untested jurisdictions,” said Burbidge Capital’s Natural Resources report for the last quarter of 2014.