Local mineral producer Base Titanium is headed for a good run as ilmenite and rutile witness an upsurge in prices oversees.
The price of ilmenite has soared due to a dip in supply against an upswing in demand on the international market, while demand for zircon has strengthened owing to lower than anticipated global production of the ore. This has led to an increasingly tight market and solid price improvements this year.
"The prices of ilmenite have gone up significantly and we expect them to stabilise in the foreseeable future," said Base Titanium general manager for external affairs and development, Mr Joe Schwarz.
"We've gone through a pretty low period in markets over the past couple of years. But there has been a significant improvement over the past six months."
"The global pigment industry, where demand for most of our products is, has firmed up over the past year," he added.
"Zircon has strengthened much quicker than we expected because the stocks around the world are gone and we are now seeing an increasingly tight market and solid price increases this year," said Mr Schwarz. He was giving an update of the business to the economic and macro committee of the Vision 2030 delivery board in Nairobi last week.
Base Titanium and Vision 2030 had assembled to sign a memorandum of understanding to have the miner as a flagship project.
Similarly, the price of rutile, a high-value product which had remained static because of a supply overhang, is improving.
"Despite strong demand, the overhang of high grade TiO2 feedstock inventory has resulted in moderate price improvement for rutile. But that stock is now disappearing and the market is tightening. There are increasing signs of an emerging supply deficit in this high-grade sector, indicating upward price pressure in the second half of 2017," he projected.
According to Mr Schwarz, retail prices of rutile represented 60 per cent of the combined revenue stream for the miner because of its higher value.
"This is all good news, not just for us but for exports, taxes and royalties," he said.
Ilmenite is the primary ingredient in the manufacture of pigment for paints and crayons. Rutile is used in titanium metal manufacture, while zircon, an unrelated product, is mainly used in ceramics, tiling and glazing as an opacifier.
The Kwale-based company is one of the most significant mineral exploitation firms in Kenya, representing 57 per cent of the total value of the country's mineral production.
It had a production valued of Sh13.3 billion in 2016, according to the national bureau of statistics. More than half of the combined total of the mineral is sold outside the country. All the other minerals combined: soda ash, fluorspar, salt, Co2, diatomite, gold and gemstones, totalled Sh10 billion.
This follows the closure of fluorspar mining with the collapse of the Eldoret-based Kenya Fluorspar Company.
It is the largest export in minerals with US$160 million annually in export revenues; and an expected US$1 billion (Sh100 billion) in GDP contribution from 2015 to 2025.
This year, the firm, which last year mined 11 million tonnes of ore (about 1 million tonnes every month) produced 467,000 tonnes of ilmenite, 91,000 tonnes of rutile, and 34,000 tonnes of zircon, whose estimated export value stood at US$160 million (Sh16.632 billion). The figures are expected to go up because of improvements in the market.
In 2017, with rises in ilmenite and zircon prices and closure of fluorspar mining, the estimated contribution from Kwale will rise to 65 per cent.
Base titanium company is on an expansion drive of its exploration programme.
It has discovered additional potential resources at the southern part of the mine, with exploration going on in Ramisi and Vanga towards the border with Tanzania.
A study by Ernst & Young last year to measure the economic impact of mining on the local economy showed building public funds of US$230 million (Sh23.828 billion) in taxes and royalties. According to current assessments, the existing reserves could last seven more years.
Beyond the direct revenue component to the government, there are other benefits including job creation.