I'd do tile but nothing too thick then edge it around the firebox and all exposed edges with Schluter for a modern look. If you want something more traditional, I would do painted wood panels full width of drywall area on either side of the firebox and a panel above with trim work.

is it wood burning or gas? There are so many beautiful tiles available right now, really depends on the rest of your decor, but consider glossy or dark tile, dark grout if wood burning so easier to clean off. And you can tile right over drywall, so you really are not limited, but I like the wood idea, then pull into built in look shelving on either side. I'd just go through the Houzz photos, though narrow the results by color and style. Save what catches your eye, and you will likely see what you are drawn to.

kivi why is that? and yes it is but can be changed.. I think I have gotten totally overwhelmed with this process, we are really doing the entire basement subflor up as well as doing all the flooring upstairs, new windows and doors ordered,..paint to chose, do I do the same paint throughout the house or separate upstairs and downstairs., bathrooms to redo, tiles, fireplace.. my minds going numb..

Btw wood burning ancient thing..

With cement boards you would have the option of stone products being used to cover both sides of your fireplace. You would not be able to do that with drywall. Incidentally I hope you did not frame in around the fireplace with wood framing since I doubt it is a zero clearance fireplace.
Major renovations can feel overwhelming, but just keep going one step at a time. You will get there.

You will want to be sure to face your fireplace with non combustible material for both your fireplace facing as well as your hearth. Best of luck with your project!

Always feel free to visit www.fireside.com or call us with any questions.

Thanks!

Alright cement board it is..and yes it is framed with wood but it has been for as long as we have owned the house so 13 plus years, and no problems with heat where it shouldn't be.. Is this a really bad thing??
I like the idea of tile with framed in look, and built in on each side..picked this out for another room but really like it around the fireplace..

I would opt for a high end rectangular grey slate over the whole of the chimney breast and hearth.

that is a great idea!.. especially since I changed my mind on the rock tiles.. and our new flooring is darker grey wood..
Btw changing it to cement board just to be on the safe side.. will post pics as the basement progresses.. thanks for the help/advice.!!