AIM and Media Release
29 April 2021
BASE RESOURCES
LIMITED
Quarterly Activities Report – March
2021
Key Points
- Kwale Operations maintained operational consistency through the
quarter with health and safety protocols in place to minimise the
risk of COVID-19 to personnel and surrounding communities.
- Kwale Operations FY21 production guidance increased for both
ilmenite and zircon.
- Ilmenite and rutile prices trended upwards in the quarter, with
higher zircon prices secured for the June quarter.
- Kwale North Dune PFS completed, with a focused study on mining
higher grade subsets of the North Dune and Bumamani deposits
underway and due in mid-2021.
- Discussions with the Government of Madagascar on Toliara Project fiscal terms
continue to progress.
- Half-year dividend of AUD3.0 cents per share paid.
- Outstanding US$25 million balance
of the revolving credit facility repaid, and facility retired
early.
African mineral sands producer, Base Resources Limited
(ASX & AIM: BSE) (Base Resources or the Company)
is pleased to provide a quarterly operational, development and
corporate update.
COVID-19 UPDATE
Base Resources continues to closely monitor the COVID-19
pandemic and its impacts on the Company’s business, people and
wider stakeholders. The Company’s Kwale Operations in
Kenya continue to operate under a
suite of mitigations aimed at protecting the health and safety of
our employees and neighbouring communities, including modified
workplace practices and a focus on hygiene and social distancing.
As the number of COVID-19 cases in Kenya and Madagascar have increased significantly in
recent weeks, the Company has also re-introduced work-from-home
protocols for non-operational staff. The Company is also
assisting governments and communities in both Kenya and Madagascar with several initiatives, primarily
involving the construction of hygiene facilities, and the donation
and distribution of food and medical supplies and equipment.
KWALE OPERATIONS
Production &
Sales |
Mar
2020 Quarter |
June
2020 Quarter |
Sept
2020 Quarter |
Dec
2020 Quarter |
Mar
2021 Quarter |
Production
(tonnes) |
Ilmenite |
105,035 |
84,843 |
65,863 |
78,500 |
84,178 |
Rutile |
23,683 |
19,035 |
15,513 |
18,171 |
19,448 |
Zircon |
9,163 |
7,590 |
6,000 |
6,677 |
7,388 |
Zircon low
grade1 |
780 |
578 |
426 |
516 |
482 |
Sales
(tonnes) |
Ilmenite |
87,819 |
102,364 |
75,502 |
53,798 |
97,179 |
Rutile |
25,280 |
27,268 |
11,651 |
12,017 |
26,074 |
Zircon |
7,377 |
9,086 |
7,336 |
6,399 |
6,612 |
Zircon low
grade1 |
- |
1,516 |
505 |
- |
502 |
[Note (1): Reported as tonnes of
zircon concentrate, it typically realises between 30% to 50% of the
value of the equivalent volume of standard grade zircon, due to
rutile credits.]
Mining operations continued according to plan on the South Dune
orebody with mined tonnage increasing to 4.7Mt (last
quarter: 4.6Mt) due to higher mining faces reducing the
downtime associated with relocating mining units and higher mining
water pressures following process water pump reconfiguration.
The heavy mineral (HM) grade of ore mined was also higher at
3.58% (last quarter: 3.43%). This was driven by mine path as
well as better grade than predicted by the resource model in some
areas. Previously reported September
2020 and December 2020 quarter
HM and VHM grades have been amended to reflect a revision of mine
feed grade sampling methodology.
Mining
& WCP Performance |
Mar
2020 Quarter |
June
2020 Quarter |
Sept
2020 Quarter |
Dec
2020 Quarter |
Mar
2021 Quarter |
Ore mined
(tonnes) |
4,295,645 |
4,271,811 |
3,938,494 |
4,600,172 |
4,695,052 |
HM % |
3.86 |
3.87 |
3.12 |
3.43 |
3.58 |
VHM % |
2.98 |
2.95 |
2.36 |
2.62 |
2.80 |
HMC produced
(tonnes) |
153,754 |
148,699 |
103,730 |
142,309 |
149,618 |
Wet concentrator plant (WCP) production of heavy mineral
concentrate (HMC) was higher at 150kt (last
quarter: 142kt) due to a combination of higher mined tonnes
and HM grades. HMC stocks increased to 18kt at quarter end
(last quarter: 14kt). Sand tails continued to be deposited
into the mined-out Central Dune area and significant progress was
made with rehabilitation of the mined-out areas of the South Dune,
with 66 hectares provisionally rehabilitated in the quarter (last
quarter: 49 hectares).
MSP
Performance |
Mar
2020 Quarter |
June
2020 Quarter |
Sept
2020 Quarter |
Dec
2020 Quarter |
Mar
2021 Quarter |
MSP Feed
(tonnes of HMC) |
186,197 |
145,550 |
114,873 |
134,019 |
145,110 |
MSP feed rate
(tph) |
90 |
78 |
61 |
64 |
69 |
MSP
recovery % |
Ilmenite |
99 |
99 |
100 |
102 |
102 |
Rutile |
99 |
100 |
102 |
102 |
100 |
Zircon |
87 |
85 |
86 |
87 |
85 |
Total mineral separation plant (MSP) feed tonnage was
higher than the prior quarter, due to improved HMC availability,
while recoveries were generally steady. Consequently,
production of all final products increased compared to the prior
quarter.
Bulk loading operations at the Company’s Likoni Port facility
continued to run smoothly, dispatching a combined 117kt of bulk
ilmenite and rutile during the quarter (last quarter: 64kt).
Containerised shipments of rutile and zircon through the Mombasa
Port proceeded according to plan.
Summary of unit costs
& Revenue per tonne (US$) |
Mar 2020
Quarter |
June
2020 Quarter |
Sept
2020 Quarter |
Dec 2020
Quarter |
Mar
2021 Quarter |
Unit operating costs
per tonne produced |
$128 |
$153 |
$189 |
$161 |
$176 |
Unit cost of goods
sold per tonne sold |
$175 |
$189 |
$192 |
$207 |
$198 |
Unit revenue per tonne
of product sold |
$476 |
$479 |
$413 |
$464 |
$478 |
Revenue: Cost of goods
sold ratio |
2.7 |
2.5 |
2.1 |
2.2 |
2.4 |
Total operating costs of US$19.6
million were significantly higher this quarter (last
quarter: US$16.8 million) due to a
revision of the underlying assumptions for the rehabilitation and
mine closure provision, resulting in a once off non-cash adjustment
of US$3.3 million. Excluding
this adjustment, operating costs were $0.5
million lower than the prior quarter. This adjustment
is reflected in the increased unit operating costs to US$176 per tonne produced (rutile, ilmenite,
zircon and low-grade zircon) (last quarter: US$161 per tonne).
Unit cost of goods sold is influenced by both the underlying
operating costs and product sales mix. Operating costs are
allocated to each product based on revenue contribution, which sees
the higher value rutile and zircon products attracting a higher
cost per tonne than the lower value ilmenite. Therefore, the
greater the sales volume of rutile and zircon relative to ilmenite
in a quarter, the higher both unit revenue per tonne and unit cost
of goods sold will be.
Ilmenite, and most of the rutile, is sold in bulk, with typical
shipment sizes of 50-54kt for ilmenite and 10-12kt for rutile,
which means any given quarter will usually contain either one or
two bulk rutile and ilmenite sales. Zircon is sold in smaller
parcels and sales generally align with production volume.
Product sales mix will therefore vary depending on the number of
bulk shipments of ilmenite and rutile in each quarter.
Cost of goods sold of US$198 per
tonne sold (operating costs, adjusted for stockpile movements, and
royalties) decreased, despite the higher operating costs, due to
the sales mix in the quarter (last quarter: US$207 per tonne). Average unit revenue
increased to US$478 per tonne (prior
quarter: US$464 per tonne) due to
increased ilmenite and rutile prices. From the combination of
these factors, the revenue to cost of goods sold ratio for the
quarter increased to 2.4 (last quarter: 2.2).
PRODUCTION
GUIDANCE (tonnes) |
Original
FY21 Guidance Range |
Updated
FY21 Guidance Range |
Rutile |
70,000
to 80,000 |
70,000 to 80,000 (no change) |
Ilmenite |
270,000
to 300,000 |
300,000 to 320,000 |
Zircon |
23,000
to 27,000 |
26,000 to 28,000 |
The Company provided its 2021 financial year (FY21)
production guidance on 28 July
20202. Base Resources’ production guidance
range for FY21 has been increased for ilmenite and zircon due to
higher than forecast ilmenite and zircon content in the MSP feed.
Production guidance for rutile has not changed. There
remains, however, the possibility of a halt to, or curtailment of,
operations at some point in the future due to a severe COVID-19
outbreak on site or change in government health directives that
could impact on the achievement of this guidance.
The above updated FY21 production guidance is based on the
following assumptions:
- Mining of 17.6Mt at an average HM grade of 3.39%, with all
remaining FY21 volume coming from Ore Reserves3.
- Average MSP feed rate of 68tph.
- Average MSP product recoveries of 101% for rutile, 101% for
ilmenite and 84% for zircon.
[Note (2): For further
information refer to Base Resources’ market announcement on
28 July 2020 “Quarterly Activities
Report – June 2020” available at
https://baseresources.com.au/investors/announcements/.
Note (3): The Ore Reserves estimate
underpinning the above production guidance was prepared by
Competent Persons in accordance with the JORC Code (2012
edition). For further information regarding the Ore Reserves
estimate refer to Base Resources’ announcement on 27 July 2020
“Updated Kwale South Dune Mineral Resources and Ore Reserves
estimate” available at
https://baseresources.com.au/investors/announcements/. The
above production guidance is the result of detailed studies based
on the actual performance of the Kwale mine and processing
plant. These studies include the assessment of mining,
metallurgical, ore processing, environmental and economic
factors.]
MARKETING
Global pigment producers have indicated that the strong recovery
in demand over the past two quarters has continued through the
March quarter, more than offsetting the usual seasonal weakness
experienced by the pigment industry at this time of year.
Western pigment producers continued to ramp up production rates
towards full capacity through the quarter. Chinese pigment
producers maintained high output rates as their domestic market
improves and high volumes of pigment exports are sustained.
Globally, pigment prices have stepped up at regular intervals
throughout the quarter as conditions have tightened and the price
gap between the historically cheaper Chinese pigment exports and
western pigment has now narrowed substantially.
Demand for ilmenite as a feedstock for Chinese pigment producers
again exceeded supply resulting in further solid price gains for
ilmenite in the quarter. Ongoing strong demand will
maintain a tight ilmenite market through the June quarter and
further price increases are expected.
The ramp up of western pigment production through the past two
quarters has absorbed the slight surplus in high grade feedstock
inventory that was created in the second half of 2020 and has
resulted in an increasingly tight market for rutile. This has
been compounded by a significant recovery in demand for rutile in
the welding sectors throughout Asia, and the Chinese titanium metal sector,
since late in 2020. As a consequence, rutile prices have
increased through the quarter and are expected to continue an
upward trend through the coming quarters.
The demand recovery for zircon gathered pace through the quarter
as ceramic plants in Europe
operated at full capacity and Chinese consumption of zircon
accelerated on the back of strong economic conditions.
Minimal inventory being held through most parts of the supply chain
has resulted in a rapid pull through in demand for zircon.
Zircon prices for March quarter contracts were consistent
with the December quarter but the tightening conditions have
resulted in significant price improvement for June quarter
contracts.
SAFETY
There were no lost time injuries during the quarter, or in the
past year, at Kwale Operations’ or the Toliara Project, resulting
in a lost time injury frequency rate (LTIFR) for the group
of zero. Compared to the Western Australian All Mines
2019/2020 LTIFR of 2.1, this is an exceptional performance
reflective of the ongoing focus and importance placed on safety by
management. Base Resources group employees and contractors
have now worked 23.9 million hours lost time injury (LTI)
free, with the last LTI recorded in early 2014. No medical
treatment injuries were recorded during the quarter. With one
medical treatment injury recorded in the last 12 months, the Base
Resources group’s total recordable injury frequency rate
(TRIFR) is 0.25 per million hours worked.
COMMUNITY AND ENVIRONMENT
Kwale Operations
Base Resources has continued to assist the Kwale community
through the COVID-19 pandemic, including collaborating with county
and national health authorities to provide public education through
community health workers and by providing additional schools-based
handwashing equipment to help improve sanitation. To support
social distancing requirements, 2,000 school desks were donated and
distributed to 20 schools across Kwale County and Likoni.
Agricultural livelihood programs in Kwale continued through the
PAVI Cooperative as farmers prepare for the upcoming rains.
Poultry and beekeeping have been particularly productive
alternatives during the current dry season. Kenyan cotton
spinners are attracting international interest for their yarn made
from Kenyan lint which has improved the outlook for the cotton
value chain and the potential contribution to the government’s
economic development agenda.
Considerable work was undertaken in the quarter to implement the
Community Development Agreement with nearby communities as required
under new Kenyan regulations. The beneficiary communities
have been defined and committees established, with capacity
building and community consultation undertaken during the quarter
to identify and prioritise development projects.
Rehabilitation activities on the mined-out areas of the South
Dune increased significantly in the quarter with community groups
supplying indigenous legumes, grass seed and manure. Youth
groups from local villages were employed to assist with slope
stabilisation, planting and road clearing. A community trial
plot has also been established on a mined-out section of the Kwale
South Dune to demonstrate to local farmers and stakeholders that
crops and trees can be successfully grown in rehabilitated mine
soils.
Toliara Project
All community training programs and social infrastructure
construction remained on hold with the Government of Madagascar’s
suspension of the Toliara Project’s on-the-ground activities.
The 24 Malagasy apprentices training in Kenya at Kwale Operations have completed their
studies, achieving very good results. They remain on site and
continue to progress through further practical training programs
and competency assessments prior to certification through the
registered training authority.
Base Resources continued to work with local authorities to
assist in the COVID-19 response in the Toliara region by supporting
face mask production in conjunction with a leading local women’s
group, with 48,000 re-usable masks now produced for distribution to
local communities.
BUSINESS DEVELOPMENT
Toliara Project development -
Madagascar
In November 2019, the Government
of Madagascar required the Company
to temporarily suspend on-the-ground activity on the Toliara
Project while discussions on fiscal terms applying to the project
were progressed4. Activity remains suspended as
Base Resources continues to engage the Government in relation to
the country’s Large Mining Investment Law (LGIM) regime,
fiscal terms applicable to the Toliara Project and the lifting of
the on-the-ground suspension.
As previously noted5, with the suspension of
activity, international travel restrictions and broader COVID-19
measures and impacts both in Madagascar and globally, the final investment
decision (FID) to proceed with development of the Toliara
Project has been delayed. Once fiscal terms are agreed and
the suspension is lifted, there will be approximately
11 months’ work to complete prior to FID. This work
includes finalising financing, completing the land acquisition
process and concluding major construction contracts. The
resumption of international travel will also be required to
complete a significant portion of this work.
Key activities during the quarter included:
- Engagement with the Government, focused on agreeing fiscal
terms and resumption of on-the-ground activities.
- Negotiations with the preferred tenderers for the marine
contract packages.
- Selection of the preferred piling contractor for the export
storage shed.
- Selection of the preferred power supply contractor and
commencement of power purchase agreement negotiations.
- Design of the haul road bridge over the Fiherenana River.
- Discussions with prospective lenders and joint venture
partners.
- Ground water modelling work to allow drilling and borehole
testing to commence shortly after lifting of the suspension.
Key activities planned for the coming quarter include:
- Further engagement with the Government, focused on agreeing
fiscal terms, lifting of the suspension and resumption of
on-the-ground activity.
- Commencing piling design at the export storage shed to allow
construction to commence soon after FID.
- Continuing power purchase agreement negotiations.
- Progressing design of the revetment and bulk earthworks at the
export facility.
- Concluding ground water modelling work.
- Ongoing engagement with prospective lenders and joint venture
partners.
Total expenditure on the Toliara Project for the quarter was
US$3.3 million (last quarter:
US$4.0 million).
[Note (4): Refer to Base
Resources’ market announcement “Toliara Project – Government of
Madagascar statement” released on
7 November 2019, which is available
at
https://baseresources.com.au/investors/announcements/.
Note (5): Refer to Base Resources’ market
announcement “Base delivers strong financial results and maiden
dividend” released on 24 August 2020,
which is available at
https://baseresources.com.au/investors/announcements/.]
Extensional exploration – Kenya
Mining tenure arrangements continued to progress with the Kenyan
Ministry of Petroleum and Mining as a precursor to an anticipated
updated Ore Reserves estimate to incorporate additional Mineral
Resources defined within the Kwale Prospecting Licence
(PL 2018/0119), but outside the current
footprint of mining lease SML 23.
The pre-feasibility study for mining the North Dune Mineral
Resources was completed6 with the conclusion that it is
not currently viable to mine the entirety of these deposits,
primarily due to the combined low heavy mineral grade, high land
acquisition costs and elevated slimes content and associated
tailings disposal costs. The Company has commenced an
assessment of the potential feasibility for mining a higher-grade
sub-set of the North Dune and Bumamani deposits, with the results
expected by mid-2021.
Auger drilling of a section of the northern Vanga Prospecting
License (PL/2015/0042) continued during the quarter but no
significant mineralisation was found. Completion of the
remaining drilling program (4,200 metres) in the North-East Sector
(Kwale East) of PL 2018/0119 remains on hold pending community
access being secured.
Prospecting licence applications lodged for an area south of
Lamu (applications 2019 0263, 0265, 0266), together with an area in
the Kuranze region of Kwale county, about 70 km west of Kwale
Operations (applications 2019 0260, 2510 and 2512), remain in
progress through the granting process. A Government
moratorium on the issuance of Prospecting Licenses in November 2019 has affected the progress of all
licence applications. However, technical assessment of
applications has now recommenced.
Expenditure on exploration activities in Kenya during the quarter was US$0.1 million (last quarter: US$0.1 million).
[Note (6): Refer to Base Resources’ market
announcement “Kwale North Dune PFS outcomes” released
on 1 April 2021, which is available
at https://baseresources.com.au/investors/announcements/.]
CORPORATE
FY21 half-year dividend payment
Following release of the Company’s FY21 half-year financial
results, the disciplined application of the Company’s capital
management policy saw a half-year dividend of AUD 3.0 cents per share, unfranked, paid to
shareholders on 31 March 2021, representing a cash payment of
US$26.6 million (in aggregate).
Kenyan VAT receivable
As previously announced, Base Resources has refund claims for
VAT paid in Kenya, relating to
both construction of the Kwale Project and the period since
operations commenced, which totalled approximately US$16.6 million at 31 March 2021. Refunds
totalling US$1.9 million were
received during the quarter (last quarter: US$2.0 million). Base Resources continues
to actively engage with the Kenyan National Treasury and the Kenya
Revenue Authority in relation to the outstanding VAT refund claims
and has taken steps under the investment agreement to secure its
claim with respect to the VAT paid during construction of the Kwale
Project.
Revolving Credit Facility retired
Following strong quarterly financial performance, which
generated US$39.3 million of
operating cashflows (excluding taxes), and with growing confidence
in the trajectory of the mineral sands markets and greater clarity
on the risks and impacts of the COVID-19 pandemic, the Company
repaid the outstanding US$25.0
million of the US$75.0 million
revolving credit facility during the quarter. Concurrently
with this repayment, the Company retired the facility, nine months
ahead of the final maturity date, saving on holding costs.
The Company is now debt free.
In summary, as at 31 March 2021:
- Net cash of US$71.6 million,
after payment of US$26.6 million
half-year dividend, consisting of:
- Cash and cash equivalents of US$71.6
million.
- No debt.
- 1,178,011,850 fully paid ordinary shares on issue.
- 71,078,976 performance rights on issue pursuant to the terms of
the Base Resources Long Term Incentive Plan, comprising:
- 266,893 vested performance rights, which remain subject to
exercise7.
- 70,812,083 unvested performance rights subject to performance
testing in accordance with their terms of issue.
[Note (7): Vested performance
rights have a nil cash exercise price. Unless exercised
beforehand, these rights expire five years after vesting.]
Forward looking statements
Certain statements in or in connection with this announcement
contain or comprise forward looking statements. Such statements may
include, but are not limited to, statements with regard to capital
cost, capacity, future production and grades, sales projections and
financial performance and may be (but are not necessarily)
identified by the use of phrases such as “will”, “expect”,
“anticipate”, “believe” and “envisage”. By their nature, forward
looking statements involve risk and uncertainty because they relate
to events and depend on circumstances that will occur in the future
and may be outside Base Resources’ control. Accordingly, results
could differ materially from those set out in the forward-looking
statements as a result of, among other factors, changes in economic
and market conditions, success of business and operating
initiatives, changes in the regulatory environment and other
government actions, fluctuations in product prices and exchange
rates and business and operational risk management. Subject to any
continuing obligations under applicable law or relevant stock
exchange listing rules, Base Resources undertakes no obligation to
update publicly or release any revisions to these forward-looking
statements to reflect events or circumstances after today's date or
to reflect the occurrence of unanticipated events.
ENDS.
For further information contact:
James Fuller, Manager Communications
and Investor Relations |
UK Media Relations |
Base Resources |
Tavistock Communications |
Tel: +61 (8) 9413 7426 |
Jos Simson and Gareth Tredway |
Mobile: +61 (0) 488 093 763 |
Tel: +44 (0) 207 920 3150 |
Email:
jfuller@baseresources.com.au |
|
This release has been authorised by the Board of Base
Resources.
About Base Resources
Base Resources is an Australian based, African focused, mineral
sands producer and developer with a track record of project
delivery and operational performance. The company operates
the established Kwale Operations in Kenya and is developing the Toliara Project in
Madagascar. Base Resources is an ASX and AIM listed
company. Further details about Base Resources are available
at www.baseresources.com.au
PRINCIPAL & REGISTERED
OFFICE
Level 1, 50 Kings Park Road
West Perth, Western Australia, 6005
Email: info@baseresources.com.au
Phone: +61 (0)8 9413 7400
Fax: +61 (0)8 9322 8912
NOMINATED ADVISOR
RFC Ambrian Limited
Stephen Allen
Phone: +61 (0)8 9480 2500
BROKER
Berenberg
Matthew Armitt / Detlir Elezi
Phone: +44 20 3207 7800