TIDMBSE
AIM and Media Release
19 October 2021
BASE RESOURCES LIMITED
Quarterly Activities Report - September 2021
Key Points
* Ongoing strong demand for all products supported further price increases in
the quarter.
* Kwale Operations mine life extended to December 2023 following finalisation
of mining lease extension.
* Bumamani PFS released concluding that higher grade subsets of the Bumamani
and Kwale North Dune deposits can be economically mined, which would extend
Kwale mine life to mid-2024.
* Three Tanzanian prospecting licences granted, with a fourth pending, and
preparatory work for an exploration program commenced.
* Ranobe Mineral Resources and Ore Reserves estimates updated to incorporate
drilling program results.
* Toliara Project scale and economics enhanced with release of DFS2.
* FY21 full-year dividend of AUD4.0 cents per share paid, totalling US$34.8
million.
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 operates under a suite of controls and
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. On site rapid antigen COVID-19 testing is
utilised and employees have been encouraged to access the Government of Kenya
vaccination program. The Company continues to assist governments and
communities with initiatives focused on the construction of hygiene facilities,
and the donation and distribution of food and medical supplies and equipment.
KWALE OPERATIONS
Production & Sales Sept 2020 Dec 2020 Mar 2021 June 2021 Sept 2021
Quarter Quarter Quarter Quarter Quarter
Production (tonnes)
Ilmenite 65,863 78,500 84,178 88,735 72,866
Rutile 15,513 18,171 19,448 20,116 17,762
Zircon 6,000 6,677 7,388 7,057 6,069
Zircon low 426 516 482 454 506
grade*
Sales (tonnes)
Ilmenite 75,502 53,798 97,179 93,959 34,107
Rutile 11,651 12,017 26,074 24,597 13,791
Zircon 7,336 6,399 6,612 7,690 5,622
Zircon low 505 - 502 698 617
grade*
*Reported as tonnes of zircon concentrate which contains low grades of zircon
and rutile credits.
Mining operations continued to plan on the South Dune orebody with mined
tonnage decreasing due to two mining block moves during the quarter. As
expected, heavy mineral (HM) grade for the quarter was lower at 3.26% (last
quarter: 3.65%) due to mining commencing on the lower grade fringes of the new
mining blocks.
Mining & WCP Sept 2020 Dec 2020 Mar 2021 June 2021 Sept 2021
Performance Quarter Quarter Quarter Quarter Quarter
Ore mined (tonnes) 3,938,494 4,600,172 4,695,052 4,748,860 4,409,883
HM % 3.12 3.43 3.58 3.65 3.26
VHM % 2.36 2.62 2.80 2.78 2.50
HMC produced 103,730 142,309 149,618 162,428 133,874
(tonnes)
Wet concentrator plant (WCP) production of heavy mineral concentrate (HMC) was
lower as a consequence of the lower mined tonnes and ore grade. HMC stocks
were slightly lower at 16.5kt (last quarter: 20kt). Sand tails continued to be
deposited into the mined-out Central Dune area and capped with a 2m thick
co-disposed slimes/sand layer to aid water retention and subsequent
rehabilitation or alternate land use. Agricultural trials on the co-disposed
water retention layer are proving successful. Rehabilitation of the mined-out
sections of the South Dune proceeded according to plan.
MSP Performance Sept 2020 Dec 2020 Mar 2021 June 2021 Sept 2021
Quarter Quarter Quarter Quarter Quarter
MSP Feed (tonnes of 114,873 134,019 145,110 160,691 137,182
HMC)
MSP feed rate (tph) 61 64 69 76 64
MSP recovery %
Ilmenite 100 102 102 101 100
Rutile 102 102 100 100 104
Zircon 86 87 85 86 84
Mineral separation plant (MSP) feed tonnage of 137kt was lower than the prior
quarter (last quarter: 161kt), being limited by HMC feed availability.
Underlying MSP product recoveries were steady, with the increase in reported
rutile recoveries due to a one-off stock adjustment. Production of final
products was in line with plan. Production of HMC, MSP feed and final product
output are expected to increase in the coming quarter as higher-grade mining
areas are accessed.
Bulk loading operations at the Company's Likoni export facility continued to
run smoothly, dispatching a combined 54kt of bulk ilmenite and rutile during
the quarter (last quarter: 104kt). Containerised shipments of rutile and
zircon through the Mombasa Port proceeded to plan.
Summary of unit costs Sept 2020 Dec 2020 Mar 2021 June 2021 Sept 2021
& Revenue per tonne (US$) Quarter Quarter Quarter Quarter Quarter
Unit operating costs per $189 $161 $142 $148 $174
tonne produced
Unit cost of goods sold per $192 $207 $169 $202 $264
tonne sold
Unit revenue per tonne of $413 $464 $478 $497 $668
product sold
Revenue: Cost of goods sold 2.1 2.2 2.8 2.5 2.5
ratio
Total cash operating costs of US$16.9 million were steady compared to the prior
quarter (last quarter at US$17.2 million), however lower production results in
higher unit operating costs of US$174 per tonne produced (rutile, ilmenite,
zircon and low-grade zircon) (last quarter: US$148 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 rutile, is sold in bulk, with typical shipment sizes of 50kt
for ilmenite and 10kt for rutile, which means any given quarter will usually
contain either one or two bulk ilmenite and rutile 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$264 per tonne sold (operating costs, adjusted for
stockpile movements, and royalties) increased due to the sales mix (last
quarter: US$202 per tonne). Average unit revenue increased to US$668 per tonne
(prior quarter: US$497 per tonne) due to sales mix and increased prices for all
products. Due to the above factors and the timing of sales, the revenue to
cost of goods sold ratio for the quarter remained steady at 2.5 (last quarter:
2.5).
FY22 PRODUCTION GUIDANCE
Kwale Operations production guidance for the 2022 financial year remains at:
* Rutile - 73,000 to 83,000 tonnes.
* Ilmenite - 310,000 to 340,000 tonnes.
* Zircon - 24,000 to 28,000 tonnes.
This guidance is based on the following assumptions:
* Mining of 17.4Mt at an average HM grade of 3.53%.
* Average MSP feed rate of 68tph.
* Average MSP product recoveries of 101% for rutile, 101.5% for ilmenite and
84.5% for zircon.
The possibility of a halt to, or curtailment of, operations at some point in
the future remains if a severe COVID-19 outbreak occurs on site or if
government health directives change.
MARKETING
Despite the usual seasonal dip in the Chinese pigment market at the start of
the northern hemisphere summer, which has since recovered, overall global
pigment demand remained very strong through the quarter leading to ongoing
robust demand for titanium feedstocks. As a result, pigment prices maintained
upward momentum with further price increases expected in coming months.
Demand for ilmenite as a feedstock for Chinese pigment producers was again very
strong in the quarter, enabling further ilmenite price gains. Increased
ilmenite supply from some African sources, Vietnamese exports and Chinese
domestic production through 2021 is not yet sufficient to meet demand and
ilmenite prices are expected to continue their upward trend through the
December quarter. However, escalating bulk freight costs to China are
partially eroding these price gains.
Demand for high grade feedstocks (which includes rutile) increased
significantly through the quarter as western pigment producers sought to
maximise output rates and the welding consumable and titanium metal sectors
continued to strengthen. The tight market for high grade feedstocks is being
exacerbated by supply constraints and uncertainties at major high grade
feedstock producers. Rutile prices increased through the quarter and are
expected to accelerate further through the coming quarters.
Zircon demand continues to be very strong due to recoveries in all end use
sectors and regions, which, when combined with limited supply and minimal
inventories, has resulted in a tightening zircon market and significant upward
price pressure. Zircon prices for the Company's September quarter contracts
increased by approximately US$150/t from the June quarter and prices agreed for
the Company's December quarter contracts have increased by an additional US$600
/t.
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 Company 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 25.9 million
hours lost time injury (LTI) free, with the last LTI recorded in early 2014.
Two medical treatment finger injuries were recorded during the quarter. As a
result, Base Resources' total recordable injury frequency rate is 0.50 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.
Agricultural livelihood programs in Kwale continued through the PAVI farmer's
cooperative although, with rains being significantly below average throughout
most of the year, alternative drought resistant crop variants have been
planted. Poultry and beekeeping continue to expand and provide farmers and
community groups with substantial incomes.
Implementation of the Community Development Agreements (CDAs) with the
Msambweni, Lunga and Likoni communities progressed well. Representing their
respective communities, each committee undertook further training and capacity
building to ensure more efficient delivery of community development projects
set out in each CDA.
Rehabilitation activities on the mined-out sections of the South Dune continued
in the quarter with community groups supplying indigenous legumes, grass seed
and manure.
The heads of several government ministries and lead agencies visited Kwale
Operations in the quarter to see the success of ongoing rehabilitation
activities and the agricultural potential of rehabilitated land on the South
Dune. This information sharing is key to creating awareness and understanding
among stakeholders of the various options being considered for post-mining land
use. Crops harvested from trial plots on the South Dune continue to be
distributed to local schools and children's homes.
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, who recently
completed their two-year training programs in Kenya at Kwale Operations,
returned to Madagascar following their certification through the Kenyan
training authority and completion of further work experience at Kwale
Operations.
Base Resources partnered with local governments and community health groups in
the Toliara region to provide additional support to vulnerable communities
affected by COVID-19, including programs to address food insecurity and
hygiene.
BUSINESS DEVELOPMENT
Toliara Project development - Madagascar
In November 2019, the Government of Madagascar required the Company to suspend
on-the-ground activity on the Toliara Project while discussions on fiscal terms
applying to the project were progressed. Activity remains suspended as Base
Resources continues to engage with the Government in relation to the country's
Large Mining Investment Law regime, fiscal terms applicable to the Toliara
Project and the lifting of the on-the-ground suspension.
In September, updated Ranobe Mineral Resources and Ore Reserves estimates were
released, incorporating available assay results from the 2018/19 drill
program. This resulted in the Ranobe Mineral Resources almost doubling to
2,580Mt (597Mt Measured, 793Mt Indicated, 1,190Mt Inferred) at an average HM
grade of 4.3% and Ore Reserves contained heavy mineral tonnes increasing by 45%
to 55Mt (30Mt Proved, 25Mt Probable) at 6.1% HM grade.1
The substantially increased Ranobe Ore Reserves estimate, combined with the
attractive long-term supply-demand outlook for mineral sands, provided the
opportunity for Base Resources to complete an enhanced Definitive Feasibility
Study (DFS2) for the Toliara Project incorporating an increase in scale, the
outcomes of which were released in September 2021. DFS2, compared to the 2019
DFS, has delivered a substantial improvement in the forecast financial returns
for the Toliara Project, including a post-tax/pre-debt (real) NPV10 of US$1.0
billion and an average revenue to cost of sales ratio of 3.5, over an initial
38-year mine life.2
The DFS2 schedule assumes construction will commence at the start of 2023, at a
capital cost of US$520 million, which would see production starting in early
2025. However, timing of the Final Investment Decision (FID) to proceed with
the construction of the Toliara Project remains subject to lifting of the
suspension of on-the-ground activities and agreeing acceptable fiscal terms
with the Government of Madagascar. Once these two key milestones are achieved,
there will be approximately 11 months' work to complete prior to reaching FID,
including finalising funding, completing the land acquisition process,
concluding major construction contracts and entering into offtake agreements
with customers. Resumption of reasonable international travel will also be
required to complete a significant portion of this pre-FID work and the Company
maintains readiness to accelerate progress when conditions support.
Total expenditure on the Toliara Project for the quarter was US$2.1 million
(last quarter: US$3.1 million).
[Notes:
(1) For further information, refer to Base Resources' announcement on 27
September 2021 "Updated Ranobe Mineral Resources and Ore Reserves estimates".
Base Resources confirms that it is not aware of any new information or data
that materially affects the information in this announcement and that all
material assumptions and technical parameters underpinning the estimates in
that announcement continue to apply and have not materially changed.
(2) For further information, refer to Base Resources' announcement on 27
September 2021 "DFS2 enhances scale and economics of the Toliara Project".
Base Resources confirms that all the material assumptions underpinning the
production information and forecast financial information in this announcement
continue to apply and have not materially changed.]
Kwale mine life extension
Significant progress was made in the quarter to extend mine life at Kwale
Operations.
In anticipation of completing tenure arrangements to extend the boundary of
Kwale's Special Mining Lease 23 (SML 23), the Kwale South Dune Ore Reserves
estimate was updated to incorporate previously defined Mineral Resources
falling outside of SML 23, resulting in Ore Reserves of 40Mt (30Mt Proved, 11Mt
Probable) at an average grade of 3.3% for 1.3Mt of contained HM as at 30 June
2021.3 The Company subsequently finalised a Deed of Variation with the
Government of Kenya to extend the boundary of SML 23 to incorporate these
additional South Dune Ore Reserves, taking mine life to December 2023.
In addition, Base Resources completed the Bumamani pre-feasibility study (PFS)
which concluded that it was economically viable to mine higher-grade subsets of
the Bumamani and Kwale North Dune (P199) deposits, which would extend mine life
at Kwale Operations by a further 7.5 months to July 2024.4 A DFS is now
underway to improve the accuracy of project estimates and is expected to be
completed in the first half of 2022.
Refer to the full PDF version of this announcement, available from Base
Resources' website (https://baseresources.com.au/investors/announcements/), for
a map showing the extended boundary of SML 23 and the location of the P199
higher grade subsets.
[Notes:
(3): For further information, refer to Base Resources' announcement on 20
August 2021 "Updated Kwale South Dune Mineral Resources and Ore Reserves
estimates". Base Resources confirms that it is not aware of any new information
or data that materially affects the information in this announcement and that
all material assumptions and technical parameters underpinning the estimates in
that announcement continue to apply and have not materially changed.
(4): For further information, refer to Base Resources' announcements on 3
September 2021 "Bumamani PFS supports extension of Kwale mine life" and
"Further supporting information for Bumamani PFS". Base Resources confirms
that all the material assumptions underpinning the production information and
forecast financial information in these announcements continue to apply and
have not materially changed.]
Extensional exploration - Kenya & Tanzania
No further work was conducted on Vanga Prospecting License (PL/2015/0042) in
the quarter and 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 in the Kuranze region of
Kwale county, about 70 km west of Kwale Operations (applications 2019 0260,
2510 and 2512), together with an area south of Lamu (applications 2019 0263,
0265, 0266), remain in progress towards granting. An additional prospecting
licence application has been lodged for the area surrounded by the Kuranze
applications in Kenya, however application numbers and boundaries have not yet
been issued. A Government of Kenya moratorium on the issuance of prospecting
licences in November 2019 has affected the progress of all licence
applications. The Company continues to work with the Government, and other
mining sector stakeholders, to see the moratorium lifted and recommencement of
the issuance of mineral rights.
During the quarter, the Company received three prospecting licences in Tanzania
for areas adjacent to the Kuranze region in Kenya with a fourth licence
pending. Training of a Tanzanian exploration field team is underway ahead of
an auger drilling program planned to commence in the December quarter.
Refer to the full PDF version of this announcement, available from Base
Resources' website (https://baseresources.com.au/investors/announcements/), for
a map showing the location of the Company's Tanzanian prospecting licences and
remaining prospecting licence application, and Kuranze prospecting licence
applications.
Expenditure on exploration activities in Kenya during the quarter was US$0.3
million (last quarter: US$0.1 million) and in Tanzania was US$0.1 million (last
quarter: zero).
CORPORATE
FY21 full-year dividend payment
Following release of the Company's FY21 annual financial results, the
disciplined application of the Company's capital management policy saw a
full-year dividend of AUD 4.0 cents per share (unfranked) paid to shareholders
on 29 September 2021, representing a cash payment of US$34.8 million (in
aggregate). This takes total dividends in respect of FY21 to US$61.4 million,
representing AUD 7.0 cents per share (unfranked).
Kenyan VAT receivable and Kwale royalty rate
During the period Base Titanium Limited, Base Resources' wholly owned Kenyan
Subsidiary, and the Government of Kenya signed Deeds of Variation for the Kwale
SML 23 that amended the mining lease boundary and increased the rate of
royalties payable5 to the Government of Kenya, such that:
* For the period from the date of first export of minerals to 30 June 2018,
the royalty is increased to 3%.
* For the period from 1 July 2018 to the end of SML 23, the royalty is
increased to 5%.
[Note (5): For further information, refer to Base Resources' announcement on
30 September 2021 "Kwale mining lease extension secured and royalty discussions
finalised".]
Prior to being varied, the applicable royalty rate under SML 23 was 2.5% and it
is on this basis that royalties have been paid. However, from first export of
minerals, royalty costs have been provided for, and expensed, by the Company at
an assumed royalty rate of 5%, based on an expected outcome from the long
running discussions with the Government of Kenya. In consideration for entry
into the Deeds of Variation, in particular agreement to a royalty for the
period to 30 June 2018 at a rate lower than had been accrued, Base Titanium
withdrew its claim for refund of VAT receivables related to the construction of
Kwale Operations.
On the basis of values at 30 June 2021, the net effect of the above is:
* Payment by Base Titanium of US$18.6 million for the agreed increases in
royalty rates, consisting of the 0.5% increase for the period to 30 June
2018 and the 2.5% increase for the period from 1 July 2018.The related
accruals will be extinguished.
* A net US$3.2 million expense will be recorded in the Company's financial
statements, consisting of the write back of the excess 2% royalty accrual
for the period to 30 June 2018, totalling US$12.8 million, and the
write-off of the construction period VAT receivable of US$16.0 million.
The above additional royalty payments are due in the December quarter.
Base Resources continues to have refund claims for VAT paid in Kenya relating
to the period since operations commenced, which totalled approximately US$4.5
million at 30 September 2021. No VAT refunds were received during the quarter
(last quarter: nil).
In summary, as at 30 September 2021:
* Net cash of US$36.7 million consisting of:
+ Cash and cash equivalents of US$36.7 million.
+ No debt.
As at 18 October 2021:
* 1,178,011,850 fully paid ordinary shares on issue.
* 62,435,197 performance rights on issue pursuant to the terms of the Base
Resources Long Term Incentive Plan, comprising:
+ 13,835,392 vested performance rights, which remain subject to
exercise6.
+ 48,599,805 unvested performance rights subject to performance testing
in accordance with their terms of issue.
[Note (6): 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 future production and grades, capital
cost, capacity, 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 UK Media Relations
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
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 3, 46 Colin Street
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
JOINT BROKER
Berenberg
Matthew Armitt / Detlir Elezi
Phone: +44 20 3207 7800
JOINT BROKER
Canaccord Genuity
Raj Khatri / James Asensio / Patrick Dolaghan
Phone: +44 20 7523 8000
END
(END) Dow Jones Newswires
October 19, 2021 02:00 ET (06:00 GMT)
Base Resources (LSE:BSE)
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