AIM and Media Release
26 April 2023
BASE RESOURCES
LIMITED
Quarterly Activities Report – March
2023
African mineral sands producer, Base Resources Limited
(ASX & AIM: BSE) (Base Resources or the Company)
is pleased to provide an operational, development and corporate
update for the quarter ended 31 March
2023.
Key Points
- Contracted sale prices were steady for rutile and ilmenite,
while zircon prices fell slightly. Renewed optimism in
China and resilience in
Europe are supporting a positive
price outlook for coming quarters.
- Bumamani Project implementation completed and mining commenced
on the North Dune, extending the mine life of Kwale
Operations.
- Exploration drilling continued in Kwale East, with 677 holes
for a total of 7,445m drilled at
quarter end and priority areas identified for targeted drilling
during the coming quarter.
- Samples from Phase 1 of exploration drilling in northern
Tanzania have been assayed, with
results expected to be released shortly and mineralogical analysis
underway. The Phase 2 infill drill program has also
completed, with assaying to commence shortly.
- Discussions with the Government of Madagascar on Toliara Project fiscal terms
continued to progress positively.
- Toliara Project Rare Earths Concept Study completed, confirming
the economic potential of the monazite contained in the Ranobe
Mineral Resources estimate and advancing to a pre-feasibility
study.
KWALE OPERATIONS
Operational performance
Mining operations successfully commenced on the North Dune in
February, as part of implementation of the Bumamani Project to
extend Kwale Operations mine life to late 2024. The North
Dune is being mined concurrently with the South Dune, with mining
operations split between the two deposits.
SUMMARY
BY QUARTER |
FY22 |
FY23 |
MAR |
JUN |
SEP |
DEC |
MAR |
Mining (million tonnes) |
Ore mined |
3.9 |
3.9 |
4.4 |
4.5 |
3.3 |
HM % |
3.8 |
4.1 |
3.8 |
4.0 |
3.9 |
VHM % |
2.9 |
3.1 |
2.9 |
3.1 |
3.1 |
|
|
|
|
|
|
Production (thousand tonnes) |
Ilmenite |
84.5 |
83.8 |
86.0 |
84.5 |
71.6 |
Rutile |
18.9 |
19.2 |
18.9 |
19.5 |
16.6 |
Zircon |
6.3 |
6.8 |
6.6 |
7.4 |
6.4 |
Low grade
products1 |
4.4 |
4.9 |
5.7 |
5.2 |
4.1 |
SUMMARY BY
QUARTER |
FY22 |
FY23 |
|
MAR |
JUN |
SEP |
DEC |
MAR |
US$ per
tonne |
Sales revenue |
$740 |
$691 |
$714 |
$651 |
$637 |
Operating costs |
$149 |
$152 |
$154 |
$165 |
$190 |
Cost of goods
sold |
$227 |
$196 |
$200 |
$191 |
$195 |
Revenue: Cost
ratio |
3.3 |
3.5 |
3.6 |
3.4 |
3.3 |
Sales (thousand tonnes) |
Ilmenite |
75.5 |
95.7 |
62.6 |
74.1 |
86.2 |
Rutile |
25.3 |
24.7 |
14.2 |
14.7 |
15.2 |
Zircon |
6.9 |
7.1 |
6.2 |
5.0 |
7.4 |
Low grade
products1 |
4.8 |
4.7 |
4.5 |
4.7 |
5.3 |
[Note (1): Low grade products
are a combination of low-grade zircon and low-grade rutile which
are sold separately at a discount to standard grade products.]
Mined tonnage was lower at 3.3 million tonnes (Mt) (last
quarter: 4.5Mt) due to stoppages associated with the move to the
North Dune and associated commissioning activities, as well as
slower than expected mining rates in the lower ore zones of the
North Dune. These ore zones have elevated oversize and slimes
and have proven more challenging to mine at the planned rates than
anticipated. Options for improving mining rates in these ore
zones are being investigated, with the Company optimistic that
mining rates will improve in the coming quarter. Production
guidance for the 2023 financial year (FY23) is not impacted
by the slower than anticipated mining rate.
The heavy mineral (HM) grade of ore mined in the quarter
was lower at 3.9% (last quarter: 4.0%) due to lower grades
associated with the North Dune. As a result of the lower
tonnage and ore grade mined and limited heavy mineral concentrate
stockpiles, production of finished products was approximately 15%
lower than the prior quarter.
Bulk shipping operations at the Company’s Likoni export facility
continued to run smoothly, with a combined 96kt of bulk ilmenite
and rutile dispatched (last quarter: 84kt). Containerised
shipments of rutile and zircon through the Mombasa Port also
proceeded to plan.
Sand tails continued to be deposited into the mined-out Central
Dune area and capped with a 6m
co-disposed slimes/sand layer to aid water retention and subsequent
rehabilitation. Rehabilitation activities on the Central Dune
and the South Dune proceeded to plan.
Total cash operating costs of US$18.8
million were lower compared to the prior quarter (last
quarter: US$19.3 million), primarily
due to reduced power consumption from the lower volumes mined and
produced. Despite the lower overall cost, the drop in
production resulted in the unit operating costs increasing to
US$190 per tonne produced (rutile,
ilmenite, zircon and low-grade products) (last quarter:
US$165 per tonne).
Cost of goods sold increased to US$195 per tonne sold (operating costs, adjusted
for stockpile movements, and royalties) due to sales volume and mix
(last quarter: US$191 per tonne),
average unit revenue decreased to US$637 per tonne (prior quarter: US$651 per tonne). Consequently, the
revenue to cost of goods sold ratio for the quarter was 3.3 (last
quarter: 3.4).
FY23 production guidance
Kwale Operations production guidance for FY23 remains at:
- Rutile – 62,000 to 73,000 tonnes.
- Ilmenite – 260,000 to 310,000 tonnes.
- Zircon – 22,000 to 27,000 tonnes2.
[Note (2): Refer to Base
Resources’ announcement on 25 October
2022 “Quarterly Activities Report – September 2022” for the
assumptions upon which the FY23 production guidance is based.]
MARKETING
The March quarter saw another period of firm demand for Base
Resources’ products. Average prices were steady for rutile
and ilmenite while economic uncertainty in some markets in late
2022 resulted in a moderate decline in contracted zircon prices for
the quarter. Overall, market conditions held up better than
expected through the quarter as optimism for 2023 grew in
China after Chinese New Year and
Europe showed signs of
resilience.
Renewed optimism in the Chinese domestic market, following the
Chinese holiday period, led to Chinese TiO2 pigment
producers ramping up production rates and increasing their demand
for ilmenite feedstock. Improving domestic pigment demand,
combined with ongoing strong Chinese pigment exports, is likely to
fuel demand for ilmenite through the coming quarters. New
TiO2 pigment production capacity continues to come
online in China and is expected to
generate further demand for feedstock. After moderate price
declines late in the December quarter and early in the March
quarter, ilmenite prices resumed an upward trend in recent weeks
generating positive momentum for the June quarter.
Major western pigment producers continue to ramp up production
with an expectation that the pigment market will return to normal
levels by mid-2023. Recent reports indicate that pigment and
paint demand has improved through the quarter, either in line with,
or exceeding, expectations. This in turn is expected to drive
ongoing support for rutile demand and prices.
Rutile demand from the smaller welding and titanium metal
sectors remained firm and the slight excess of feedstock inventory
from late 2022 is reducing. Rutile sales prices to these
sectors declined slightly in the quarter but continued to maintain
significant price premiums over bulk rutile for the TiO2
pigment sector and are expected to remain stable through the June
quarter. Base Resources continues to seek to increase its
proportion of rutile sales to the welding
sector.
Zircon sale contracts are agreed quarterly in advance and
subdued markets across Europe and
China in late 2022 resulted in a
modest decline in the price of zircon in the quarter.
However, better than expected conditions in Europe through the quarter, combined with an
optimistic outlook in China and
constrained supply, has resulted in a more favourable outlook for
zircon in coming quarters and zircon prices have increased
moderately for June quarter contracts.
SUSTAINABILITY
Health and safety
There were no lost time injuries during the quarter, and with no
lost time injuries in the past 12 months, Base Resources has a lost
time injury frequency rate (LTIFR) of 0.0 per million hours
worked. Compared to the Western Australian All Mines
2020/2021 LTIFR of 2.0, this is an exceptional performance and
reflects the ongoing focus and importance placed on safety by
management. With one medical treatment injury recorded in the
last 12 months, Base Resources’ total recordable injury frequency
rate is 0.21 per million hours worked.
Community and environment – Kwale
Operations
Farmers participating in the Company’s agricultural livelihood
programs in Kwale County, implemented through the PAVI farmers’
cooperative, harvested 74 tonnes of produce by the end of the
season. This included record cotton production as well as
soybean, sunflower, pearl millet, groundnuts and sorghum. The
cotton was delivered to a local ginnery, continuing the program’s
contribution to the Kenyan Government’s commitment to revive the
country’s cotton industry. A total of 25 tonnes of poultry
feed was also produced by farmers during the quarter, which is a
newly established income stream for the PAVI farmers’
cooperative.
All routine environmental monitoring for regulatory compliance
and social purposes was completed as scheduled in the quarter.
No instances of non-compliance, major environmental incidents
or environment-related community complaints were identified or
recorded. With the onset of the long rains,
environment-related activities will include a focus on planting
more trees in the rehabilitated areas and controlling stormwater to
prevent erosion within Kwale Operations and its surrounds.
Community and environment – Toliara
Project
All community training programs and social infrastructure
projects remain on hold while the Company’s on-ground activities
are suspended.
BUSINESS DEVELOPMENT
Toliara Project development –
Madagascar
Discussions with the Government of Madagascar on fiscal terms, and lifting of its
on-ground suspension, continue to progress positively.
A Final Investment Decision (FID) to proceed with
construction of the Toliara Project remains subject to lifting of
the suspension and fiscal terms being agreed 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 finalisation of funding, completion of land access
arrangements, conclusion of major construction contracts and entry
of offtake agreements with customers. Contact with major EPCM
consultants, construction contractors and equipment suppliers
continues to be maintained in readiness to accelerate progress once
the suspension is lifted. Assessment of potential funding
options for the Toliara Project also progressed during the
quarter.
The Toliara Rare Earths Concept Study was completed in the
quarter, confirming the significant economic potential of the
monazite contained in the Toliara Project’s Ranobe Mineral
Resources estimate. A pre-feasibility study is now underway
and planned for completion in the March quarter of 2024.
Total expenditure on the Toliara Project for the quarter
decreased to US$1.7 million (last
quarter: US$2.6 million), due to
completion of the Toliara Rare Earths Concept study in the
period.
Kwale mine life extension
Mining of the Bumamani Project, which extends Kwale Operations
mine life to late 2024, commenced on the North Dune in
February. The subsets of the North Dune forming part of the
Bumamani Project will be mined concurrently with the South Dune to
maximise mining rates and better manage tailings. Expenditure
on the Bumamani Project during the quarter was US$4.9 million (last quarter: US$9.9 million) with construction, earthworks and
final land access activities completed on the P199 block of the
North Dune. Further construction and earthworks, as well as
limited land access activities, will be required in preparation for
mining of the P200 block of the North Dune and the Bumamani
deposit.
Extensional exploration – Kenya
Further landowner consent for exploration access in the Kwale
East area (within Prospecting Licence 2018/0119) was secured during
the quarter, with 677 holes for a total of 7,445m having been drilled by the end of the
quarter - refer to the PDF version of this release for a photograph
of the drill rig, available from the Company’s website:
www.baseresources.com.au. Several prospects have been
identified for targeted drilling. It is expected that these
will be completed in the June quarter as further land access is
secured. Additional drilling rigs have been secured in order
to accelerate the program over the June quarter.
Prospecting licence applications lodged for an area totalling
722 km2 in the Kuranze region of Kwale County, about 70
km west of Kwale Operations, together with applications for an area
south of Lamu, totalling 888 km2, remain on hold pending
lifting of a Government of Kenya
moratorium on issuance of new mineral rights, in place since
November 2019. The Company is working with the Government,
and other mining sector stakeholders, to see the moratorium
lifted.
Expenditure on exploration activities during the quarter in
Kenya was US$312k (last quarter: US$158k).
Extensional exploration – Tanzania
Assay results for Phase 1 of the exploration drill program at
Umba South were received during the quarter, including graphite
analysis on a batch of selected samples. The results of this
program are expected to be released shortly. Mineralogical
analysis is also underway.
A second infill phase of 200m x
200m spaced reverse circulation
drilling was completed during the quarter, resulting in a further
91 holes for a total of 2,264m being
drilled. The drill samples are in the process of being
exported to Kenya for analysis at
the Kwale Operations laboratory, however assay priority is
currently being given to Kwale East samples and therefore results
are not expected until the September quarter.
Expenditure on exploration activities during the quarter in
Tanzania was US$431k (last quarter: US$232k).
CORPORATE
Following release of the Company’s FY23 half-year financial
results, the disciplined application of the Company’s capital
management policy resulted in an interim dividend of AUD
2.0 cents per share (unfranked) being
paid to shareholders on 30 March
2023, representing a cash payment of US$15.6 million in aggregate. This takes
total dividends distributed to shareholders since October 2020 to US$155.6
million, representing AUD 18.5
cents per share (unfranked).
In summary, as at 31 March 2023,
the Company had cash of US$77.2
million and no debt.
The Company has the following securities on issue:
- 1,178,011,850 fully paid ordinary shares.
- 53,598,359 performance rights issued pursuant to the terms of
the Base Resources Long Term Incentive Plan, comprising:
- 1,872,852 vested performance rights, which remain subject to
exercise3; and
- 51,725,507 unvested performance rights subject to performance
testing in accordance with their terms of issue.
[Note (3): 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:
Australian Media Relations |
UK Media Relations |
Citadel Magnus |
Tavistock Communications |
Cameron Gilenko and Michael
Weir |
Jos Simson and Gareth Tredway |
Tel: +61 8 6160 4900 |
Tel: +44 207 920 3150 |
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, is developing the Toliara Project in
Madagascar and is conducting
exploration in Tanzania. 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 8 9413 7400
Fax: +61 8 9322 8912
NOMINATED ADVISOR
RFC Ambrian Limited
Stephen Allen
Phone: +61 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