TIDMBSE
AIM and Media Release
31 October 2023
Base Resources Limited
Quarterly Activities Report - September 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 30 September 2023.
Key Points
· Prices for ilmenite and rutile improved, while zircon prices softened on
sluggish demand.
· Mineral separation plant transitioned from continuous operation to campaign
processing, as planned, to ensure optimum product recoveries are maintained as
lower ore grades over the remainder of Kwale Operations' mine life constrain HMC
production.
· Kwale East Phase 2 air core drilling program was discontinued after an
evaluation of the drill results to date concluded there is unlikely to be
sufficient volume or heavy mineral grade to support an economically viable
mining development.
· A new Mining Code has come into effect in Madagascar with fiscal provisions
not materially out of step with Toliara Project DFS assumptions.
· Engagement with the Government on Toliara Project fiscal terms and lifting
of the project's on-ground suspension has been limited, principally due to
preparations for the upcoming Presidential elections. The incumbent President
has declared his candidacy and officially resigned on 9 September 2023.
KWALE OPERATIONS
Operational performance
The Kwale South and North Dunes continued to be mined concurrently during the
quarter, with two hydraulic mining units operating in each area. Mined tonnage
was steady at 4.1 million tonnes (Mt) (last quarter: 4.1Mt). Mining rates in
the North Dune improved during the quarter after the water pressure for one of
the hydraulic mining units was boosted from the standard 25 bar to 32 bar. A
second higher pressure hydraulic mining unit will be commissioned when mining
commences on the Bumamani deposit in the March quarter of 2024. Consistent with
mine plan, the heavy mineral (HM) grade of ore mined in the quarter was lower
than last quarter at 2.5% (last quarter: 3.0%), and consequently, heavy mineral
concentrate (HMC) production was lower at 84.8kt (last quarter: 103.2kt).
As ore grades and HMC production will be lower for the remainder of Kwale
Operations' mine life, the mineral separation plant (MSP) was transitioned, as
planned, from continuous operations to campaign processing to ensure optimum
product recoveries are maintained, with extended shuts between campaigns to
allow HMC stocks to rebuild. The combination of lower HMC production and MSP
shuts reduced the HMC fed to the MSP in the quarter to 71.6kt (last quarter:
106.1kt), resulting in a corresponding fall in production for all products.
Deposition of sand tails into the mined out North Dune pit P199 commenced in the
quarter, with sand tails also continuing to be deposited on the mined-out
Central Dune area. To aid water retention and subsequent rehabilitation, the
sand tails are capped with a co-disposed slimes/sand layer. Rehabilitation
activities on the Central Dune, South Dune and North Dune proceeded to plan.
SUMMARY BY QUARTER FY23 FY24
SEP DEC MAR JUN SEP
Mining (million tonnes)
Ore mined 4.4 4.5 3.3 4.1 4.1
HM % 3.8 4.0 3.9 3.0 2.5
VHM % 2.9 3.1 3.1 2.3 1.9
Production (thousand tonnes)
Ilmenite 86.0 84.5 71.6 55.5 38.8
Rutile 18.9 19.5 16.6 13.8 9.6
Zircon 6.6 7.4 6.4 5.5 3.8
Low grade products1 5.7 5.2 4.1 3.4 2.0
SUMMARY BY QUARTER FY23 FY24
SEP DEC MAR JUN SEP
US$ per tonne
Sales revenue $714 $651 $637 $695 $1,029
Operating costs $154 $165 $190 $240 $343
Cost of goods sold $200 $191 $195 $263 $442
Revenue: Cost ratio 3.6 3.4 3.3 2.6 2.3
Sales (thousand tonnes)
Ilmenite 62.6 74.1 86.2 74.6 11.1
Rutile 14.2 14.7 15.2 19.6 5.5
Zircon 6.2 5.0 7.4 6.6 3.9
Low grade products1 4.5 4.7 5.3 3.2 2.0
[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.]
Bulk shipping operations at the Company's Likoni export facility continued to
run smoothly, albeit at significantly lower volumes with 11.0kt of bulk ilmenite
dispatched (last quarter: 89.5kt). Containerised shipments of rutile and zircon
through the Mombasa Port also proceeded to plan. Despite lower production
levels for the remainder of Kwale Operations' mine life, the Company plans to
continue bulk shipments of ilmenite (up to 54kt lots) and rutile (between 5-10kt
lots), which will result in greater volatility in quarterly sales volumes, as
illustrated by the sales volumes for this quarter.
Unit operating costs have increased to US$343 per tonne produced (rutile,
ilmenite, zircon and low-grade products) (last quarter: US$240 per tonne) due to
the lower production. Despite this, total cash operating costs of US$18.6
million were marginally lower than the prior quarter (last quarter: US$18.8
million).
Cost of goods sold increased to US$442 per tonne sold (operating costs, adjusted
for stockpile movements, and royalties) due to the higher unit operating costs
and product sales mix (last quarter: US$263 per tonne), which also drove an
increase in the average unit revenue US$1,029 per tonne (prior quarter: US$695
per tonne). Consequently, the revenue to cost of goods sold ratio for the
quarter decreased to 2.3 (last quarter: 2.6).
FY23 production and FY24 production guidance
Kwale Operations FY24 production guidance is unchanged and remains as follows2:
· Rutile - 35,000 to 41,000 tonnes.
· Ilmenite - 130,000 to 160,000 tonnes.
· Zircon - 13,000 to 16,000 tonnes.
[Note (2): Refer to Base Resources' announcement on 26 June 2023, "FY24
Production Guidance - Kwale Operations", for the assumptions upon which the
guidance is based.]
MARKETING
Market conditions became increasingly challenging through the September quarter
due to growing economic uncertainty and softening property sectors across all
key markets. However, firm demand continued for Base Resources' products
through the quarter and sales were in line with expectations. Prices held up
well for ilmenite and rutile, but zircon prices moderated due to the sluggish
conditions that emerged during the latter part of the June quarter.
Ilmenite demand and prices in China remained relatively stable through the
quarter as major Chinese pigment plants maintained high levels of production.
The domestic pigment market in China was subdued through most of the quarter but
saw a seasonal improvement towards the end of the quarter. Export opportunities
for Chinese pigment producers increased through the quarter as significant
pigment production capacity in Taiwan and Europe was closed. Chloride pigment
producers in China, which are reliant on imported ilmenite, continued to build
and ramp up new production capacity which supported demand for Base Resources'
ilmenite.
Major western pigment producers have continued to sacrifice sales volumes to
support stable prices and, as a result, production rates were well below
capacity levels to avoid a build-up of inventory and demand for high-grade
titanium dioxide feedstocks was consequently reduced. While one major high
-grade feedstock producer has suspended production of synthetic rutile for at
least four months, which will assist in offsetting the drop in demand, downward
pressure on rutile prices is expected to continue building.
Rutile demand from the smaller welding and titanium metal sectors remained firm
in the quarter. Sales into these sectors command a significant price premium
over bulk rutile for the TiO2 pigment market, but this premium is expected to
reduce as some high-grade feedstock supply to the pigment sector is re-directed
to these sectors. Base Resources is maintaining its approach of increasing the
proportion of its rutile sales to the welding sector.
The weakening conditions in the Chinese and European zircon markets towards the
end of the June quarter led to a reduction in contracted zircon prices for
September quarter. Global demand for zircon has continued to soften through the
quarter and prices will moderate further for December 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. With no medical
treatment injuries recorded in the last 12 months, Base Resources' total
recordable injury frequency rate is 0.0per 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, commenced harvesting
of cotton and maize crops towards the end of the quarter and are also commencing
preparations for what is expected to be a successful growing season, with above
average rainfall forecast for the December quarter's `small rains' as an El Nino
weather pattern develops.
Training on business, entrepreneurship and leadership was delivered to 21
women's groups during the quarter, with the approximately 350 participants also
receiving support from the Company for various income generating initiatives.
The `long rains', which normally run April to June, extended well into the
September quarter allowing a further 30,000 trees to be planted as part of the
Company's rehabilitation efforts, bringing the total planted for the rainy
season to 80,000 trees. No instances of environmental non-compliance, major
environmental incidents or environment-related community complaints were
identified or recorded during the quarter.
Community and environment - Toliara Project
All community training programs and social infrastructure projects remain on
hold while the Toliara Project's on-ground activities are suspended.
BUSINESS DEVELOPMENT
Toliara Project development - Madagascar
Engagement with the Government of Madagascar on Toliara Project fiscal terms and
lifting of the project's on-ground suspension has been limited during the
quarter, principally due to the Government focus on preparations for the
upcoming Presidential elections.
The new Mining Code was recently passed into law and now applies to the
Company's Toliara Project. Key financial elements of the new Mining Code
relevant to the Toliara Project are:
· Increase in royalty rate from 2% to 5%. A reduction of 30% is applied to
the 5% royalty in the event the products are locally "transformed", the
definition and application of which are unclear. The Toliara Project Updated
Definitive Feasibility Study (DFS2) completed on 27 September 2021 assumed a 4%
royalty rate.
· A contribution to the "Mining Fund for Community and Social Investment"
equal to 3% of the direct investment amount. The term "direct investment" is
not defined and the applicability of this contribution requirement to the
Toliara Project is unclear. If this requirement were to apply to the Toliara
Project, based on the DFS2 Stage1 CAPEX of US$520million, this would require a
contribution of US$15.6million.3 DFS2 assumed an upfront community development
spend of US$10million.
The application of the above elements, and several other key provisions of the
new Mining Code, lack sufficient detail to fully assess their potential impact
on the Toliara Project. Other provisions that may impact the project include
any prescribed specifications (conditions) attaching to the project's
exploitation permit 37242, minimum requirements for the project's corporate
social responsibility plan (which will include social investment, infrastructure
spending and local content requirements), prescribed annual mining fees and
requirements for an environmental and rehabilitation provision.
The Government is preparing the Implementing Decree for the new Mining Code, a
draft of which should shortly be available for industry consultation. Greater
clarity on the new Mining Code and its application to the Toliara Project is
expected once the Implementing Decree is finalised together with any further
supporting regulations, orders and decrees.
Separately, the first round of the Presidential elections have been deferred by
a week to 16 November 2023, with the second round (if needed) scheduled for
20December 2023. The incumbent President has declared his candidacy and
officially resigned on 9 September 2023 to commence campaigning.
Until the full suite of Mining Code reform is completed and elections finalised,
the Company does not expect to achieve material progress in securing fiscal
terms or lifting of the project's on-ground suspension. The Company remains
ready and committed to progressing the world class Toliara Project to a final
investment decision once fiscal terms are secured and the on-ground suspension
is lifted.
The Toliara Rare Earths Pre-Feasibility Study of the economic potential of the
monazite contained in the Toliara Project's Ranobe Mineral Resources estimate
continued in the quarter and remains on track for completion in the March
quarter of 2024.
Total expenditure on the Toliara Project and Toliara Rare Earths Pre-Feasibility
Study for the quarter was US$2.4 million (last quarter: US$2.0 million).
[Note (3): For further information about DFS2, refer to Base Resources'
announcement on 27 September 2021 "DFS2 enhances scale and economics of the
Toliara Project" available at
https://baseresources.com.au/investors/announcements/. Base Resources confirms
that all the material assumptions underpinning the production information and
forecast financial information disclosed in that announcement continue to apply
and have not materially changed.]
Extensional exploration - Kenya
The Company released progress results from the first phase auger drilling
program (Phase 1) at the Kwale East exploration project4 (within Prospecting
Licence 2018/0119) at the start of the quarter. A total of 1,019 holes for
11,536.5 metres was completed, with the results confirming the presence of HM,
as well as a high value mineral assemblage. A second phase air core drilling
program (Phase 2) targeting the three areas of mineralisation identified during
Phase 1 - Magaoni, Masindeni and Zigira - was also undertaken during the
quarter. In total for Phase2, 65 holes for 1,054.5 metres were completed in the
Magaoni and Zigira target area, resulting in 703 samples. The Phase 2 drilling
assay results were released subsequent to the quarter end.
Exploration activities at Kwale East have been discontinued following an
evaluation of the likely mineralisation for the three targets using the results
from both Phase1 and Phase2 drill programs and applying optimistic assumptions
on the continuity of mineralisation in the Magaoni and Zigira target areas that
were not able to be drilled. Even on these optimistic assumptions, the
evaluation concluded that there is unlikely to be sufficient volume or heavy
mineral grade to support an economically viable mining development.5
Subsequent to the quarter end, Kenya's Department of Mining announced the
partial lifting of the moratorium on issuance of mining rights for all
construction and industrial minerals, including heavy mineral sands. All other
minerals have been classified as strategic minerals and mining rights shall be
processed on a case-by-case basis in accordance with Kenyan Mining Regulations.
Base Resources is now engaging with the Kenya Department of Mining to understand
the process for progressing its eight prospecting licence applications in Kwale,
Kuranze and Lamu regions, most of which were lodged prior to the decision to
implement the moratorium in 2019.
Expenditure on exploration activities during the quarter in Kenya was US$303k
(last quarter: US$389k).
[Note (4): For further information, refer to Base Resources' announcement on 3
July 2023 "Kwale East exploration drilling update" available at
https://baseresources.com.au/investors/announcements/. Base Resources confirms
that it is not aware of any new information that materially affects the
information included in that announcement.]
[Note (5): For further information, refer to Base Resources' announcement on 30
October 2023 "Kwale East - Exploration update" available at
https://baseresources.com.au/investors/announcements/. Base Resources confirms
that it is not aware of any new information that materially affects the
information included in that announcement.]
Extensional exploration - Tanzania
The Umba South Project in northern Tanzania is located approximately 75km west
-south-west of the Company's Kwale Operations in Kenya. Exploration at Umba
South was designed to test the southern extremity of a prominent north-south
trending ridge of quartzite and gneiss that extends 35km north to the Kuranze
region of Kenya, where initial rock chip and soil sampling indicated the
presence of rutile. Exploration activity in this area has so far been confined
to areas south of the Umba River, while the Company seeks to obtain the
necessary approvals from various government departments to explore in the
Mkomazi Game Controlled Area to the north which hosts the target ridge feature
extending north to the Kenyan border.
Results from the first phase reconnaissance exploration program were released in
the June quarter6. Three primary geological domains were observed - a
soil/colluvial cover sequence, underlying saprolite material and bedrock. While
rutile mineralisation was present in each domain, factors unique to each domain
were identified which would be expected to limit any significant economic
potential.
A second phase infill program to assess the continuity of rutile mineralisation
in the saprolite layer was completed in the March quarter with 86holes for 2,128
metres drilled. Assaying of these drill samples has commenced at the Kwale
Operations laboratory and is approximately 50% complete as assay priority was
given to Kwale East exploration drill samples. The results, which are expected
in the December quarter, will assist in planning future exploration activity at
Umba South and elsewhere along the prospective geological zone, including the
Kuranze region of Kenya once necessary land access approvals are obtained.
Expenditure on exploration activities during the quarter in Tanzania was US$32k
(last quarter: US$101k).
[Note (6): For further information, refer to Base Resources' announcement on 8
May 2023 "Tanzanian exploration - Umba South Phase 1 drill results" available at
https://baseresources.com.au/investors/announcements/. Base Resources confirms
that it is not aware of any new information that materially affects the
information included in that announcement.]
CORPORATE
Following release of the Company's full-year results for the 2023 financial year
(FY23) and disciplined application of the Company's capital management policy, a
final dividend of AUD 4.0 cents per share (unfranked) was paid to shareholders
on 28 September 2023, representing a cash payment of US$29.9 million (in
aggregate). Total dividends in respect of FY23 were AUD 6.0 cents per share
(unfranked), equal to US$45.5 million (in aggregate).
As at 30 September 2023, the Company had cash of US$77.2 million and no debt.
The Company currently has the following securities on issue:
· 1,178,011,850 fully paid ordinary shares.
· 43,327,165 performance rights issued pursuant to the terms of the Base
Resources Long Term Incentive Plan, comprising:
· 8,727,959 vested performance rights, which remain subject to exercise7; and
· 34,599,206 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 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 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 8 9413 7400
Fax: +61 8 9322 8912
NOMINATED ADVISER & JOINT BROKER
Canaccord Genuity Limited
James Asensio / Raj Khatri / George Grainger
Phone: +44 20 7523 8000
JOINT BROKER
Berenberg
Matthew Armitt / Detlir Elezi
Phone: +44 20 3207 7800
This information was brought to you by Cision http://news.cision.com
END
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