Base Resources Limited Quarterly Activities Report - March 2023
26 Abril 2023 - 1:00AM
UK Regulatory
TIDMBSE
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
END
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