AIM and Media Release
29 April 2019
BASE RESOURCES LIMITED
Quarterly Activities Report – March
2019
HIGHLIGHTS
- Toliara Project PFS released, confirming the Company’s view
that the Toliara Project is a world class mineral sands
project.
- Transition of mining to the South Dune is on schedule for
June 2019.
- Strengthening of rutile and ilmenite prices while zircon prices
moderate.
- Production guidance for FY20 released.
- No lost time or medical treatment injuries.
- Drilling commences within the Vanga prospecting licence in
Kenya.
- Toliara Project DFS commences, due for completion in the
December 2019 quarter.
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.
Kwale Mineral Sands Operations (Kwale Operations) in
Kenya continued to focus on
maximising mineral recoveries under a high tonnage, low grade
regime, together with progressing preparations for relocating
mining operations to the South Dune orebody in June 2019. In
pursuit of further mine life extension, drilling of the Vanga
exploration license also commenced on 1 April 2019.
Base Resources released the pre-feasibility study (PFS)
for its Toliara mineral sands project (Toliara Project) in
the south-west of Madagascar,
which confirmed the Company’s view that the Toliara Project is a
world class mineral sands project[1]. The Toliara
Project continued to progress with all workstreams on schedule to
complete the definitive feasibility study (DFS) in the
December 2019 quarter.
Graphics referenced in this release have been omitted. A
full PDF version of this release, including all graphics, is
available from the Company’s website:
www.baseresources.com.au.
[Note (1): For further information
about the Toliara Project PFS outcomes refer to Base Resources’
market announcement on 21 March 2019
“Toliara Project PFS confirms status as a world-class mineral sands
development” available at
https://www.baseresources.com.au/investor-centre/asx-releases/.]
KWALE OPERATIONS
Production & Sales |
Mar 2018
Quarter |
June 2018 Quarter |
Sept 2018
Quarter |
Dec 2018
Quarter |
Mar 2019 Quarter |
Production
(tonnes) |
|
|
|
|
|
Ilmenite |
111,630 |
114,773 |
118,265 |
108,465 |
87,179 |
Rutile |
21,634 |
24,451 |
25,125 |
24,505 |
20,171 |
Zircon |
9,166 |
9,286 |
9,683 |
8,252 |
6,943 |
Zircon low
grade[2] |
- |
- |
- |
- |
172 |
Sales (tonnes) |
|
|
|
|
|
Ilmenite |
140,665 |
107,170 |
107,632 |
106,788 |
81,339 |
Rutile |
25,526 |
25,635 |
23,580 |
24,008 |
14,593 |
Zircon |
9,884 |
9,007 |
8,507 |
8,063 |
7,260 |
Zircon low
grade[2] |
- |
- |
- |
- |
115 |
[Note (2): Reported as tonnes of zircon
contained in concentrate, equivalent to approximately 70-80% of the
value of primary zircon.]
Mining & WCP Performance |
Mar 2018
Quarter |
June 2018 Quarter |
Sept 2018
Quarter |
Dec 2018
Quarter |
Mar 2019 Quarter |
Ore mined
(tonnes) |
1,883,159 |
3,543,430 |
4,791,969 |
5,036,211 |
4,349,984 |
HM % |
6.88 |
6.36 |
4.78 |
3.60 |
3.59 |
HMC produced
(tonnes) |
125,298 |
192,559 |
199,079 |
148,937 |
154,001 |
Wet concentrator plant (WCP) production of heavy mineral
concentrate (HMC) increased to 154kt (last
quarter: 149kt) as a result of improved recoveries. HMC
stockpiles increased to 49kt (last quarter: 46kt) due to reduced
MSP feed rates. With the Tailings Storage Facility
(TSF) outer wall complete, all sand tails were deposited
into the mined-out area of the Central Dune, representing the first
stage of rehabilitation in this section. Rehabilitation of
the TSF outer wall continued.
MSP
Performance |
Mar
2018
Quarter |
June
2018 Quarter |
Sept
2018
Quarter |
Dec
2018
Quarter |
Mar
2019 Quarter |
MSP Feed (tonnes of
HMC) |
180,128 |
192,376 |
194,311 |
191,633 |
155,373 |
MSP feed rate
(tph) |
92 |
90 |
91 |
90 |
78 |
MSP recovery % |
|
|
|
|
|
Ilmenite |
101 |
100 |
101 |
102 |
104 |
Rutile |
99 |
101 |
99 |
99 |
102 |
Zircon |
78 |
79 |
79 |
73 |
78 |
As previously announced, the MSP feed rate was reduced to 71tph
from February to ensure sufficient HMC stocks are available to
allow continuous feed to the MSP during the transition to the South
Dune orebody. Consequently, production of all final products
was reduced in the quarter:
- Rutile production fell to 20.2kt (last quarter: 24.5kt) and
recoveries were 102% (last quarter: 99%).
- Ilmenite production fell to 87.2kt (last quarter: 108.5kt) and
recoveries were 104% (last quarter: 102%).
- Zircon production fell to 6.9kt (last quarter: 8.3kt) and
recoveries (inclusive of low-grade zircon) were 78% (last quarter:
73%). Production of a low-grade zircon product commenced in
February from a previously rejected MSP tailings stream with a
contained 172t produced during the quarter.
Bulk loading operations at the Company’s Likoni Port facility
continued to run smoothly, dispatching more than 90kt of ilmenite
and rutile during the quarter (last quarter: 126kt).
Containerised shipments of rutile and zircon through the Mombasa
Port proceeded to plan.
Summary of unit costs
& Revenue per tonne (US$) |
Mar
2018
Quarter |
June
2018 Quarter |
Sept
2018
Quarter |
Dec
2018
Quarter |
Mar
2019 Quarter |
Unit operating costs
per tonne produced |
$98 |
$102 |
$103 |
$115 |
$138 |
Unit cost of goods
sold per tonne sold |
$114 |
$143 |
$124 |
$146 |
$151 |
Unit revenue per tonne
of product sold |
$314 |
$376 |
$354 |
$377 |
$368 |
Revenue: Cost of goods
sold ratio |
2.8 |
2.6 |
2.8 |
2.6 |
2.4 |
Total operating costs were marginally lower than the previous
quarter due to lower mining and production volumes, but the lower
production resulted in a higher unit operating cost of US$138 per tonne produced (rutile, ilmenite and
zircon) (last quarter: US$115 per
tonne). Unit operating costs are higher than the same period
last year (March 2018 quarter:
US$98 per tonne) due to higher
operating costs associated with a 131% increase in mining and WCP
volumes following implementation of the Kwale Phase 2 mine
optimisation project.
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 the majority of 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 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$151 per
tonne sold (operating costs, adjusted for stockpile movements, and
royalties) was higher (last quarter: US$146) due to higher unit operating costs,
offset in part by the product sales mix containing a lower
proportion of rutile and zircon than the prior quarter.
The lower proportion of zircon and rutile sold in the quarter
contributed to the fall in average revenue per tonne decreasing to
US$368 per tonne (last quarter:
US$377 per tonne).
MINING TRANSITION TO SOUTH DUNE
OREBODY
The transition of mining to the South Dune orebody in
June 2019 remains on schedule and
will result in a two-week shutdown of the WCP that month followed
by a two-week ramp up on restart. The transition primarily
involves the supply and installation of 7,400m of slurry and water piping, an
8,500m 11kV power line, a pipe bridge
across the Mukurumudzi Dam spillway, a 1.25MW slurry booster pump
and a 1MW process water booster pump. Engineering and
procurement work is complete and construction, clearing and
earthworks were largely complete by the end of the quarter.
The total cost of works for the transition are forecast to be
US$12.3 million and will be incurred
over financial year 2019 (FY19). Total expenditure on
the transition to the South Dune orebody to date is US$10.1 million (last quarter: US$5.1 million).
Production
Guidance |
FY19
Guidance Range (tonnes) |
FY20
Guidance Range (tonnes) |
Rutile |
88,000
to 94,000 |
64,000
to 70,000 |
Ilmenite |
385,000
to 415,000 |
315,000
to 350,000 |
Zircon |
31,000
to 34,000 |
25,000
to 28,000 |
The Company released production guidance on 10 April 2019 for FY20[3]. The
FY20 production guidance is lower than that for FY19 as a
consequence of the lower HM grade of the South Dune orebody,
depletion of stockpiled HMC during the transition of mining
operations to the South Dune orebody and normal uncertainties
associated with mining a new orebody.
FY19 production guidance shown above was not changed, although
some of the underlying assumptions were updated to reflect actual
production to 31 March 2019 and
forecast remaining production over FY19. FY20 production
guidance is consistent with internal assumptions underpinning
forecast Kwale Operations cash flows for the purposes of the
Company’s Toliara Project pre-feasibility study when assessing
project funding requirements[4].
The above production guidance is based on the following
assumptions:
- Mining of 18.0Mt in FY20 (FY19 guidance 17.8Mt) at an average
HM grade of 3.58% (FY19 guidance 3.87%), with the remaining FY19
volume and all FY20 volume coming from Ore
Reserves[5].
- MSP feed rate at an average of 75tph in FY20, lower than FY19
guidance of 84tph due to the lower HMC production and depleted HMC
stocks.
- MSP product recoveries of 100% for ilmenite in FY20 (FY19
guidance 102%), 99% for rutile in FY20 (FY19 guidance 99%) and 77%
for zircon in FY20 (FY19 guidance 76%).
[Note (3): For further information refer
to Base Resources’ market announcement on 10
April 2019 “Production Guidance for FY20” available at
https://www.baseresources.com.au/investor-centre/asx-releases/.
Note (4): For further detailed information on the
Toliara Project Pre-Feasibility Study, refer to Base Resources’
market announcements of 21 March 2019
“Toliara PFS confirms a world-class mineral sands development”
available at
https://www.baseresources.com.au/investor-centre/asx-releases/.
Note (5): The Ore Reserves estimates underpinning the above
production targets were prepared by Competent Persons in accordance
with the JORC Code (2012 edition). The above production
targets are 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
Constraints on the global supply of sulphate ilmenite and
high-grade chloride feedstocks (including rutile) have continued
into the quarter. In particular, supply of ilmenite from two
of the major ilmenite producing countries, India and Vietnam, has declined sharply. In
India, a recent blanket ban on
private mining of mineral sands by the national government has
added to existing bans on mining and exports by state governments
in the major producing states of Tamil Nadu and Andrah
Pradesh. In Vietnam, export
quotas for ilmenite need to be renewed for some producers and the
relatively high cost of production, together with the uncertainty
of obtaining future export quotas, is restricting mining
activity.
Chinese pigment experienced a strong increase in demand
following Chinese New Year and pigment producers were able to
secure price increases for their pigment through the quarter.
The improved conditions have resulted in increased pigment
production activity which has maintained a high demand for
ilmenite. These conditions have continued into the start of
the seasonally strong June quarter.
The emerging ilmenite deficit being created by strong demand and
supply restrictions has resulted in a strengthening ilmenite price
through the end of the quarter and into the June quarter.
Demand for Base Resources ilmenite from existing customers exceeded
the Company’s ability to supply and there has been a significant
increase in enquiries from new customers globally.
Some western pigment producers have reported that the pigment
de-stocking from their customers, which took place through the
latter part of calendar 2018, continued into the early part of
calendar 2019, but the rate of such de-stocking has slowed.
The consensus is that this de-stocking will be completed during the
June quarter with pigment demand expected to bounce back by the
middle of calendar 2019. Chloride ilmenite pigment production
remains strong and the constraints on high grade feedstock supply
has continued to support price improvement for rutile. Rutile
prices continued to strengthen in the quarter and further
improvement is expected in coming quarters.
Zircon demand continued to moderate through the seasonally slow
March quarter as a result of global trade tensions and softer
economic conditions across most markets. After a period of
significant gains, zircon prices stabilised through the December
and March quarters but retreated slightly in the early part of the
June quarter. The extent of a rebound in zircon demand during
the seasonally strong June quarter will largely depend on the
general economic performance in China and other major zircon markets.
SAFETY
With no lost time or medical treatment injuries occurring during
the quarter, or in the past year, Kwale Operations’ lost time
injury frequency rate (LTIFR) and total recordable injury
frequency rate (TRIFR) are both zero. No injuries were
recorded in the quarter for the Toliara Project and the total
number of injuries of any type since project commencement remains
at zero. This is an exceptional performance reflective of the
ongoing focus and importance placed on safety by management.
Base Resources’ employees and contractors have now worked 15.9
million man-hours LTI free, with the last LTI recorded in early
2014. Further, 6.2 million man-hours have been worked without
a medical treatment injury.
COMMUNITY AND ENVIRONMENT
Agricultural livelihood programs at Kwale, run in conjunction
with partners Business for Development, DEG, FMO, Australia’s DFAT,
Kenya Red Cross and the Cooperative Bank of Kenya, continue to develop with encouraging
support from both national and county Kenyan governments.
These programs have expanded again this season with more
smallholder farmers and community groups in Kwale, Mombasa and Lamu
counties.
Preparations for the next planting season are underway to ensure
that everything is ready for the commencement of rains in
late-April. Capacity has been established at the PAVI
Co-operative Business Park to enable preparation of poultry feeds
produced from this year’s harvest. This aspect, together with
support for the purchase of the cotton harvest through funding
mechanisms from the Co-operative Bank of Kenya, is vital to the multi-faceted
livelihood improvement approach being implemented. The PAVI
Co-operative has also been bolstered with increased marketing
capacity to assist with sales of agricultural produce, poultry and
honey which continues to grow in popularity and positive income
generating outcomes.
Rehabilitation of the tailings storage facility outer sand wall
continues with installation of erosion controls and laying top soil
in preparation for the upcoming rains. Local women’s and
youth groups have proven to be strong partners in the
rehabilitation program, supplying grass seed and manufacturing
erosion control materials and training to undertake seeding and
specialised grass planting for when the rains begin.
At the Toliara Project, three community water supply boreholes
have been drilled with construction of tank stands and installation
of solar pumping equipment to be completed in the June
quarter. Land planning in conjunction with local communities
and regional authorities has commenced in relation to construction
of school and health facilities in three project-affected
communes. Several local improvement projects continue in each
of the five affected local communes including flood protection,
irrigation channels and preparations for the upcoming planting
season. Environmental baseline work in and around the planned
mine site commenced with ecological studies and water
monitoring.
BUSINESS DEVELOPMENT
Toliara Project Development -
Madagascar
Base Resources completed the PFS and released the outcomes in
the quarter. The PFS confirms the Company’s view that the
Toliara Project is a world class mineral sands project, with
estimated[6]:
- post-tax/pre-debt (real) NPV10 of US$671 million;
- a sector leading average revenue to cost ratio of 3.06 over the
33-year initial mine life; and
- Stage 1 CAPEX of US$439
million.
The DFS commenced in the quarter and is on target for completion
by the end of 2019, ahead of a planned decision to proceed to
construction in the March 2020
quarter. If a decision to proceed is approved at that time, the
project timetable is still expected to have the Toliara Project in
production by the end of the December
2021 quarter.
Key activities during the quarter included:
- Completion of the PFS and commencement of the DFS.
- Continuation of the mineral separation plant test work and
flowsheet verification, using the heavy mineral concentrate
produced by the wet concentrator plant test work.
- Progressing processing plant, camp and infrastructure
design.
- Completion of recruitment and pre-screening of local staff for
early capacity building and training.
- Progressing baseline studies in accordance with environmental
approvals.
- Progressing the land acquisition process and completion of the
final list of beneficiaries for road and port facility land
acquisition.
Continuing the DFS activities will be the focus in the coming
quarter, including:
- Preparing the application for certification under the Large
Mining Investment Code (LGIM).
- Continuing the drill program, targeting an increase in
measured, indicated and inferred resources, completion of the
Ranobe deposit mineralogy and an update to the Mineral Resources
estimate.
- Generating an Ore Reserve estimate for DFS financial modelling
based on the Ranobe Deposit Mineral Resource
estimate[7].
- Producing rutile and zircon market samples.
- Continuing baseline studies and land acquisition
programs.
- Continuing training of local staff ahead of planned
construction.
- Conducting geotechnical investigations and continuing
infrastructure design.
- Progressing the detailed design and tendering for the camp
facilities, ahead of early works construction expected to start in
the second half of 2019.
- Shortlisting EPC contractors for the marine facility and
issuing the request for tender.
- Shortlisting independent power producers and issuing the
request for tender for the planned hybrid power plant.
Total expenditure on the Toliara Project for the quarter was
US$5.0 million (last quarter:
US$3.8 million).
[Note (6): For further information about
the Toliara Project PFS outcomes refer to Base Resources’ market
announcement on 21 March 2019
“Toliara Project PFS confirms status as a world-class mineral sands
development” available at
https://www.baseresources.com.au/investor-centre/asx-releases/.
This announcement contains details of the material assumptions
underpinning this forecast financial and production information,
including material assumptions with respect to forecast production
profile, product pricing, capital expenditure and operating
costs. The Company confirms that all material assumptions
underpinning the forecast financial and production information
continue to apply and have not materially changed. Note
(7): For further information refer to Base Resources
market announcement on 23 January
2019 “Updated Ranobe Deposit Mineral Resources (corrected)”
available at
https://www.baseresources.com.au/investor-centre/asx-releases/.]
Extensional exploration – Kenya
Mining tenure arrangements continue to progress with the Kenyan
Ministry of Petroleum and Mining as a precursor to an anticipated
updated Ore Reserve based on the expanded 2017 Kwale South Dune
Mineral Resource as announced on 4th October
2017[8].
A Mineral Resource estimate for the Kwale North Dune deposit is
expected to be issued shortly.
Completion of the remaining drilling program (4,200 metres) in
the North-East Sector (Kwale East) of PL 2018/0119 remains
suspended pending resolution of community access issues.
Drill assay results to date have shown potential for some limited
extensional economic resource close to the Central Dune (Bumamani),
but this remains subject to more detailed evaluation.
Drilling commenced in the Company’s Vanga Prospecting Licence
(PL/2015/0042) on 1 April 2019. Community engagement
in the area is ongoing and a north eastern extension of the
Prospecting Licence (App No/1753) has been applied for to
cover further prospective ground which has since become
available. Expenditure on exploration activities in
Kenya during the quarter was
US$0.2 million (last quarter:
US$0.4 million).
[Note (8): Refer to Base Resources market
announcement “Mineral Resource Increase for Kwale South Dune”
released on 4 October 2017, which is
available at
http://www.baseresources.com.au/investor-centre/asx-releases.
]
CORPORATE
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, totalling approximately US$26.3 million at 31 March 2019. These
claims are proceeding through the Kenya Revenue Authority process,
although no refunds were received during the quarter (last quarter:
nil). Base Resources is continuing to engage with the Kenyan
Treasury and the Kenya Revenue Authority, seeking to expedite the
refunds.
March
2019 quarterly cash flow
The increase in net cash of US$800k in the March quarter was a product of the
following:
- Group operational cashflow of US$16.0
million.
- Less refundable Kenyan VAT paid of US$2.0 million.
- Less total capital expenditure of US$13.2 million.
In summary, at 31 March 2019:
- Net cash of US$1.8 million,
consisting of:
- Cash and cash equivalents of US$31.8
million.
- Revolving Credit Facility debt of US$30.0 million.
- 1,166,623,040 fully paid ordinary shares on issue.
- 48,586,062 performance rights issued pursuant to the terms of
the Base Resources Long Term Incentive Plan.
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 Barnaby Hayward |
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 Sands
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
Andrew Thomson / Stephen Allen
Phone: +61 (0)8 9480 2500 |
Disclaimer and Important Notices
Information included in this report that relates to the outcomes
of the Pre-Feasibility Study for the Toliara Project (i) is,
by its nature, preliminary information and conclusions presented
should be viewed in this light, and (ii) represent the reasonable
judgments of Base Resources within the time and budget context of
preparation of the Pre-Feasibility Study using the information
available at the time of its preparation.
No representation or warranty, express or implied, is made as to
the fairness, accuracy or completeness of the information contained
in this report (or any associated presentation, information or
matters). To the maximum extent permitted by law, Base
Resources and its related bodies corporate and affiliates, and
their respective directors, officers, employees, agents and
advisers, disclaim any liability (including, without limitation,
any liability arising from fault, negligence or negligent
misstatement) for any direct or indirect loss or damage arising
from any use or reliance on this document or its contents,
including any error or omission from, or otherwise in connection
with, it.
Certain statements in or in connection with this report contain
or comprise forward looking statements. Such statements may
include, but are not limited to, statements with regard to future
production and available grades 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.