TIDMBSE
AIM and Media Release
20 June 2022
BASE RESOURCES LIMITED
Decision to proceed with the Bumamani Project
Key outcomes
* A decision to proceed with development of the Bumamani Project has been
made following consideration of the Bumamani DFS outcomes.
* This will extend the life of Kwale Operations by 13 months to December
2024, once land access arrangements are finalised.
* An additional 17.9 million tonnes of Ore Reserves are expected to be mined
to produce an estimated 42,000 tonnes of rutile, 171,000 tonnes of ilmenite
and 20,000 tonnes of zircon.
* Proceeding with the Bumamani Project is a significant further step towards
extending mine life at Kwale Operations and maintaining operational
continuity, providing additional time to develop other opportunities in
Kenya and the region.
* Production guidance released for FY23, incorporating mining of the Bumamani
Project:
+ Rutile - 62,000 to 73,000 tonnes
+ Ilmenite - 260,000 to 310,000 tonnes
+ Zircon - 22,000 to 27,000 tonnes
African mineral sands producer and developer, Base Resources Limited (ASX &
AIM: BSE) (Base Resources or the Company) is pleased to announce that a
decision to proceed with development of the Bumamani Project has been made
after a definitive feasibility study (the Bumamani DFS) confirmed its economic
viability.
The decision means that life at Base Resources' 100% owned and operated mineral
sands operations in Kwale County, Kenya (Kwale Operations) will be extended by
13 months to December 2024 once land access arrangements are finalised.
The Bumamani Project comprises higher-grade subsets of the Bumamani and Kwale
North Dune deposits (see Figure 1) and the Bumamani DFS confirmed the viability
of mining these areas concurrently with the Kwale South Dune deposit.
Mining at the Kwale North Dune is expected to commence in March 2023.
Graphics/figures referenced in this release have been omitted. A full PDF
version of this release, including all graphics/figures, is available from the
Company's website: www.baseresources.com.au.
FY23 production guidance
The Company's 2023 financial year (FY23) production guidance is shown below,
together with its FY22 production guidance which is unchanged from that last
reported. The FY23 production guidance is lower than that for FY22 as a
consequence of the planned commencement of mining in the lower HM grade Kwale
North Dune orebody from March 2023 and normal uncertainties associated with
mining a new orebody.
PRODUCTION GUIDANCE FY22 FY23
(tonnes) Guidance Range Guidance Range
Rutile 73,000 to 83,000 62,000 to 73,000
Ilmenite 310,000 to 340,000 260,000 to 310,000
Zircon 24,000 to 28,000 22,000 to 27,000
The FY23 production guidance is supported by the Bumamani DFS and is based on
the following assumptions:
* Land access arrangements are finalised in time to enable mining at the
Kwale North Dune to commence in March 2023.
* Mining of 16.5Mt at an average HM grade of 3.51%.
* Heavy mineral concentrate (HMC) produced by the wet concentrator plant of
571kt.
* HMC fed into the mineral separation plant (MSP) of 556kt.
* MSP product recoveries of 101% for rutile, 101.5% for ilmenite and 84.5%
for zircon.
Summary of the Bumamani DFS outcomes
The Bumamani DFS was undertaken following an earlier pre-feasibility study (
Bumamani PFS) which supported mining higher-grade subsets of the North Dune and
Bumamani deposits1 (referred to as the P199 and Bumamani pits). Following the
pit optimisation stage of the Ore Reserves estimation process undertaken for
the Bumamani DFS, additional material to that considered for the Bumamani PFS
was shown to be economically extractable and was added to the scope of the
Bumamani DFS. The area added is a subset of the Kwale North Dune referred to
as the P200 pit (refer to Figure 1).
The Bumamani DFS forecasts net positive, post-tax, cash flows from mining the
Bumamani Project. The other key outcomes, together with the assumed product
prices, for the Bumamani DFS are set out in table 1 below.
Table 1: Bumamani DFS key outcomes.
Outcome / Assumption Units Bumamani DFS
Operations life extension Months
13
Ore mined Million tonnes
17.9
Ore Grade % HM 2.1
Upfront capex US$ millions
28.1
Rutile produced Thousand tonnes
42
Ilmenite produced Thousand tonnes
171
Zircon produced Thousand tonnes
20
Operating cost per tonne mined, inclusive of US$/t 4.64
5% royalty
Operating cost per tonne produced, inclusive US$/t 266.38
of 5% royalty
Rutile price - average over LOM US$/t FOB 1,811
Ilmenite price - average over LOM US$/t FOB 285
Zircon price - average over LOM US$/t FOB 2,021
Study margin of error band % -5 / +15
[Note (1): For further information about the Bumamani PFS, refer to Base
Resources' market announcements on 3 September 2021 "Bumamani PFS supports
extension of Kwale mine life to mid-2024" and "Further supporting information
for Bumamani PFS", available at https://baseresources.com.au/investors/
announcements/.]
Mining
The Bumamani DFS considered mining the Kwale North Dune Ore Reserves, which are
estimated at 13.9 million tonnes (Mt) (8.3Mt Proved and 5.6Mt Probable) at an
average heavy mineral (HM) grade of 2.1% for 0.29Mt of contained HM, and the
Bumamani Ore Reserves, which are estimated at 3.9Mt (2.6Mt Proved and 1.3Mt
Probable) at an average HM grade of 2.3% for 0.09Mt of contained HM2.
Together, these Ore Reserves estimates total 17.9Mt at an average HM grade of
2.1% for 0.38Mt of contained HM (with 10.9Mt or approximately 61% Proved and
6.9Mt or approximately 39% Probable).
The mining method planned for the Bumamani DFS is hydraulic mining, utilising
Kwale Operations' existing hydraulic mining units (HMUs). This mining method
has been successfully used at Kwale Operations since 2016. It is
non-selective, with HMUs using high pressure water jets to sluice the entire
ore face, creating an ore slurry which can then be pumped to the wet
concentrator plant.
To maximise mining rates and better manage tailings, the Bumamani DFS
established that the Bumamani Project will be mined concurrently with the Kwale
South Dune deposit, commencing from March 2023. Four existing HMUs will be
utilised, instead of three (as is current mining practice at Kwale South Dune),
with two continuing to mine at Kwale South Dune and two at the Bumamani Project
pits. After the transition to four HMUs, in both areas, one HMU will operate
at full capacity of up to 800 tph and one at half capacity of up to 400 tph to
give a total feed rate of up to 2,400 tph, consistent with the present feed
rate at Kwale South Dune. HMUs are capable of mining at either up to 400 or
800 tph by operating one or two high pressure monitors, each capable of up to
400 tph.
A shutdown of mining operations and the wet concentrator plant is scheduled for
February 2023 to relocate the HMUs and associated pumping infrastructure, after
which mining at P199 will commence. Following depletion of P199 (anticipated
in February 2024), mining equipment will relocate to P200 while mining
continues at Kwale South Dune. When mining completes at Kwale South Dune in
May 2024, mining equipment will be relocated to the Bumamani pit.
Figure 2 summarises the planned mining schedule incorporating the Bumamani
Project, compared to the mine plan if mining at the Bumamani Project does not
occur.
Figure 3 shows the planned mining schedule at the Bumamani Project across seven
stages. Mining is scheduled at P199 and P200 concurrently with mining at Kwale
South Dune for stages 1-5, following which (and for the last two stages) mining
occurs solely at the Bumamani pits.
[Note (2): For further information, refer to Base Resources' market
announcement on 20 June 2022 "Maiden Kwale North Dune and Bumamani Ore Reserves
estimates" available at https://baseresources.com.au/investors/announcements/.]
Tailings
The majority of fine tailings will be accommodated within Kwale Operations'
current tailings storage facility while coarse tailings will be used for land
rehabilitation across Kwale Operations. It is anticipated that approximately
25% of the fine tailings from all mining will be co-disposed with the coarse
tailings to create a water retention layer as part of land rehabilitation,
which is the current practice at Kwale Operations. Coarse tailings disposal
will commence in the P199 mined out void as soon as space is available and will
subsequently move to P200 when space is available. From commencement of P199
mining, approximately 30% of coarse tails production will be placed in these
pit voids. Figure 4 depicts the planned tailings schedules for the Bumamani
DFS.
Processing
Material mined will be processed through Kwale Operations' existing wet
concentrator plant and mineral separation plant. Recovery factors assumed were
the same as those currently experienced at Kwale Operations and are set out in
Table 2 below. They are also supported by the metallurgical testwork carried
out on the Kwale North Dune.
The metallurgical testwork comprised wet concentrator and mineral separation
plant tests on bulk samples collected from two 61cm diameter holes drilled in
the Kwale North Mineral Resource, as part of the earlier Kwale North
pre-feasibility study. One hole is adjacent to P199 while the other hole is in
P200. Discrete ore zones were sampled (Ore1, Ore4 and Ore5) from each hole.
The samples were dried and shipped to Brisbane, Australia for processing
through IHC Robbins' laboratory. Samples of the fine tailings generated by IHC
Robbins were sent to Outotec Metso for thickener testwork. The results of the
testwork were not materially different to the run of mine results being
achieved from mining the Kwale South Dune deposit. No metallurgical testwork
was completed on the Bumamani deposit, however, it exhibits similar
characteristics (including particle size) to ore currently mined at Kwale South
Dune and is expected to achieve similar processing results, including mineral
recoveries, as those achieved from mining the Kwale South Dune ore.
Table 2: Bumamani DFS recovery assumptions.
Description Units Bumamani DFS
(consistent with
current)
Concentrate grade % 85.0
HM recovery - wet concentrator plant % 79.5
Rutile recovery - wet concentrator plant % 88.9
Ilmenite recovery - wet concentrator % 90.0
plant
Zircon recovery - wet concentrator plant % 94.7
Rutile recovery - mineral separation % 101.0
plant
Ilmenite recovery - mineral separation % 101.5
plant
Zircon recovery - mineral separation % 84.5
plant
Marketing
The chemical specifications of products from the Bumamani Project are the same
as existing Kwale Operations production and the Bumamani DFS assumes the same
price forecast applicable to Kwale Operations products.
The assumed product prices were derived from Base Resources' internal price
forecasts for the proposed period of extraction, based on supply/demand
analysis and taking into account relevant data from independent industry
consultants, TZMI, and are not materially different from TZMI's average
forecast prices over the same period.
Infrastructure and capital and operating costs
As Kwale Operations is an operating mine, all the major infrastructure already
exists - 132 kV power line and transformer yard, 8Gl water dam, water bores,
export facility, processing plants, offices, maintenance workshops, laboratory
and camp. The cost of additional roads, powerlines, pumps and pipelines
required to service the proposed pits have been allowed for in the capital
expenditure estimate. Figure 5 shows the locations of new mine infrastructure,
including a new community road to replace those intersected by the pits, with
all infrastructure implemented in a staged approach as required by the mine
plan.
Capital cost is estimated at US$28.1 million, including the acquisition of land
and the additional mine services and infrastructure that will be required. The
Bumamani DFS capital cost estimate is higher than that of the Bumamani PFS,
primarily due to inclusion of the P200 area and related field services and land
acquisition costs. Capital costs will be funded from internally generated cash
flows.
Operating cost per tonne mined is expected to be consistent with current Kwale
Operations performance but operating costs per tonne produced are expected to
be higher due to the lower production volumes, a consequence of the lower heavy
mineral grade of the Bumamani Project relative to the Kwale South Dune.
Implementation schedule
Implementation is planned in three stages:
* Stage 1 - (7 months) land acquisition, resettlement and completion of all
construction work, including mining earthworks and installation of new
field services to the P199 mining area.
* Stage 2 - (1 month) relocation of two HMUs, plus associated plant, and
field services from Kwale South Dune to P199, including a 2-week shutdown
for tie-ins followed by commissioning and start-up.
* Stage 3 - following the start-up of P199, field services will be extended
to P200 and the Bumamani pit, as required by the mine plan, and consists of
mining earthworks, relocation and installation of pipelines, booster
stations and power supply lines.
Legal, community and environment
The Company has secured the right to mine the Bumamani Project, following the
recent extension of the boundary of Special Mining Lease 23 (SML 23) to
incorporate that project. The extension was effected by a formal deed of
variation between the Company's wholly-owned Kenyan subsidiary, Base Titanium
Limited, and the Government of Kenya acting through the Ministry of Petroleum
and Mining. In accordance with the terms of SML 23, a royalty of 5% is payable
to the Government of Kenya.
The Resettlement Action Plan for landowners in the Bumamani Project areas has
been approved by the National Environmental Management Authority (NEMA) and is
currently being implemented. The socio-economic baseline study has confirmed
landowner eligibility and, following an extensive consultation and negotiation
process, compensation rates have been agreed. Asset valuation is underway
following which, individual compensation agreements will be signed and
relocation implemented. Broader community consultation programs have been
running for the duration of the current mining operation, assisting with
two-way information sharing and management of stakeholder expectations.
The key regulatory approval in addition to the SML 23 extension, being that in
respect of the Environmental and Social Impact Assessment (ESIA), was issued on
23 August 2021 by NEMA following extensive public consultation and
environmental impact assessments.An environmental management plan was also
approved as part of the ESIA. The only other authorisation required to mine the
Bumamani Project is that for silt trap construction as a control measure for
sedimentation with no issues expected in obtaining this authorisation.
Key risks and sensitivities
Completing the necessary land acquisitions at reasonable prices within a
timeframe that does not impact the implementation schedule and commencement of
mining at the Bumamani Project in March 2023, has been identified as a key
risk. The Company is confident that this risk will not give rise to material
impacts on implementation of the Bumamani Project given progress made to date
and further planned mitigations. However, given the requirement for engagement
with and action by landowners, residual risk remains. Inaction on the part of
landowners and any emerging project opposition could stem from, among other
things, the upcoming Kenyan general election in August 2022. The inability to
commence mining at the Bumamani Project by March 2023 as planned would impact
project economics.
The key sensitivity to the Bumamani Project achieving forecast net positive,
post-tax cash flows is product prices, which are subject to many variables
outside the control of Base Resources and the assumed average product prices
may not reflect realised prices. If all other financial and operating outcomes
were as forecast, realised prices for the full product suite would need to be
29% lower than forecast for the Bumamani Project to not be net cash flow
positive.
Other factors which could negatively affect cash flows include an increase in
operating costs or an increase in land acquisition costs, though these are
moderated by the Company's experience managing Kwale Operations and the
progress made in the land acquisition process.
Ore Reserves estimates and production and forecast financial information
The information included in this announcement about the estimated Ore Reserves
for the Kwale North Dune and Bumamani deposits has been extracted from Base
Resources' ASX announcement titled "Maiden Kwale North Dune and Bumamani Ore
Reserves estimates" dated 20 June 2022, which is available at https://
baseresources.com.au/investors/announcements/. Base Resources confirms that it
is not aware of any new information or data that materially affects the
information included in that announcement and all material assumptions and
technical parameters underpinning the estimates continue to apply and have not
materially changed.
The estimated Ore Reserves for the Kwale North Dune and Bumamani deposits
underpin the Bumamani DFS and the anticipated production and financial outcomes
from that study. These Ore Reserves estimates were prepared by Competent
Persons in accordance with the requirements of the JORC Code. The proportions
of Probable and Proved Ore Reserves underpinning the Bumamani DFS and the
anticipated production outcomes are disclosed in the main body of this
announcement. The material assumptions on which Bumamani DFS production and
financial outcomes disclosed in this announcement are based are also disclosed
in the main body of this announcement.
Forward Looking Statements
The Bumamani DFS is based on technical, economic and other conditions and
information as at the date of this announcement, which may be subject to
change. Accordingly, the information and conclusions presented in this
announcement should be viewed in this light. Information in this announcement
should also be read in conjunction with other announcements made by Base
Resources to ASX.
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 capital cost, operating cost, future
production and available grades, product prices, 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. Some risks that could impact Base
Resources' ability to achieve the outcomes or results expressed or implied by
such statements are disclosed in this announcement. 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
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 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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