Base Resources Limited Quarterly Activities Report - March 2021

 
TIDMBSE 
 
AIM and Media Release 
 
29 April 2021 
 
BASE RESOURCES LIMITED 
Quarterly Activities Report - March 2021 
 
Key Points 
 
  * Kwale Operations maintained operational consistency through the quarter 
    with health and safety protocols in place to minimise the risk of COVID-19 
    to personnel and surrounding communities. 
  * Kwale Operations FY21 production guidance increased for both ilmenite and 
    zircon. 
  * Ilmenite and rutile prices trended upwards in the quarter, with higher 
    zircon prices secured for the June quarter. 
  * Kwale North Dune PFS completed, with a focused study on mining higher grade 
    subsets of the North Dune and Bumamani deposits underway and due in 
    mid-2021. 
  * Discussions with the Government of Madagascar on Toliara Project fiscal 
    terms continue to progress. 
  * Half-year dividend of AUD3.0 cents per share paid. 
  * Outstanding US$25 million balance of the revolving credit facility repaid, 
    and facility retired early. 
 
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. 
 
COVID-19 UPDATE 
 
Base Resources continues to closely monitor the COVID-19 pandemic and its 
impacts on the Company's business, people and wider stakeholders.  The 
Company's Kwale Operations in Kenya continue to operate under a suite of 
mitigations aimed at protecting the health and safety of our employees and 
neighbouring communities, including modified workplace practices and a focus on 
hygiene and social distancing.  As the number of COVID-19 cases in Kenya and 
Madagascar have increased significantly in recent weeks, the Company has also 
re-introduced work-from-home protocols for non-operational staff.  The Company 
is also assisting governments and communities in both Kenya and Madagascar with 
several initiatives, primarily involving the construction of hygiene 
facilities, and the donation and distribution of food and medical supplies and 
equipment. 
 
KWALE OPERATIONS 
 
Production & Sales      Mar 2020      June 2020     Sept 2020     Dec 2020      Mar 2021 
                         Quarter       Quarter       Quarter       Quarter       Quarter 
 
Production (tonnes) 
 
        Ilmenite         105,035       84,843        65,863        78,500        84,178 
 
        Rutile           23,683        19,035        15,513        18,171        19,448 
 
        Zircon            9,163         7,590         6,000         6,677         7,388 
 
        Zircon low         780           578           426           516           482 
grade1 
 
Sales (tonnes) 
 
        Ilmenite         87,819        102,364       75,502        53,798        97,179 
 
        Rutile           25,280        27,268        11,651        12,017        26,074 
 
        Zircon            7,377         9,086         7,336         6,399         6,612 
 
        Zircon low          -           1,516          505            -            502 
grade1 
 
[Note (1):  Reported as tonnes of zircon concentrate, it typically realises 
between 30% to 50% of the value of the equivalent volume of standard grade 
zircon, due to rutile credits.] 
 
Mining operations continued according to plan on the South Dune orebody with 
mined tonnage increasing to 4.7Mt (last quarter: 4.6Mt) due to higher mining 
faces reducing the downtime associated with relocating mining units and higher 
mining water pressures following process water pump reconfiguration.  The heavy 
mineral (HM) grade of ore mined was also higher at 3.58% (last quarter: 
3.43%).  This was driven by mine path as well as better grade than predicted by 
the resource model in some areas.  Previously reported September 2020 and 
December 2020 quarter HM and VHM grades have been amended to reflect a revision 
of mine feed grade sampling methodology. 
 
Mining & WCP           Mar 2020      June 2020     Sept 2020     Dec 2020      Mar 2021 
Performance             Quarter       Quarter       Quarter       Quarter       Quarter 
 
Ore mined (tonnes)     4,295,645     4,271,811     3,938,494     4,600,172     4,695,052 
 
HM %                     3.86          3.87          3.12          3.43          3.58 
 
VHM %                    2.98          2.95          2.36          2.62          2.80 
 
HMC produced            153,754       148,699       103,730       142,309       149,618 
(tonnes) 
 
Wet concentrator plant (WCP) production of heavy mineral concentrate (HMC) was 
higher at 150kt (last quarter: 142kt) due to a combination of higher mined 
tonnes and HM grades.  HMC stocks increased to 18kt at quarter end (last 
quarter: 14kt).  Sand tails continued to be deposited into the mined-out 
Central Dune area and significant progress was made with rehabilitation of the 
mined-out areas of the South Dune, with 66 hectares provisionally rehabilitated 
in the quarter (last quarter: 49 hectares). 
 
MSP Performance        Mar 2020      June 2020     Sept 2020     Dec 2020      Mar 2021 
                        Quarter       Quarter       Quarter       Quarter       Quarter 
 
MSP Feed (tonnes of     186,197       145,550       114,873       134,019       145,110 
HMC) 
 
MSP feed rate (tph)       90            78            61            64            69 
 
MSP recovery % 
 
        Ilmenite          99            99            100           102           102 
 
        Rutile            99            100           102           102           100 
 
        Zircon            87            85            86            87            85 
 
Total mineral separation plant (MSP) feed tonnage was higher than the prior 
quarter, due to improved HMC availability, while recoveries were generally 
steady.  Consequently, production of all final products increased compared to 
the prior quarter. 
 
Bulk loading operations at the Company's Likoni Port facility continued to run 
smoothly, dispatching a combined 117kt of bulk ilmenite and rutile during the 
quarter (last quarter: 64kt).  Containerised shipments of rutile and zircon 
through the Mombasa Port proceeded according to plan. 
 
Summary of unit costs         Mar 2020    June 2020   Sept 2020   Dec 2020    Mar 2021 
& Revenue per tonne (US$)      Quarter     Quarter     Quarter     Quarter     Quarter 
 
Unit operating costs per        $128        $153        $189        $161        $176 
tonne produced 
 
Unit cost of goods sold per     $175        $189        $192        $207        $198 
tonne sold 
 
Unit revenue per tonne of       $476        $479        $413        $464        $478 
product sold 
 
Revenue: Cost of goods sold      2.7         2.5         2.1         2.2         2.4 
ratio 
 
Total operating costs of US$19.6 million were significantly higher this quarter 
(last quarter: US$16.8 million) due to a revision of the underlying assumptions 
for the rehabilitation and mine closure provision, resulting in a once off 
non-cash adjustment of US$3.3 million.  Excluding this adjustment, operating 
costs were $0.5 million lower than the prior quarter.  This adjustment is 
reflected in the increased unit operating costs to US$176 per tonne produced 
(rutile, ilmenite, zircon and low-grade zircon) (last quarter: US$161 per 
tonne). 
 
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 most of the 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 bulk 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$198 per tonne sold (operating costs, adjusted for 
stockpile movements, and royalties) decreased, despite the higher operating 
costs, due to the sales mix in the quarter (last quarter: US$207 per tonne). 
Average unit revenue increased to US$478 per tonne (prior quarter: US$464 per 
tonne) due to increased ilmenite and rutile prices.  From the combination of 
these factors, the revenue to cost of goods sold ratio for the quarter 
increased to 2.4 (last quarter: 2.2). 
 
PRODUCTION GUIDANCE (tonnes)           Original                      Updated 
                                 FY21 Guidance Range           FY21 Guidance Range 
 
Rutile                             70,000 to 80,000       70,000 to 80,000 (no change) 
 
Ilmenite                          270,000 to 300,000           300,000 to 320,000 
 
Zircon                             23,000 to 27,000             26,000 to 28,000 
 
The Company provided its 2021 financial year (FY21) production guidance on 28 
July 20202.  Base Resources' production guidance range for FY21 has been 
increased for ilmenite and zircon due to higher than forecast ilmenite and 
zircon content in the MSP feed.  Production guidance for rutile has not 
changed.  There remains, however, the possibility of a halt to, or curtailment 
of, operations at some point in the future due to a severe COVID-19 outbreak on 
site or change in government health directives that could impact on the 
achievement of this guidance. 
 
The above updated FY21 production guidance is based on the following 
assumptions: 
 
  * Mining of 17.6Mt at an average HM grade of 3.39%, with all remaining FY21 
    volume coming from Ore Reserves3. 
  * Average MSP feed rate of 68tph. 
  * Average MSP product recoveries of 101% for rutile, 101% for ilmenite and 
    84% for zircon. 
 
[Note (2): For further information refer to Base Resources' market announcement 

on 28 July 2020 "Quarterly Activities Report - June 2020" available at https:// 
baseresources.com.au/investors/announcements/. 
 
Note (3): The Ore Reserves estimate underpinning the above production guidance 
was prepared by Competent Persons in accordance with the JORC Code (2012 
edition).  For further information regarding the Ore Reserves estimate refer to 
Base Resources' announcement on 27 July 2020 "Updated Kwale South Dune Mineral 
Resources and Ore Reserves estimate" available at https://baseresources.com.au/ 
investors/announcements/.  The above production guidance is 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 
 
Global pigment producers have indicated that the strong recovery in demand over 
the past two quarters has continued through the March quarter, more than 
offsetting the usual seasonal weakness experienced by the pigment industry at 
this time of year. 
 
Western pigment producers continued to ramp up production rates towards full 
capacity through the quarter.  Chinese pigment producers maintained high output 
rates as their domestic market improves and high volumes of pigment exports are 
sustained.  Globally, pigment prices have stepped up at regular intervals 
throughout the quarter as conditions have tightened and the price gap between 
the historically cheaper Chinese pigment exports and western pigment has now 
narrowed substantially. 
 
Demand for ilmenite as a feedstock for Chinese pigment producers again exceeded 
supply resulting in further solid price gains for ilmenite in the 
quarter.  Ongoing strong demand will maintain a tight ilmenite market through 
the June quarter and further price increases are expected. 
 
The ramp up of western pigment production through the past two quarters has 
absorbed the slight surplus in high grade feedstock inventory that was created 
in the second half of 2020 and has resulted in an increasingly tight market for 
rutile.  This has been compounded by a significant recovery in demand for 
rutile in the welding sectors throughout Asia, and the Chinese titanium metal 
sector, since late in 2020.  As a consequence, rutile prices have increased 
through the quarter and are expected to continue an upward trend through the 
coming quarters. 
 
The demand recovery for zircon gathered pace through the quarter as ceramic 
plants in Europe operated at full capacity and Chinese consumption of zircon 
accelerated on the back of strong economic conditions.  Minimal inventory being 
held through most parts of the supply chain has resulted in a rapid pull 
through in demand for zircon.  Zircon prices for March quarter contracts were 
consistent with the December quarter but the tightening conditions have 
resulted in significant price improvement for June quarter contracts. 
 
SAFETY 
 
There were no lost time injuries during the quarter, or in the past year, at 
Kwale Operations' or the Toliara Project, resulting in a lost time injury 
frequency rate (LTIFR) for the group of zero.  Compared to the Western 
Australian All Mines 2019/2020 LTIFR of 2.1, this is an exceptional performance 
reflective of the ongoing focus and importance placed on safety by management. 
Base Resources group employees and contractors have now worked 23.9 million 
hours lost time injury (LTI) free, with the last LTI recorded in early 2014. 
No medical treatment injuries were recorded during the quarter.  With one 
medical treatment injury recorded in the last 12 months, the Base Resources 
group's total recordable injury frequency rate (TRIFR) is 0.25 per million 
hours worked. 
 
COMMUNITY AND ENVIRONMENT 
 
Kwale Operations 
 
Base Resources has continued to assist the Kwale community through the COVID-19 
pandemic, including collaborating with county and national health authorities 
to provide public education through community health workers and by providing 
additional schools-based handwashing equipment to help improve sanitation.  To 
support social distancing requirements, 2,000 school desks were donated and 
distributed to 20 schools across Kwale County and Likoni. 
 
Agricultural livelihood programs in Kwale continued through the PAVI 
Cooperative as farmers prepare for the upcoming rains.  Poultry and beekeeping 
have been particularly productive alternatives during the current dry season. 
Kenyan cotton spinners are attracting international interest for their yarn 
made from Kenyan lint which has improved the outlook for the cotton value chain 
and the potential contribution to the government's economic development agenda. 
 
Considerable work was undertaken in the quarter to implement the Community 
Development Agreement with nearby communities as required under new Kenyan 
regulations.  The beneficiary communities have been defined and committees 
established, with capacity building and community consultation undertaken 
during the quarter to identify and prioritise development projects. 
 
Rehabilitation activities on the mined-out areas of the South Dune increased 
significantly in the quarter with community groups supplying indigenous 
legumes, grass seed and manure.  Youth groups from local villages were employed 
to assist with slope stabilisation, planting and road clearing.  A community 
trial plot has also been established on a mined-out section of the Kwale South 
Dune to demonstrate to local farmers and stakeholders that crops and trees can 
be successfully grown in rehabilitated mine soils. 
 
Toliara Project 
 
All community training programs and social infrastructure construction remained 
on hold with the Government of Madagascar's suspension of the Toliara Project's 
on-the-ground activities.  The 24 Malagasy apprentices training in Kenya at 
Kwale Operations have completed their studies, achieving very good results. 
They remain on site and continue to progress through further practical training 
programs and competency assessments prior to certification through the 
registered training authority. 
 
Base Resources continued to work with local authorities to assist in the 
COVID-19 response in the Toliara region by supporting face mask production in 
conjunction with a leading local women's group, with 48,000 re-usable masks now 
produced for distribution to local communities. 
 
BUSINESS DEVELOPMENT 
 
Toliara Project development - Madagascar 
 
In November 2019, the Government of Madagascar required the Company to 
temporarily suspend on-the-ground activity on the Toliara Project while 
discussions on fiscal terms applying to the project were progressed4.  Activity 
remains suspended as Base Resources continues to engage the Government in 
relation to the country's Large Mining Investment Law (LGIM) regime, fiscal 
terms applicable to the Toliara Project and the lifting of the on-the-ground 
suspension. 
 
As previously noted5, with the suspension of activity, international travel 
restrictions and broader COVID-19 measures and impacts both in Madagascar and 
globally, the final investment decision (FID) to proceed with development of 
the Toliara Project has been delayed.  Once fiscal terms are agreed and the 
suspension is lifted, there will be approximately 11 months' work to complete 
prior to FID.  This work includes finalising financing, completing the land 
acquisition process and concluding major construction contracts.  The 
resumption of international travel will also be required to complete a 
significant portion of this work. 
 
Key activities during the quarter included: 
 
  * Engagement with the Government, focused on agreeing fiscal terms and 
    resumption of on-the-ground activities. 
  * Negotiations with the preferred tenderers for the marine contract packages. 
  * Selection of the preferred piling contractor for the export storage shed. 
  * Selection of the preferred power supply contractor and commencement of 
    power purchase agreement negotiations. 
  * Design of the haul road bridge over the Fiherenana River. 
  * Discussions with prospective lenders and joint venture partners. 
  * Ground water modelling work to allow drilling and borehole testing to 
    commence shortly after lifting of the suspension. 
 
Key activities planned for the coming quarter include: 
 
  * Further engagement with the Government, focused on agreeing fiscal terms, 
    lifting of the suspension and resumption of on-the-ground activity. 
  * Commencing piling design at the export storage shed to allow construction 
    to commence soon after FID. 
  * Continuing power purchase agreement negotiations. 
  * Progressing design of the revetment and bulk earthworks at the export 
    facility. 
  * Concluding ground water modelling work. 
  * Ongoing engagement with prospective lenders and joint venture partners. 
 
Total expenditure on the Toliara Project for the quarter was US$3.3 million 
(last quarter: US$4.0 million). 
 
[Note (4): Refer to Base Resources' market announcement "Toliara Project - 
Government of Madagascar statement" released on 7 November 2019, which is 
available at https://baseresources.com.au/investors/announcements/. 
 
Note (5): Refer to Base Resources' market announcement "Base delivers strong 
financial results and maiden dividend" released on 24 August 2020, which is 
available at https://baseresources.com.au/investors/announcements/.] 
 
Extensional exploration - Kenya 
 
Mining tenure arrangements continued to progress with the Kenyan Ministry of 
Petroleum and Mining as a precursor to an anticipated updated Ore Reserves 
estimate to incorporate additional Mineral Resources defined within the Kwale 
Prospecting Licence (PL  2018/0119), but outside the current footprint of 
mining lease SML 23. 
 
The pre-feasibility study for mining the North Dune Mineral Resources was 
completed6 with the conclusion that it is not currently viable to mine the 
entirety of these deposits, primarily due to the combined low heavy mineral 
grade, high land acquisition costs and elevated slimes content and associated 

tailings disposal costs.  The Company has commenced an assessment of the 
potential feasibility for mining a higher-grade sub-set of the North Dune and 
Bumamani deposits, with the results expected by mid-2021. 
 
Auger drilling of a section of the northern Vanga Prospecting License (PL/2015/ 
0042) continued during the quarter but no significant mineralisation was found. 
 Completion of the remaining drilling program (4,200 metres) in the North-East 
Sector (Kwale East) of PL 2018/0119 remains on hold pending community access 
being secured. 
 
Prospecting licence applications lodged for an area south of Lamu (applications 
2019 0263, 0265, 0266), together with an area in the Kuranze region of Kwale 
county, about 70 km west of Kwale Operations (applications 2019 0260, 2510 and 
2512), remain in progress through the granting process.  A Government 
moratorium on the issuance of Prospecting Licenses in November 2019 has 
affected the progress of all licence applications.  However, technical 
assessment of applications has now recommenced. 
 
Expenditure on exploration activities in Kenya during the quarter was US$0.1 
million (last quarter: US$0.1 million). 
 
[Note (6): Refer to Base Resources' market announcement "Kwale North Dune PFS 
outcomes" released on 1 April 2021, which is available at https:// 
baseresources.com.au/investors/announcements/.] 
 
CORPORATE 
 
FY21 half-year dividend payment 
 
Following release of the Company's FY21 half-year financial results, the 
disciplined application of the Company's capital management policy saw a 
half-year dividend of AUD 3.0 cents per share, unfranked, paid to shareholders 
on 31 March 2021, representing a cash payment of US$26.6 million (in 
aggregate). 
 
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, which totalled approximately US$16.6 million at 31 March 
2021.  Refunds totalling US$1.9 million were received during the quarter (last 
quarter: US$2.0 million).  Base Resources continues to actively engage with the 
Kenyan National Treasury and the Kenya Revenue Authority in relation to the 
outstanding VAT refund claims and has taken steps under the investment 
agreement to secure its claim with respect to the VAT paid during construction 
of the Kwale Project. 
 
Revolving Credit Facility retired 
 
Following strong quarterly financial performance, which generated US$39.3 
million of operating cashflows (excluding taxes), and with growing confidence 
in the trajectory of the mineral sands markets and greater clarity on the risks 
and impacts of the COVID-19 pandemic, the Company repaid the outstanding 
US$25.0 million of the US$75.0 million revolving credit facility during the 
quarter.  Concurrently with this repayment, the Company retired the facility, 
nine months ahead of the final maturity date, saving on holding costs.  The 
Company is now debt free. 
 
In summary, as at 31 March 2021: 
 
  * Net cash of US$71.6 million, after payment of US$26.6 million half-year 
    dividend, consisting of: 
      + Cash and cash equivalents of US$71.6 million. 
      + No debt. 
  * 1,178,011,850 fully paid ordinary shares on issue. 
  * 71,078,976 performance rights on issue pursuant to the terms of the Base 
    Resources Long Term Incentive Plan, comprising: 
      + 266,893 vested performance rights, which remain subject to exercise7. 
      + 70,812,083 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 capital cost, capacity, future production 
and grades, 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: 
 
James Fuller, Manager Communications and Investor  UK Media Relations 
Relations 
 
Base Resources                                     Tavistock Communications 
 
Tel: [phone]                             Jos Simson and Gareth Tredway 
 
Mobile: [phone]                        Tel: [phone] 
 
Email: [e-mail] 
 
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 1, 50 Kings Park Road 
West Perth, Western Australia, 6005 
Email:  [e-mail] 
Phone: [phone] 
Fax: [phone] 
 
NOMINATED ADVISOR 
RFC Ambrian Limited 
Stephen Allen 
Phone: [phone] 
 
BROKER 
Berenberg 
Matthew Armitt / Detlir Elezi 
Phone: [phone] 
 
 
 
 
END 
 
 

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April 29, 2021 02:00 ET (06:00 GMT)