Base Resources Limited Quarterly Activities Report - December 2022

 
TIDMBSE 
 
AIM and Media Release 
 
24 January 2023 
 
BASE RESOURCES LIMITED 
Quarterly Activities Report - December 2022 
 
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 December 2022. 
 
Key Points 
 
  * Contracted sales saw further price gains for rutile, while ilmenite and 
    zircon prices moderated. 
  * Bumamani Project implementation remains on schedule - extending Kwale 
    Operations mine life. 
  * Phase 1 of exploration drilling in northern Tanzania was completed, with a 
    total of 149 holes for 3,889m.  Results from this program are expected to 
    be released in the March 2023 quarter. 
  * Exploration drilling commenced North-East of Kwale Operations, with 320 
    holes for 3,260m drilled to date. 
  * Discussions with the Government of Madagascar on Toliara Project fiscal 
    terms continued to progress positively. 
  * Toliara Project Rare Earths Concept Study is on track for completion in the 
    March 2023 quarter. 
  * Inaugural Sustainability Report and Sustainability Databook released. 
 
KWALE OPERATIONS 
 
Operational performance 
 
Mining operations continued on the South Dune with mined tonnage as planned at 
4.5 million tonnes (Mt) (last quarter: 4.4Mt).  The heavy mineral (HM) grade of 
ore mined in the quarter was higher at 4.02% (last quarter: 3.78%) due to new, 
higher-grade blocks being mined.  As a result of the higher ore grade mined, 
there was a 3% increase in heavy mineral concentrate (HMC) production over the 
prior quarter, with the HMC stockpile increasing from 10kt to 15kt.  Rutile and 
zircon production were higher in the quarter due to those products representing 
a higher proportion of the mineral assemblage and higher recoveries, while 
ilmenite production dropped slightly. 
 
SUMMARY BY QUARTER                         FY22                          FY23 
 
                                DEC         MAR         JUN         SEP         DEC 
 
Mining (million tonnes) 
 
Ore mined                           4.3         3.9         3.9         4.4         4.5 
 
HM %                               3.82        3.84        4.06        3.78        4.02 
 
VHM %                              2.94        2.92        3.12        2.85        3.12 
 
Production (thousand tonnes) 
 
Ilmenite                           84.0        84.5        83.8        86.0        84.5 
 
Rutile                             18.4        18.9        19.2        18.9        19.5 
 
Zircon                              6.4         6.3         6.8         6.6         7.4 
 
Low grade products1                 3.5         4.4         4.9         5.7         5.2 
 
 
 
                                          FY22                         FY23 
 
                                DEC        MAR        JUN        SEP         DEC 
 
US$ per tonne 
 
Sales revenue                      $459       $740       $691       $714        $651 
 
Operating costs                    $161       $149       $152       $154        $165 
 
Cost of goods sold                 $156       $227       $196       $200        $191 
 
Revenue: Cost ratio                 2.9        3.3        3.5        3.6         3.4 
 
Sales (thousand tonnes) 
 
Ilmenite                          130.0       75.5       95.7       62.6        74.1 
 
Rutile                             11.6       25.3       24.7       14.2        14.7 
 
Zircon                              6.2        6.9        7.1        6.2         5.0 
 
Low grade products1                 1.5        4.8        4.7        4.5         4.7 
 
[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, with a combined 84kt of bulk ilmenite and rutile dispatched (last 
quarter: 63kt).  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 thick co-disposed slimes/sand layer to aid water retention and 
subsequent rehabilitation.  Rehabilitation activities on the Central Dune and 
South Dune proceeded to plan. 
 
Total cash operating costs of US$19.3 million were higher compared to the prior 
quarter (last quarter at US$17.9 million), primarily due to higher unit power 
costs and increased maintenance costs.  With the higher operating costs and 
consistent combined production volume, unit operating costs increased to US$165 
per tonne produced (rutile, ilmenite, zircon, low grade zircon and low-grade 
rutile) (last quarter: US$154 per tonne). 
 
Cost of goods sold decreased to US$191 per tonne sold (operating costs, 
adjusted for stockpile movements, and royalties) due to sales volume and mix 
(last quarter: US$200 per tonne), as did average unit revenue, which was US$651 
per tonne (prior quarter: US$714 per tonne).  Consequently, the revenue to cost 
of goods sold ratio for the quarter was 3.4 (last quarter: 3.6). 
 
FY23 production guidance 
 
With the concurrent mining of the South Dune with the lower grade North Dune 
remaining on track to commence in March 2023, Kwale Operations production 
guidance for the 2023 financial year (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 
 
Demand for Base Resources' products remained firm through the quarter, however 
pricing outcomes were mixed given the challenging economic conditions across 
some regions and market sectors.  Rutile prices experienced further gains while 
ilmenite and zircon prices declined.  Subdued conditions in most downstream 
markets are applying downward price pressure across all products for the March 
quarter, however demand for most products is expected to stabilise and provide 
a steady footing for future prices. 
 
Despite weakness in the Chinese economy and the Chinese domestic pigment 
market, demand for imported ilmenite as a feedstock for Chinese TiO2 pigment 
producers continued to hold up.  Chinese domestic pigment demand stabilised 
towards the end of the quarter after a prolonged period of weakening conditions 
and most Chinese pigment plants are moving back towards normal production 
levels.  Major pigment producers with exposure to export markets, which 
typically have a high dependence on imported ilmenite as a feedstock, have 
generally maintained high production levels as increased offshore sales have 
offset a decline in domestic sales.  Export demand for these producers is 
likely to be maintained, particularly as high-cost sulphate pigment production 
in Europe has been curtailed.  This, combined with a potential recovery in the 
Chinese domestic market following the lifting of the government's COVID-19 
restrictions, is expected to provide ongoing demand strength for ilmenite 
imported into China. 
 
Softening pigment market conditions in Europe since the latter part of the 
September quarter added to subdued domestic conditions in Asia and growing 
uncertainty in North America, resulting in some western pigment producers 
curtailing production rates.  This has weighed on rutile demand through the 
quarter and into the start of 2023.  However, contracted rutile prices to the 
pigment sector, mostly established in mid-2022 during tighter conditions, saw 
further price gains through the quarter.  Major western pigment producers plan 
to ramp up production from early 2023 with an expectation that the pigment 
market will improve through early 2023 and return to normal levels by 
mid-2023.  This should result in improving demand for rutile and provide 
support for prices. 
 
Rutile demand from the smaller welding and titanium metal sectors remains 
strong but increased rutile inventories in Asia has placed pressure on the 
price premium that has been achieved in these sectors relative to the pigment 
sector.  Overall, rutile prices are expected to decline moderately in the March 
quarter. 
 
Softer zircon conditions in Europe added to the weak environment in the Chinese 
zircon market through the quarter which resulted in a decline in zircon 
prices.  Subdued zircon demand going into the March quarter is being partially 
offset by reduced supply from some major producers experiencing production 
challenges and/or re-building their own zircon inventory in order to stabilise 
prices.  Building optimism from the lifting of the government's COVID-19 
restrictions in China may result in improved demand and pricing conditions for 
zircon in coming quarters. 
 
SUSTAINABILITY 
 
Sustainability reporting 
 
The Company released its inaugural Sustainability Report and Sustainability 
Databook in the quarter with both documents available on the Base Resources 
website. 
 
Health and safety 
 
There were no lost time injuries during the quarter resulting in a lost time 
injury frequency rate (LTIFR) for Base Resources of 0.23 per million hours 
worked.  Compared to the Western Australian All Mines 2020/2021 LTIFR of 2.0, 
this remains an exceptional performance and reflects the ongoing focus and 
importance placed on safety by management.  With two medical treatment injuries 
recorded in the last 12 months, Base Resources' total recordable injury 
frequency rate is 0.69 per million hours worked. 
 
Community and environment - Kwale Operations 
 
Farmers participating in the Company's agricultural livelihood programs in 
Kwale, implemented through the PAVI farmers' cooperative, continued harvesting 
of cotton, soybean, sunflower, pearl millet, groundnuts and sorghum.  A strong 
yield has been harvested with over 30 tonnes of cotton delivered to a local 

ginnery and plans underway to increase the PAVI feed mill capacity from two to 
five tonnes per month following identification of new markets.  100 youths from 
local villages were selected and enrolled in vocational training courses as 
part of the Company's ongoing commitment to education and skills development. 
 
Indigenous legumes, grass seed and manure continued to be sourced from local 
community groups for use in rehabilitation activities on the mined-out sections 
of the South Dune and the Central Dune.  Propagation of indigenous trees in the 
Kwale Operations nursery to use in rehabilitation areas is ongoing. 
 
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, have made encouraging progress in the quarter. 
 
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 has been maintained in readiness to 
accelerate progress when conditions support.  Assessment of potential funding 
options for the Toliara Project also progressed during the quarter. 
 
The Toliara Rare Earths Concept Study, which is assessing the commercial 
potential of the monazite contained in the Toliara Project's Ranobe Mineral 
Resources estimate, is progressing towards completion in the March 2023 
quarter. This study will provide the basis for a decision to proceed to a 
pre-feasibility study. 
 
Total expenditure on the Toliara Project for the quarter increased to US$2.6 
million (last quarter: US$2.0 million), with increased spend on the Toliara 
Rare Earths Concept Study and intensified government engagement activities. 
 
Kwale mine life extension 
 
Implementation of the Bumamani Project, which will extend Kwale Operations mine 
life, continued during the quarter, and mining activities on the Kwale North 
Dune remain on schedule to commence in March 2023.  The subsets of the Kwale 
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$9.9 million (last 
quarter: US$9.2 million) with construction, earthworks and final land access 
activities taking place. 
 
Extensional exploration - Kenya and Tanzania 
 
Landowner consent for access for exploration activities to the area immediately 
North-East of Kwale Operations (and within Prospecting Licence 2018/0119) was 
secured during the quarter, with 320 holes for a total of 3,260m having been 
drilled by the end of the quarter- refer to Figure 1 in the PDF version of this 
release, available from the Company's website:  www.baseresources.com.au, for a 
photograph of the exploration drilling.  Exploration in this area will continue 
in the March quarter as further land access is secured. 
 
On-ground exploration in northern Tanzania progressed, with the initial 400m x 
200m spaced reverse circulation drilling program being completed during the 
quarter.  In total, 149 holes for 3,889m were drilled.  The drill samples were 
exported to Kenya for analysis at the Kwale Operations laboratory with this 
work currently ongoing.  Analysis for graphite is also being concurrently 
undertaken by an external laboratory.  Results from this program are expected 
to be released in the March 2023 quarter. 
 
Prospecting licence applications lodged for an area in the Kuranze region of 
Kwale County, about 70 km west of Kwale Operations, together with applications 
for an area south of Lamu, 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 of Kenya, and other mining 
sector stakeholders, to see the moratorium lifted. 
 
Expenditure on exploration activities during the quarter in Tanzania was 
US$232k (last quarter: US$223k) and in Kenya was US$158k (last quarter: 
US$53k). 
 
CORPORATE 
 
FY23 half-year financial results 
 
The Company plans to release of its FY23 half-year consolidated financial 
statements on 27 February 2023.  The timing for release will be confirmed, and 
investor call details will be advised, closer to the targeted release date. 
 
In summary, as at 31 December 2022, the Company had net cash of US$60.2 million 
consisting of cash and cash equivalents of US$60.2 million and no debt. 
 
Despite recording strong sales in the quarter, the Company's net cash position 
decreased, primarily due to Bumamani Project implementation expenditure, 
corporate tax instalment payments, dividend withholding tax payments and the 
majority of the sales occurring late in the quarter, leading to an increase in 
receivables of US$17.2 million. 
 
As at 31 December 2022, the Company had the following securities on issue: 
 
  * 1,178,011,850 fully paid ordinary shares. 
  * 58,020,619 performance rights pursuant to the terms of the Base Resources 
    Long Term Incentive Plan, comprising: 
      + 4,630,289 vested performance rights, which remain subject to exercise3; 
        and 
      + 53,390,330 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: 
 
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 3, 46 Colin Street 
West Perth, Western Australia, 6005 
Email:  [e-mail] 
Phone: [phone] 
Fax: [phone] 
 
NOMINATED ADVISOR 
RFC Ambrian Limited 
Stephen Allen 
Phone: [phone] 
 
JOINT BROKER 
Berenberg 
Matthew Armitt / Detlir Elezi 
Phone: [phone] 
 
JOINT BROKER 
Canaccord Genuity 
Raj Khatri / James Asensio / Patrick Dolaghan 
Phone: [phone] 
 
 
 
 
END 
 
 

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January 24, 2023 02:00 ET (07:00 GMT)