As a flagship asset, the Kwale mineral sands mine in Kenya has plenty going for it.
It’s low cost, it has a balanced range of products across the mineral sands suite, and it has customers that want to buy.
Against that backdrop Base has been able to put ilmenite prices up recently, and is likely to be able to do so again before too long.
But if that all sounds too good to be true, it hasn’t come easy.
When Base first put its development plans for Kwale in place mineral sands prices were forecast to rise and keep on rising.
Instead, they dropped into a death spiral about a year before Kwale came into production, from which they only recently recovered.
What kept Base alive was the quality of Kwale itself and with prices rising that is becoming very evident.
“The thing that underpins us,” continues Carstens, “is that we have one of the best mineral sands deposits in the world.”
It has taken investors some time to cotton on, however, as the wider storms in the mining equities markets and in mineral sands in particular, have rather taken the shine off the Kwale operation.
Shares up dramatically
Since February 2016 Base’s shares have risen more than sevenfold as mining markets in general have recovered and as the read-across into the mineral sands space has become obvious.
“It all started to bite in 2015," says Carstens. "We saw the price falls starting to compromise viability across the sector. We saw significant volume reductions coming out of China and Russia.”
That meant there was less supply to go round. But demand was still in place, albeit that it’s seasonal across the northern hemisphere summer.
“With the end use of our products being ubiquitous in everyday life, demand can’t just fall off a cliff,” continues Carstens.
Instead, he argues that what has mattered has been the amount of time it’s taken previously built up inventories to work their way through the system.”
And, after a long period of pain, it seems the inventories are now largely gone in the titanium (TiO2) supply chain.
The primary market for ilmenite is in paint pigment, and demand for paint pigment is fairly correlated to global GDP.
That’s currently in growth mode - in spite of the pervasive geopolitical uncertainty - and with China still on the march economically, is likely to continue to that way.
That bodes well for Kwale, which as it stands boasts a nine year mine life, but which may yet turn out to have capacity to produce for much longer than that.
Indeed, recent drilling has indicated mineral zone extensions to the north and south at two prospective areas adjoining or near Kwale: the south-west sector and north east sector.
Results boosted by rising prices
In the year to June 2017, Base delivered sales of US$215.5 mln from the production of record amounts of ilmenite.
Net profit was US$21 mln, and debt was cut significantly.
In additions costs were kept down such that Kwale remains among the lowest cost quartile producers in the world.
-- updates for year to June 2017 results --