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Base Resources: THE INVESTMENT CASE

Net profits up 466% at Base Resources, as mineral sands markets continue to grow

The Kwale mine in Kenya is now a major player in the ilmenite, rutile and zircon markets
Net profits up 466% at Base Resources, as mineral sands markets continue to grow
INVESTMENT OVERVIEW: BSE The Big Picture
Workers at Kwale

Kwale a premium asset in a strengthening market

The Kwale mine in Kenya has been owned and operated by Base Resources Ltd (LON:BSE) for some years now, and lately has been going from strength to strength in its mining of mineral sands.

Located 10 kilometres inland from the Kenyan coast and 50 kilometres south of the country’s principal port, Mombasa, the mine is currently producing an annualised 12mln tonnes of ore per year with a heavy mineral content of 7.61%.

The key products are ilmenite, rutile and zircon, in that order.

In the six months to December 2017, Base sold 225,814 tonnes of ilmenite, 37,971 tonnes of rutile, and 17,427 tonnes of zircon.

As of June 2017, the total ore reserves at Kwale were set at 91.3mln tonnes proven and probable grading 4.3% heavy minerals, with overall resources set at 147.3mln tonnes grading 3.5%.

Around 57% of the total heavy minerals contained in the Kwale orebody is ilmenite.

Sophisticated infrastructure supports mining operations

Back in 2013, Base built a purpose-built marine facility just south of Mombasa to allow for the easy shipment overseas of the bulk product, although the rutile and zircon still goes through the main port at Mombasa.

Water is a key input for mineral sands projects, and supply for the Kwale Operation comes from the dedicated Mukurumudzi Dam constructed by Base and completed in the second half of 2013. In addition, a borefield accessing a local aquifer has been constructed to provide a supplementary supply in the event of prolonged drought conditions.

Power for Kwale is supplied from the Kenyan grid via a Base-constructed, 132kVA power line from the Galu substation just 16 kilometres away. The power line was commissioned in 2013 and the reliability of the supply has proved to be excellent with negligible downtime from outages or voltage dips.

Strong financial performance

The most recent financial results from Base Resources Ltd (LON:BSE) speak to the strength of the current mineral sands markets, as sales and profits are both up, and considerable amounts of debt have been paid down.

In the six months to December 2017 the company delivered sales of A$115.9mln, up 28% on the corresponding period a year earlier. Net profit rang in at A$21.5mln, up 466%.

The company was also able to cut net debt by 80% over the comparable period, with net debt outstanding at the end of the year of A$84.1mln.

Costs remained steady at around US$102 per tonne of product sold.

Routes to market secure, with Chinese customers to the fore

Base Resources has a number of off-take agreements across its product range, and is tied in to some of the world’s largest consumers of titanium dioxide minerals and zircon products.

Base continues to maintain its strong market presence in China, the world’s largest ilmenite market, with over 225,000 tonnes of ilmenite sold into the Chinese market in the second half of 2017, and further sales continuing into 2018.

Solid relationships with major Chinese ilmenite consumers have ensured regular sales through a mix of shorter-term contracts and spot sales.

Strong commodities prices

Ilmenite and rutile are used primarily for the production of titanium dioxide pigment, the white pigment used most widely in the world because of its non-toxicity and brightness.

Global consumption of pigment has maintained a long-term averaged growth rate closely correlated to global GDP, at approximately 3% per annum.

 

 

 

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Base Resources Timeline

Newswire
October 16 2017

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