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In The News: Base Resources

In The News: Base Resources

COMPANIES

Base Resources*

BSE : AU | A$0.25 | US$207m | Buy | TP : A$0.51

September Quarterly Activities Report — Record Rutile and Zircon Production

Base Resources has released its September quarterly Activities Report. This reflected another quarter of good performance at the Kwale mineral sands operations in Kenya, with ilmenite production up 3% to 118,000t and record production of rutile and zircon (25,125t and 9,683t respectively). Production guidance for FY19 to June 2019 was maintained.

Net debt was reduced by US$9m over the period to US$24m. In a move that increased its funding flexibility and reduced its finance costs, in October the company repaid the outstanding project finance facility with a combination of existing cash and an increase in the revolving credit facility, which stood at US$48m after the repayment.

COMMENT: Operationally this was (yet) another good performance from the company. This follows the completion of the KP2 expansion of the Wet Concentrator Plant in March 2018, and the move to hydraulic mining, which was completed during the quarter. The move of mining operations to the South Dune remains on track for completion in July 2019.

A drilling programme at the North Dune at Kwale was completed during the period and a resource update is planned to be completed in 1Q19. Drilling at Kwale East remained suspended pending the resolution of the community access issues there.

Work at Toliara in Madagascar also remains on track to deliver a pre-feasibility study in 1Q19 and a DFS ahead of a Final Investment Decision in 4Q19. We expect that the upcoming PFS will confirm our view that Toliara has the potential to be a long-life, high-margin operation once in production, which is targeted for 2021.

With continued strong production and an ongoing supportive mineral sands environment, we expect that the results of the exploration programmes at Kwale and the definition of parameters at the Toliara Project have the potential to add further value. In the meantime, we maintain our Buy rating and our target price of A$0.51.

This content has been approved under section 21(1) of the FMSA 2000 by RFC Ambrian Limited ("RFC Ambrian") for communication only to eligible counterparties and professional clients as those terms are defined by the rules of Financial Conduct Authority. The contents are not directed at retail clients as RFC Ambrian does not provide investment advisory services to retail clients.  RFC Ambrian publishes this document as non-independent research which is a marketing communication under the Conduct of Business rules. It has not been prepared in accordance with the regulatory rules relating to independent research, nor is it subject to the prohibition on dealing ahead of the dissemination of investment research. It does not constitute a personal recommendation and does not constitute an offer or a solicitation to buy or sell any security. Neither RFC Ambrian nor any of its directors, officers, employees or agents shall have any liability, howsoever arising, for any error or incompleteness of fact or opinion in it or lack of care in its preparation or publication; provided that this shall not exclude liability to the extent that this is impermissible under the law relating to financial services. All statements and opinions are made as of the date on the face of this document and are not held out as applicable thereafter. This document is intended for distribution only in those jurisdictions where RFC Ambrian is permitted to distribute its research. In particular, it is not intended for distribution in and is not directed as persons in the United States.  On the date of this document, RFC Ambrian, RFC Ambrian's holding company, persons connected with it and their respective directors may have a long or short position in any of the investments mentioned in this document.
RFC Ambrian is a member of the London Stock Exchange and is regulated and authorised by the Financial Conduct Authority. RFC Ambrian is registered in England and Wales no. 4236075. Its registered office is at Level 5, Condor House, 10 St Paul’s Churchyard, London EC4M 8AL.

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