Proactive Investors - Run By Investors For Investors

In The News - Base Resources

In The News - Base Resources


(ASX:BSE) | A$0.24 | US$195m | Buy | TP : A$0.46

Resources at Toliara Project Increased by 25% ahead of PFS due March 2019

Base Resources has published an updated resource for the Ranobe Deposit at its Toliara Mineral Sands Project in Madagascar. The overall headline resource contained 25% more Heavy Minerals (HM) than in the previous resource of June 2019. Total resources were 1.3Bt grading 5.1% HM, a 51% increase in tonnage and an 18% decrease in HM grade. The HM assemblage (the proportion of the HM content made up by ilmenite, rutile and zircon) remained in line with the previous resource estimate. The PFS remains on track for delivery before the end of March 2019.

The announcement points out that approximately half of the increase in resources was due to additional drilling completed at the project and the remainder due to a lowering of the cut-off grade from 3%HM to 1.5% HM, which was in line with the likely economics of the project.

Drilling will continue over the remainder of 2019, primarily aimed at increasing measured and indicated resources, which will be the basis of the DFS, which is planned to be completed by the end of this year.

COMMENT: The 25% increase in resources obviously bodes well for March’s PFS. Our current TP includes a risked value of US$128m for the company’s interest in Toliara (0.4*NPV10), which is based on our conceptual development parameters for the project, including a 26-year life supported by a mineable resource of 400Mt grading 6.7%HM. The updated measured and indicated resources at the project are now nearly double this level, (794Mt @ 5.8%HM), further underpinning the significance of the project and our view that upcoming PFS will confirm the project’s potential to be a long-life, high-margin operation once in production, which is targeted for 2021.

All of the historical resources at the project and the vast majority of the updated resources are contained within the Upper Sandy Unit (USU), one of three mineralised units identified at the deposit. Ongoing drilling will also further test the two underlying mineralised units which have the potential to add significantly to the overall level of resource at the project. Part of the relatively thin Intermediate Clay Sandy Unit (ICSU)(average of 4%HM and 25% slimes) was included in the resource for the first time, although the thicker Lower Sandy Unit (LSU) (average of 4%HM and 6% slimes) was not included in the resource to date due to lack of data.

With continued strong cashflow generation from Kwale and a supportive mineral sands outlook, we expect that the definition of the Toliara project parameters in the PFS will help to de-risk the company’s valuation. In the meantime, we maintain our BUY rating and our TP of A$0.46/share.

Figure 1: Ranobe Deposit - Stylised Cross Section

 Source: Company announcement


Corporate Broking

Charlie Cryer

+44 (0)20 3440 6834
[email protected]



Jim Taylor

+44 (0)20 3440 6821

[email protected]


David Bird

+44 (0)20 3440 6822

[email protected]

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.

© Proactive Investors 2019

Proactive Investors Limited, trading as “Proactiveinvestors United Kingdom”, is Authorised and regulated by the Financial Conduct Authority.
Registered in England with Company Registration number 05639690. Group VAT registration number 872070825 FCA Registration number 559082. You can contact us here.

Market Indices, Commodities and Regulatory News Headlines copyright © Morningstar. Data delayed 15 minutes unless otherwise indicated. Terms of use