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Base Resources fires on all cylinders as mineral sands markets continue to grow

Last updated: 10:36 29 Aug 2018 BST, First published: 15:36 07 Mar 2018 GMT

1520437311_Kwale-workers
Workers at Kwale

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.

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 speak to the strength of the current mineral sands markets, as sales and profits were both up and considerable amounts of debt paid down.

Production was steady at 91,672 tonnes of rutile, 464,988 tonnes of ilmenite and 37,157 tonnes of zircon; but prices of the metals rose by 17%, 28% and 46% respectively.

Revenue rose 22% to US$198.8mln, while net profit climbed by 114% to US$34mln.

Debt was cut by two-thirds to US$65.3mln as the strong operating performance translated into cashflow.

Tim Carstens, managing director, described it as an outstanding year for the business, especially as it had been achieved without one recorded injury during the year.

“Consistent production and strong average price improvement across all products contributed to record financial results for the company and has allowed significant debt reduction and established a strong platform from which to grow the business.”

Broker bullish

RFC Ambrian added that the mid-points of production guidance for the current year hav been set at 90,500t of rutile, 435,000t of ilmenite and 34,500t of zircon, broadly similar to this year’s production for rutile and zircon and 7% lower for ilmenite.

“At Kwale the KP2 expansion has been completed and the move from the Central to the South Dune is planned to be undertaken in July 2019.

 “Exploration is ongoing around the North Dune, following which the company aims to start further drilling in the NE Extension area.

“Base has continued to advance its understanding of the Toliara Project in Madagascar, and we expect that the upcoming PFS will confirm our view that it has the potential to be a long-life, high-margin operation once in production, which is targeted for 2021. “

RFC Ambrian maintained its price target of A$0.62 (35p) compared to a current share price of 15.3p.

 

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