In the news: Base Resources & Monument Mining
FROM THE BROKING DESK
Base Resources*† has released another impressive set of results. These cover 1HFY17 (to December 2016). Operational sales revenue at Kwale increased 11% YoY to A$90.9m, group EBITDA was up 44% YoY to A$44mn and net profit came in at A$3.8m. Operating cashflow was up 68% YoY to A$45.1m, and free cashflow rose 215% YoY to A$30.9m. As a result, net debt continued to decline rapidly; it fell by A$24.5m to A$179.7m.
While zircon and rutile price moves over the period were minor, ilmenite prices soared. After trading at around US$60/t at the start of 2016, they traded consistently around US$120/t through summer and autumn. Contracts during 2017 are likely to be up to US$140-160/t, and some in the industry are mooting a US$200/t price at some point this year.
Given continued efficiency improvements, Kwale is running like a well-oiled machine. As debt gets re-paid far faster than looked likely a year ago, the share price has performed extremely well; from a low of A$0.055 in April 2016 to a high of A$0.32 last week. There is some small arbitrage between the UK and the ASX lines, which is explained by liquidity; however, we have seen significant UK institutional buying of the shares and as the stock is being transferred across we would expect the UK discount to diminish over time. We saw a little bit of profit taking in Sydney overnight, so this could well be a buying opportunity.
We should have a full piece on Base to follow, but in the meantime you can content yourselves with Jim Taylor’s 26-page introductory piece: Monument Mining††† — Moving Towards Development, 27 February 2017. Monument is aiming to develop a biox plant at its Selinsing gold mine in Malaysia to more than double its mine life from the current three years. It is also aiming to complete the re-development of operations at the Murchison Project in Western Australia. We expect plans for both projects to be finalised in 2Q17, which would allow us to conclude our valuation and rating assessment.