COMPANIES
ASX:BSE | A$0.31 | US$169m | Buy | TP : A$0.43
Approves Kwale Phase 2, Optimising the Project and Enhancing Value
Base Resources has approved the ‘Kwale Phase 2’ (KP2) Project to expand the front-end of its operations in order to offset declining grades and maintain final product output. The company plans to increase the mining rate (and concentrator feed rate) by 50% during 2HCY18. This will allow the tonnage of heavy mineral concentrate product from the concentrator and the Mineral Separation Plant throughout and output to be maintained. As a result of bringing forward production, the current reserve is sufficient to support output until November 2022 (previously November 2024). Compared with its previous plans, the incremental capex to complete KP2 is estimated at US$13.1m.
COMMENT: There are a number of significant benefits expected as a result of the KP2 Project. In addition to bringing forward production, the expansion is expected to result in a 20% reduction in unit mining costs as a result of moving exclusively to hydraulic mining over dozer trap mining. It also implies an expected saving of US$60m in fixed costs.
The KP2 Project as described here is based on the ore reserve statement of June 2016 (103Mt grading 4.6% HM) and does not benefit from the addition of the material that has been outlined in the company’s exploration update of 10 May. An updated resource and reserve statement is planned to be completed in the September quarter. The KP2 Project would also increase the value of any reserve additions by bringing production forward by two years.
We should have a full report on this to follow.