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Base Resources builds strong track record of production at Kwale

Snapshot

Base's ability to operate under unusual circumstances has stood it in good stead

Base Resources Limited - Base Resources makes smooth transition at Kwale

Quick facts: Base Resources Limited

Price: 10.25 GBX

AIM:BSE
Market: AIM
Market Cap: £120.09 m
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  • Minerals sands miner in Kenya
  • Working on a new project in Madagascar on similar size to Kenya deposit
  • Ilmenite used as a whitener in paint and toothpaste

What it owns

Kwale

In Kenya, during Kwale’s 13-year mine life, Base expects to mine and process 140mt of ore and produce 4.6mt of the final product for sale.

Toliara

In Madagascar, Toliara’s Ranobe deposit has 586mln tonnes (Mt) of ore with an average heavy mineral grade of 6.5%, giving some 38mln tonnes of in-situ minerals.

Samples taken from the 2019 drill programme are now being processed, and, subsequently the company aims to upgrade both resources and reserves estimates further in due course.

Its net present value (measured at a 10% discount rate) was put at US$671mln, while the investment required to build a 13Mt a year operation was calculated to be US$439mln.

 

How is it doing?

The company maintained operational consistency at the Kwale mine in Kenya throughout the second quarter of 2020, with production coming in at the higher end guidance ranges.

Meanwhile demand from customers in the quarter was firm and supported further upward movement in ilmenite prices, while rutile and zircon prices remained steady. Sales of ilmenite, zircon and rutile were all up on a quarter-on-quarter basis.

Elsewhere, the front-end engineering design for the Toliara project, as well as lender due diligence and discussions with the Government of Madagascar progressed within the constraints of coronavirus responses.

Base closed out the quarter with net cash of US$87.6mln, supported by a chunky US$75mln revolving credit facility.

 

What the boss says: Stephen Hay, general manager of marketing

"There is a very clear consensus across the global industry that mineral sands products will fall into a very substantial and growing supply deficit in the coming years and, as a result, some major mineral sands projects are required to come on stream to start filling that gap and to secure supply for the end consumers."

"We believe that our Toliara project in Madagascar is exceptionally well-placed to be the first cab off the rank to start making that need."

 

Video

 

What the broker says

In October, broker Numis said production and cash flow were lower due to grade this quarter but guidance was reiterated and we don’t see grade as a cause for particular concern based on the mine plan.

An operational positive from the quarter was the 19.8Mtpa run rate achieved, which suggests that Base could push production as it moves into higher-grade areas.

Base remains significantly undervalued relative to its free cash flow added the broker, which has a buy rating and 30p target.

 

Inflexion points

  • Kwale Mine Life extension
  • Further analysis at Toliara
  • Strong demand currently for titanium feedstocks

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Watch

Base Resources reports strong sales and hits upper end of production...

Base Resources Ltd's (LON:BSE) chief financial officer Kevin Balloch tells Proactive's Andrew Scott they were able to operate in the second quarter uninterrupted at the Kwale mine in Kenya with production coming in at the higher end of guidance. Demand from customers was firm and supported...

1 week, 3 days ago

3 min read