viewBase Resources Limited

Base Resources makes smooth transition at Kwale


Grades improved throughout the quarter as operations moved further into the orebody

Base Resources Limited - Base Resources makes smooth transition at Kwale

Quick facts: Base Resources Limited

Price: 12.5 GBX

Market: AIM
Market Cap: £146.45 m
  • 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


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.


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 it is doing

Base Resources Limited (LON:BSE) reported production at Kwale came in in line with guidance at 92,393 tonnes of rutile, 402,698 tonnes of ilmenite and 31,941 tonnes of zircon, and the mining rate increased by 57% to 17.8mln tonnes per year.

There was a 22% increase in the average rutile price and a 28% increase in the zircon price.

This helped boost revenue by 5% to US$209.5mln in the year to June.

Underlying profits [EBITDA] increased 4% to US$113.5mln and net profits after tax by 15% to US$39.2mln.

Net cash at the end of June stood at US$19.2mln.

In October, Base highlighted a successful ramp-up of mining and processing operations as it released an activities update for the three months ended 30 September.

The company noted Kwale advanced at the South Dune orebody following a transition from a depleted orebody, Central Dune, at the end of June.

As scheduled, mining began on the northern fringes of South Dune and, although they started in lower grades this improved throughout the quarter as operations moved further into the orebody.

Mining rates in the quarter were equivalent to 19.6mln tonnes per year, above the targeted 18mln tonne rate.

It also highlighted supportive market forces with ongoing supply constraints elsewhere factoring into stronger rutile and ilmenite prices.


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."




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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