Base Resources Limited - Quarterly Activities Report - March 2024
AIM and Media Release
Quarterly Activities Report –
African mineral sands producer,
Corporate
-- Post quarter-end,Base Resources reached agreement with, a US-based uranium and critical minerals producer, for a proposed combination to create a global critical minerals business. -- Subject to satisfaction of several conditions, Energy Fuels Energy Fuels will acquire 100% of the issued shares inBase Resources by way of scheme of arrangement in return for 0.0260Energy Fuels common shares plus an unfranked special dividend ofA$0.065 perBase Resources shares, representing a premium of 188% to Base Resources’ last pre-announcement closing price.
Kwale Operations
-- Following depletion of South Dune ore reserves, mining operations were successfully relocated to the Bumamani deposit over a two-week period resulting in reduced tonnage in the quarter. -- Due to improvements in HMC quality, FY24 production guidance has been revised upwards. Production guidance for FY25 (to the end of Kwale Operations’ mine life) also issued. -- After challenging conditions over the past few quarters, the market stabilised as demand improved and some downstream re-stocking supported flat pricing across all products.
-- Engagement onToliara Project fiscal terms and lifting of the project’s on-ground suspension was reinitiated afterPresident Rajoelina formed his new government in January. -- Substantial progress was made towards agreeing the fiscal terms for theToliara Project , with the Government indicating that finalising terms and launching the project is a priority.
PROPOSED COMBINATION WITH ENERGY FUELS
On
Under the terms of the Transaction,
Base Resources’ Board has unanimously recommended that shareholders vote in favour of the Scheme and each Director owning
Potential benefits of the Transaction to
-- A combined group with a strong platform for funding development of theToliara Project , through the step-change in market capitalisation, trading liquidity, market profile and funding capacity, plus an enhanced opportunity to secure strategic, low-cost United States Government critical minerals funding support. -- An opportunity to add significant value to the monazite produced at theToliara Project by capturing a greater share of the REE value chain through processing at the White Mesa mill into separated rare earth oxides4. -- An opportunity to retain exposure to a unique diversified critical minerals business.
The independent expert, PwC, has commenced their work, as has the independent technical specialist,
[
Notes:
(1)
: Payment of the special dividend is conditional on the Scheme becoming legally effective.
(2)
: Implied offer price and premium based on (as applicable) Energy Fuels’ and Base Resources’ last closing price, prior to announcement of the Transaction, on
KWALE OPERATIONS
Operational performance
South Dune ore reserves were fully depleted early in the quarter, following which, mining operations were successfully relocated to the Bumamani deposit. This major logistical exercise was completed over a two-week period resulting in lower mined tonnage of 3.7 million tonnes ( Mt ) in the quarter (last quarter: 3.9Mt). Mining at the North Dune continued uninterrupted throughout the quarter.
FY23 FY24 SUMMARY BY QUARTERMAR JUN SEP DEC MAR Mining (million tonnes) Ore mined 3.3 4.1 4.1 3.9 3.7 HM % 3.9 3.0 2.5 2.2 2.4 VHM % 3.1 2.3 1.9 1.7 1.9 Production (thousand tonnes) Ilmenite 71.6 55.5 38.8 38.9 33.5 Rutile 16.6 13.8 9.6 9.3 9.0 Zircon 6.4 5.5 3.8 3.8 3.7 Low grade products5 4.1 3.4 2.0 2.2 2.3
FY23 FY24 SUMMARY BY QUARTER MAR JUN SEP DEC MAR US$ per tonne Sales revenue$637 $695 $1,029 $589 $685 Operating costs$190 $240 $343 $317 $373 Cost of goods sold$195 $263 $442 $315 $403 Revenue: Cost ratio 3.3 2.6 2.3 1.9 1.7 Sales (thousand tonnes) Ilmenite 86.2 74.6 11.1 63.7 20.1 Rutile 15.2 19.6 5.5 15.0 3.9 Zircon 7.4 6.6 3.9 3.3 4.5 Low grade products5 5.3 3.2 2.0 2.6 1.0
[ Note (5) : Low grade products are a combination of low-grade zircon and low-grade rutile which are sold separately at a discount to standard grade products.]
The heavy mineral ( HM ) grade of ore mined in the quarter was higher than last quarter at 2.4% (last quarter: 2.2% HM), due to the introduction of the higher-grade feed from the Bumamani deposit and a high-grade strand encountered in the North Dune. The grade and volume of ore mined in the quarter, together with lower slimes content and an increase in concentrator recoveries, increased heavy mineral concentrate ( HMC ) production to 73.3kt (last quarter: 67.5kt). At these ore grades and HMC production rates, the mineral separation plant ( MSP ) continued to be operated on a campaign basis to ensure optimum product recoveries were maintained, with extended shuts between campaigns to allow HMC stocks to rebuild. HMC fed to the MSP was lower in the quarter at 63.0kt (last quarter: 71.4kt).
Deposition of sand tails into the mined-out Central Dune and P199 pit on North Dune continued in the quarter.
To aid water retention and subsequent rehabilitation, the sand tails are capped with a 4m to 6m co-disposed slimes/sand layer.
Rehabilitation activities on the Central Dune, South Dune and North Dune proceeded to plan with the rehabilitation activities for the entire South Dune mining area expected to be largely complete by
Bulk shipping operations at the Company’s Likoni export facility continued to run smoothly with 20kt of bulk ilmenite dispatched (last quarter: 73.6kt). Containerised shipments of rutile and zircon were exported through the Mombasa Port. Despite lower production levels for the remainder of Kwale Operations’ mine life, the Company plans to continue bulk shipments of ilmenite (up to 54kt lots) and rutile (between 5-10kt lots), which will result in significant sales volatility between quarters, as illustrated by the sales volumes over recent quarters.
Total cash operating costs of
Cost of goods sold also increased to
Transition to closure
Mining at Kwale Operations is expected to end in
Production guidance
Improvements in the quality of HMC produced through the rejection of more ‘trash’ minerals has increased the proportion of rutile, ilmenite and zircon in the MSP feed.
With the expectation that this trend will continue, and in conjunction with the higher than planned mining volumes and ore grades achieved year to date, the production guidance for all products has been revised upwards for the 2024 financial year (
FY24
) as set out in the table below.
Production guidance for the 2025 financial year (
FY25
) is also set out in the table.
With mining at Kwale Operations expected to end in
FY24 Guidance Range FY25 PRODUCTION GUIDANCE Original Updated To end of mine life (tonnes) Rutile 35,000 to 41,000 38,000 to 42,000 17,000 to 19,000 Ilmenite 130,000 to 160,000 145,000 to 160,000 55,000 to 63,000 Zircon 13,000 to 16,000 15,000 to 17,000 5,500 to 7,000
The production guidance for FY25, is based on the following assumptions:
-- Mining of 6.3Mt at an average HM grade of 1.90%, with the volume coming predominately from Ore Reserves. -- HMC produced by the wet concentrator plant of 118kt. -- HMC fed into the MSP feed of 123kt. -- MSP product recoveries of 101% for rutile, 101.5% for ilmenite and 84.5% for zircon.
MARKETING
After challenging conditions over the past few quarters, the market stabilised through the March quarter as demand improved and some downstream re-stocking supported flat pricing across all products.
Chinese pigment plants continue to operate at high levels of production, driven by ongoing strong pigment exports – maintaining firm demand for ilmenite.
An improved global pigment outlook and speculation over the potential for new import tariffs to be applied to Chinese pigment in the
Chloride pigment producers in
Western pigment producers have mostly reported improved sales volumes for the quarter with a positive order book outlook for the June quarter.
This has resulted in increased pigment production rates and consumption of high-grade feedstock including rutile.
Despite the improved demand, prices for bulk rutile have remained under pressure in the quarter due to the elevated inventories.
However, the recent suspension of rutile mining in
Rutile demand from the smaller welding and titanium metal sectors remains firm.
The expected tightening of the rutile market is likely to see prices improve in these sectors at some point in the next few months.
Re-stocking of zircon by major users in
SUSTAINABILITY
Health and safety
There were no lost time injuries during the quarter and, with no lost time injuries in the past 12 months,
Community and environment – Kwale Operations
Engagements with communities on the impact of mine closure continued throughout the quarter with the focus of these engagements shifting to discussions on post-mining land use options. A further impact of mine closure is the conclusion of the Company’s scholarship and bursary support program, with the final disbursements commencing during the quarter for existing beneficiaries. Mentoring sessions for current students were conducted to reinforce the importance of staying in school and working hard.
Support for agricultural livelihood programs continued through the PAVI Farmers’ Cooperative which undertook a farmer recruitment exercise ahead of the “long-rains” wet season.
Over 750 small-scale farmers signed up to grow cotton and maize.
Construction of the
Infrastructure programs continue to be implemented by the three Community Development Agreement Committees established for the communities affected by Kwale Operations, with the programs focusing on improving infrastructure in local schools and access to clean water.
Average rainfall for the quarter allowed rehabilitation and restoration work across the mine site to continue at pace.
Over 30,000 trees were planted during the quarter, including within the tailings storage facility where eucalypt species are being trialled as part of its dewatering plan following mine closure.
Seasonal ecological monitoring was completed in partnership with the
Community and environment – Toliara Project
All community training programs and social infrastructure projects remain on hold while the Toliara Project’s on-ground activities are suspended .
BUSINESS DEVELOPMENT
Toliara Project development – Madagascar
Following the presidential elections late last year,
Following its passing into law late last year, the Government is preparing the Implementing Decree for the new
The Company remains committed to progressing the world class
Total expenditure on the
Extensional exploration – Kenya
Despite last quarter’s announcement that the moratorium on issuance of mining rights for all construction and industrial minerals was lifted, including for heavy mineral sands, no prospecting licences have been issued.
The Company continues to engage with Kenya’s
Expenditure on exploration activities during the quarter in
CORPORATE
As at
The Company currently has the following securities on issue:
-- 1,178,011,850 fully paid ordinary shares. -- 72,041,626 performance rights issued pursuant to the terms of the Base Resources Long Term Incentive Plan, comprising:
o 8,295,847 vested performance rights, which remain subject to exercise6; and o 63,745,779 unvested performance rights subject to performance testing in accordance with their terms of issue.
[ Note (6) : Vested performance rights have a nil cash exercise price. Unless exercised beforehand, these rights expire five years after vesting.]
INVESTOR CONFERENCE CALL
All participants will need to pre-register their details using the teleconference registration URL provided below. Upon registering, participants will receive a calendar invite with their unique PIN and dial-in details so that they can join the call without speaking to an operator.
Investor conference call details
-- Date: Tuesday,30 April 2024 -- Time:4:30pm AWST /9.30am (London time) -- Teleconference pre-registration URL: https://registrations.events/direct/OCP488275
ENDS.
Forward looking statements
Certain statements in or in connection with this announcement contain or comprise forward looking statements.
Such statements may include, but are not limited to, statements with regard to future production and grades, capital cost, capacity, sales projections and financial performance and may be (but are not necessarily) identified by the use of phrases such as “will”, “expect”, “anticipate”, “believe” and “envisage”.
By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside Base Resources’ control.
Accordingly, results could differ materially from those set out in the forward-looking statements as a result of, among other factors, changes in economic and market conditions, success of business and operating initiatives, changes in the regulatory environment and other government actions, fluctuations in product prices and exchange rates and business and operational risk management.
Subject to any continuing obligations under applicable law or relevant stock exchange listing rules,
For further information contact:
______________________________________________________________ |Australian Media Relations |UK Media Relations | |________________________________|_____________________________| |Morrow Sodali |Tavistock Communications | |________________________________|_____________________________| |Cameron Gilenko and Michael Weir|Jos Simson andGareth Tredway | |________________________________|_____________________________| |Tel: +61 8 6160 4900 |Tel: +44 207 920 3150 | |________________________________|_____________________________|
This release has been authorised by the Board of
About
PRINCIPAL & REGISTERED OFFICE
Level 3,
Email:
info@baseresources.com.au
Phone: +61 8 9413 7400
Fax: +61 8 9322 8912
NOMINATED ADVISER & JOINT BROKER
Phone: +44 20 7523 8000
JOINT BROKER
Berenberg
Phone: +44 20 3207 7800
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