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Base Resources' Kenyan Mineral Sands Project Passes Halfway Mark

Base Resources' (ASX: BSE) world-class Kwale Mineral Sands Project is now 50% complete, with production on track for the second half of 2013.

With development continuing on schedule for completion in the September quarter of this year, the first bulk shipments of product are expected in the December quarter.

All material project approvals, permits and licenses required for development are currently in place, funding has been secured and construction of all project elements is underway.

With financing secured and key offtake arrangements in place, the development of Kwale is now well advanced and on schedule.

Kwale is tipped to be a "globally significant" producer, with a front-ended production profile over a 13-year mine life.

Two pilot plant operations at Kwale have already provided confidence in processing behaviour and indicate a suite of readily marketable products, which is why Base has a portfolio of well advanced offtake arrangements covering the first five years of production.

The project's high value mineral assemblage and low stripping ratio result in a projected revenue to cash cost ratio that would place Kwale in the top quartile of world producers.

Based on the November 2012 TZMI price outlook, the EDFS shows Kwale to be extremely robust, producing an estimated life of mine cash surplus approaching US$1 billion.

The economics of the project remain impressive with an estimated net present value of US$485 million (post tax real), an internal rate of return of 36%, and an expected capital payback period of 28 months. The capital cost, including contingencies, is US$298 million.

The project has an enviable cash flow profile with over US$350 million expected in the first five years of operations.

The funding required to progress development through to positive cashflow (on EDFS projections) was secured in 2011.

This comprised a A$140 million equity placement to Australian, US and UK institutional investors, and a US$170 million syndicated debt facility (US$150 million primary facility and US$20 million cost overrun).

To date around US$120 million has been spent on development with A$110 million in cash, and US$118 million in undrawn debt facilities ($52 million drawn).

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