Base Resources To Finalise US$170M Financing For Kwale Minerals Sands Project

Sep. 23, 2012 8:53 PM ET

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Base Resources (ASX: BSE) has met the key conditions for its US$170 million (A$162 million) Debt Finance Facility for the Kwale Mineral Sands Project in Kenya and expects to make its first drawdown in the December 2012 quarter.

A number of minor conditions are the subject of a waiver request which the lender is expected to confirm next week.

The company is also considering a number of alternative funding sources to accommodate a 14% increase in capital cost to US$298 million.

These include extended or additional debt facilities, an equity raising, the reallocation of internal funding, or some combination of the options.

Base's contribution to funding for Kwale is a prerequisite to drawdown on the Debt Finance Facility and the company is working to finalise the additional funding requirements over the next month to ensure a timely drawdown on the facility.

Kwale Mineral Sands Project

Detailed design of the project, which is tipped to deliver a life of mine cash surplus of over US$1 billion, is nearing completion while the procurement and contracting phase is now 70% complete.

This has also led to the completion of a review of the capital cost estimate of US$275 million plus additional total contingencies of US$23 million.

While much of the increase in capital cost can be attributed to design improvements and scope changes during the design phase, a significant proportion of the cost increase is related to labour costs in construction.

This is as a result of the direct experience gained in the implementation of project to date, particularly in relation to the manning levels and supervisory input required to achieve schedule.

Base regards this component of the cost increase an investment in implementation risk management.

First production at Kwale is targeted for the second half of 2013.

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