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Base Resources' Kwale Project Drives Positive Operating Cash Flows

Base Resources (ASX:BSE) is reaping the benefits of commercial production from its Kwale Mineral Sands operation in Kenya with its first quarter of positive operating cash flows totalling $4.1 million.

Shares in the company should trade higher today on the news.

Importantly, recoveries are progressively improving towards design targets with ongoing implementation of process design enhancements and optimisation.

Bulk rutile and containerised zircon shipments commenced in April while design throughputs, plant availability and runtime now being consistently achieved.

Declaration of commercial production was made on 1 April with plant producing at commercial levels and the board believing there will be no impediments to its reaching intended operating capacity.

Revenue for the June quarter was $22.4 million with 141,753 tonnes of heavy mineral concentrates produced.

This comes amid feedback that Chinese demand for pigment had improved and that prices achieved by Chinese pigment producers had commenced a gradual uplift.

Kwale Operations

Mining operations delivered steadily increasing feed grades as the mine path approached the central, high grade, section of the Central Dune.

While tonnages were restricted due to a planned program of rectifying the concentrator spiral collection launders under a defects liability claim, this was compensated for by the higher grade areas.

This allowed heavy mineral concentrate output to be maintained as planned with the mined ore grade increasing to 8.1% heavy minerals from 6.4% over the quarter.

The rectification work was successfully completed by the end of June.

Valuable heavy mineral recoveries in the concentrator also improved by 3.5% over the previous quarter to 93.8%.

Ilmenite production has reached design capacity and is exceeding expectations while Zircon production is consistent with a planned 12 month ramp-up to design capacity.

Rutile production ramp-up has been hampered by wet gravity circuit losses that are expected to be largely resolved during the current quarter.

Further plant modifications and optimisation are expected to increase production to design output over the balance of the 2015 financial year.

Early results from this work have been encouraging with mineral separation plant recoveries of 85% and 51% achieved in the month of July to date for rutile and zircon respectively.

Mineral separation plant throughput of 152,777 tonnes was 38% above the previous quarter's 110,860 tonnes and feed rates were consistently at design levels of 80 tonnes per hour.

Its availability also increased to 87% from 72% over the quarter, providing a stable operation on which to undertake further refinement testwork and plant optimisation over the next few quarters.

Bulk loading at Base's fully-owned and operated Likoni Port facility continued to perform to expectations with four bulk shipments of ilmenite (more than 90,000 tonnes) and two bulk shipments of rutile (about 14,000 tonnes) completed during the June quarter.

A further bulk shipment of 10,000 tonnes of rutile scheduled for late June was delayed into the first week of July by the late arrival of the vessel.

The company commenced container shipments of Zircon in April and has completed 12 individual shipments totalling about 2700 tonnes.

Its first container shipment of rutile was dispatched in early July and will be followed by a regular container shipping schedule.


The global pigment industry continued to improve throughout the June quarter with recent feedback suggesting that Chinese demand had improved and that prices achieved by Chinese pigment producers had commenced a gradual uplift.

Inventories of titanium dioxide feedstock are being gradually worked down but are likely to remain at elevated levels for the remainder of 2014.

Pricing of high grade titanium dioxide feedstock (including rutile) appeared to stabilise through the June quarter with Base expecting prices to remain flat for the remainder of the year.

Ilmenite prices continued to be under pressure through the June quarter though recent reports of reduced output in some of the main producing regions indicate the prices will stabilise at, or near, current levels.

Zircon trade activity continued to firm through the June quarter. Stocks of zircon held by producers continued to be run down and prices have remained relatively flat since the early stages of 2014.

There are increasing signs that the zircon market has reached the bottom of the cycle and is turning towards a firm recovery.

With this expected strength in the zircon market over the coming months there may be support for zircon price improvement towards the end of 2014 or the beginning of 2015.

Other Updates

Base is currently working with the syndicate of lenders that has provided the Kwale Project debt facility to realign the repayment schedule.

This reflects the delay in commencement of sales to February 2014 from the original expectation of October 2013, with a satisfactory outcome expected in the next couple of months.

It had debt drawn of US$215 million.

The company also continues to work with both the Kwale County Government and the Kenyan National Government to have the export levy purported to be imposed by the Kwale County withdrawn or rescinded on the basis that it is unconstitutional.

Base is comfortable with its legal position and expects to have the matter resolved in the near future.


With its first quarter of positive operating cash flows in the bag after reaching commercial production for its Kwale Mineral Sands, Base Resources is now well on the road towards achieving strong earnings.

With improvement in run time and throughput at the plant, focus shifts to recoveries.

Shares in the company should trade higher today on the news.

The company has $20.9 million in cash and cash equivalents.

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