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Base Resources' Kwale Mineral Sands Project Potential Not Lost On L1 Capital

The sheer size and potential of Base Resources' (ASX: BSE) Kwale Mineral Sands Project in Kenya continues to attract institutional investors to the registrar, with specialist fund manager L1 Capital increasing its stake to 7.90%.

L1 Capital purchased just over 6.3 million shares for a consideration of $1.7 million, for an average entry price of $0.28.

Kwale is tipped to deliver a life of mine cash surplus of over US$1 billion, and has an enviable cash flow profile with over US$550 million expected in the first five years of operation, which will provide a sizeable capital base that the company can use to capitalise on a pipeline of opportunities.

With A$140 million in cash and US$170 million in undrawn debt facilities, the company is more than adequately funded through to first cash flows which are expected towards the end of 2013 with the start of production.

The project hosts a JORC Resource of 146 million tonnes at 4.9% heavy minerals, 2.59% ilmenite, 0.65% rutile and 0.29% zircon.

Analysis - trading near cash backing

Base has around $0.28 in cash per share, yet the company last changed hands at $0.30 - putting the company in a position of almost being fully cash backed.

With Base set to become a globally significant producer of rutile, ilmenite and zircon from Kwale - the recent retraction in share price provides investors with the opportunity to again get into the stock at very low levels - just like what L1 Capital is doing.

Kwale will become a large scale, robust, and highly competitive producer of high quality minerals that is well supported by existing infrastructure and a motivated Kenyan government.

The project is fully funded, and is well advanced in arranging off-take agreements.

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