Base Resources Ltd (ASX: BSE)
Base Resources Ltd (Base Resources) is an Australian based, African focused, mineral sands producer and developer with a track record of project delivery and operational performance. It operates the Kwale Project in Kenya and is developing the Toliara Project in Madagascar.
Mineral sands are used to manufacture everyday “quality-of life” items such as paints (ilmenite and rutile) and ceramic tiles (zircon). Base Resources has as a market capitalisation of around $175 million.
What project is of key interest to investors?
The Toliara Project is a major ilmenite project (with zircon as a by-product) which could produce annual cashflow of over $US110 million over the 33 years plus project life. Overtime, the project is estimated to generate cash flow of US$3.7 billion over 33 years. Recent exploration suggests that the project could have a life could be at least double current plans. The timing of the project has been delayed as Base Resources negotiate fiscal terms with the Madagascan Government and issues around COVID-19. However, construction of the project could commence in the first half of 2021 and production could commence in 2023.
The long-term outlook on the price side for mineral sands is positive. It has been noted that ongoing constraints on the global supply of sulphate ilmenite and high-grade chloride feedstocks (including rutile) have maintained tight market conditions for ilmenite and rutile. This is resulting in continued positive price momentum. The timing of the Toliara project is expected to coincide with emerging supply shortages in the industry, which will benefit Base Resources.
Carnarvon Petroleum (ASX: CVN)
Carnarvon Petroleum Ltd (Carnarvon) is an oil and gas exploration company with projects located offshore off the north-west coast of Western Australia and in the Timor Sea. Carnarvon has a market capitalisation of A$283 million.
What project is of key interest to investors?
Carnarvon’s project of significant interest is the Dorado/Roc project, located 160 kms north of Port Hedland (Carnarvon’s interest 20% and Santos’ interest 80%).
On 8 October 2019, Carnarvon and Santos (ASX: STO) announced the results of the Caley flow test for Dorado-3. The test was very successful. It was reported that the Caley reservoir flow test exceeded 11,000 barrels of oil per day plus associated gas. Carnarvon notes that the potential flow rate is even higher, but the flow rate was limited by the capacity of the test equipment on the rig. This is a significant oil discovery. The test indicates very high potential flow rates of around 30,000 barrels per day from each production well in the Caley reservoir.
Carnarvon announced on 13 May 2020, the commencement of the pre-FEED design competition. Production of this project is expected in 2024-2025.
Carnarvon’s other main project of interest is the Buffalo project (located in the Timor Sea, 100 per cent interest). The main update for this project is that the Buffalo project is moving from Australian to Timor-Leste jurisdiction. Following this development, Carnarvon’s management signed a Production Sharing Contract with the Government of Timor-Leste. Currently, Carnarvon does not have a partner for this project. However, Carnarvon’s management note they are actively pursuing to secure a partner to join the project.
Carnarvon is a small company compared with the major oil and gas companies such as BHP Group Ltd (ASX: BHP), STO and Woodside Petroleum Ltd (WPL). However, the Dorado discovery could allow Carnarvon to become an established oil and gas company with significant earnings.
This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)
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