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Base Resources Ltd – Another sound quarterly report

Jordan Baird

Jordan Baird is the head ASR Wealth Advisers client services desk and has been with the organisation since 2017. He first started investing in his early years. While he believes that investors should leave no stone unturned he has a particular interest in trading based on broad macroeconomic trends along with specific analysis of innovative up-and-coming companies.

Base Resources Ltd (ASX: BSE) 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 every day “quality-of-life” items such as paints (ilmenite and rutile) and ceramic tiles (zircon). Base Resources has as a market capitalisation of around $290  million.

Base Resources Ltd - Report

What are the key outcomes in the September 2019 quarterly report?

In respect of the Kwale Project, mining operations successfully commenced at the South Dune orebody following the transition from the fully depleted Central Dune orebody at the end of June 2019. Production of Ilmenite, rutile and zircon was lower than previous quarters but in line with expectations. Base Resources held net cash of $US30.6 million at 30 September 2019 compared with $US19.2 million at end June 2019.

The current mine life of the Kwale Project is around mid-2024. Base Resources continues to investigate possibilities of extending this mine life through the development of a nearby low-grade deposit and by undertaking exploration.

Base Resources 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 including further price increases expected in December 2019. However, zircon prices weakened in the September quarter 2019 but the long term outlook remains positive due to declining supply. This commentary is consistent with comments made by other mineral sand producers.

In the September quarter 2019, Base Resources spent around $US9.0 million on the Toliara Project in Madagascar. The Toliara Project definitive feasibility study remains on schedule to be completed in December 2019. The Toliara Project is a major ilmenite project (with zircon as a by-product) which could produce an annual cash flow of over $US100 million over the 33 years plus project life. A final investment decision is expected in early 2020 and production is expected to commence in 2022. The timing of the project is expected to coincide with emerging supply shortages in the industry.

 

What is the market’s reaction?

Today, Base Resources’ share price remained steady at $A0.24. Over the past 2 years, Base Resources share price has been trading in the range of $0.21 to $0.33.

 


 

Disclaimer:

This article has been prepared by the Australian Stock Report Pty Ltd (AFSL: 301 682. ABN: 94 106 863 978)

(“ASR”). ASR is part of Amalgamated Australian Investment Group Limited (AAIG) (ABN: 81 140 208 288 Level 13, 130 Pitt Street, Sydney NSW 2000).

This article is provided for informational purpose only and does not purport to contain all matters relevant to any particular investment or financial instrument. Any market commentary in this communication is not intended to constitute “research” as defined by applicable regulations. Whilst information published on or accessed via this website is believed to be reliable, as far as permitted by law, we make no representations as to its ongoing availability, accuracy or completeness. Any quotes or prices used herein are current at the time of preparation. This document and its contents are proprietary information and products of our firm and may not be reproduced or otherwise disseminated in whole or in part without our written consent unless required to by judicial or administrative proceeding. The ultimate decision to proceed with any transaction rests solely with you. We are not acting as your advisor in relation to any information contained herein. Any projections are estimates only and may not be realised in the future.

ASR has no position in any of the stocks mentioned.

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