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Base Resources Ltd – Increase in production guidance for FY20

Stuart Lucy

Stuart Lucy is an Investment Specialist at the Australian Stock Report, and has gained exposure to funds management and investment banking throughout his career. He draws on this experience to provide macroeconomic commentary and actionable investment insights to clients. Stuart is responsible for writing reports, is involved in delivering Macrovue webinars and provides general advice to our members on portfolio construction. Stuart currently holds RG146 General and Securities qualifications.

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 everyday “quality-of life” items such as paints (ilmenite and rutile) and ceramic tiles (zircon). Base Resources has as a market capitalisation of around $264 million.


base resource - increase production FY20


What is the increase in production guidance for FY20?

In respect of the Kwale Project, mining operations commenced at the South Dune orebody in the September quarter 2019, following the transition from the fully depleted Central Dune orebody at the end of June 2019.

Since commencing mining on the South Dune orebody in July 2019, Base Resources has encountered higher rutile and marginally lower ilmenite than expected, with zircon largely as forecast. In addition, due to the mineral characteristics of the South Dune ore, separation efficiency has improved, when compared with the Central Dune ore, and recoveries for all products in the mineral separation plant are higher, particularly for rutile and zircon.

With the expectation that these trends will continue, in conjunction with higher mining volumes achieved year to date, the production guidance for all products has been revised upwards for FY20 as shown below:

Production Guidance

Original FY20 Guidance Range Tonnes

Updated FY20 Guidance range Tonnes

Percentage Increase (based on the mid-point of guidance)


64,000 to 70,000

75,000 to 81,000



315,000 to 350,000

335,000 to 355,000



25,000 to 28,000

29,000 to 32,000



The increase in production guidance for the high-valued products rutile and zircon, combined with strengthening rutile and ilmenite prices, materially improves the expected cash flow from operating the Kwale Project. This is particularly important for Base Resources as it is seeking to commence construction of the world class Toliara Project, with capital expenditure of around $US442 million, in September 2020. This is because the improved cash flow from the Kwale Project eases the funding task to construct the Toliara Project.

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 31 years. The project’s cash flow is illustrated in the graph below: 


What is the market’s reaction?

Today, Base Resources’ share price increased 9% to $A0.245. Over the past 2 years, Base Resources share price has been trading in the range of $0.21 to $0.33. The Toliara project is world class mineral sands project that has not been priced into Base Resources share price. This could change over time as the project approaches production.




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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