Operations Update

Further zircon price increases achieved this quarter. Steady operations experienced, with a further improvement in zircon recovery. Another good safety performance with no lost time injuries (“LTI”) bringing the consecutive LTI free months to 46. Net debt further reduced by US$21.0 million to US$65.6 million.

December 2017 Quarter Highlights
Key Indicator Unit Q3 2017 Q4 2017 Variance
Mining:
Ore Mined tonnes 3,023,550 2,882,5292 (5%)
Ore Grade % HMC 8.16 6.97
Processing:
HMC Produced tonnes 238,580 196,725 18%
HMC Treated tonnes 192,499 190,797 -
Ilmenite Recovery % 100 100
Rutile Recovery % 100 100
Zircon Recovery % 75 78
Ilmenite Produced tonnes 119,376 119,209 -
Rutile Produced tonnes 22,789 22,798 -
Zircon Produced tonnes 9,136 9,569 5%
Zircon Low Grade Produced* tonnes 1,425 - -
Shipments:
Ilmenite Shipped tonnes 106,260 119,554
Rutile Shipped tonnes 12,594 25,377
Zircon Shipped tonnes 9,283 8,144
Zircon Low Grade Shipped* tonnes - 3,287

*Zircon low grade tonnes contained in concentrate equivalent to 70-80% of the value of primary zircon.

The quarter was again characterised by continuing improvement zircon markets and rutile prices, but short-term restraint in ilmenite prices.

Ore mined decreased by 5% from 3.02 to 2.88 million tonnes and the mined grade declined, as expected, from 8.2 to 7.0% as mining proceeded around the north-western fringes of the Central Dune orebody.

The tailings storage facility (“TSF”) sand wall stacking, lining and slimes deposition continued according to plan, with the final wall lift in progress. Once this lift is complete, sand stacking will move to the mined-out area of the Central Dune representing the start of rehabilitation in this section. Rehabilitation of the TSF outer wall continued with good vegetation results achieved so far.

Good rainfall of 427mm was received during the quarter, resulting in the Mukurumudzi Dam filling during November with storage now standing at 97% of capacity.

Rutile production, at 22,798 tonnes, was consistent with that of the previous quarter and the recovery remained steady at 100%.

Ilmenite production, at a recovery of 100%, was 119,209 tonnes, again very similar to that achieved in the prior quarter.

Zircon production increased again (by 5%) to 9,569 tonnes, driven by a 3% improvement in recovery to 78% as a result of process optimisation and circuit changes introduced in September.

Bulk loading operations at the Likoni Port facility continued to run smoothly, dispatching more than 142,000 tonnes of ilmenite and rutile during the quarter. Containerised shipments of rutile and zircon through the Port of Mombasa continued according to plan.

Exploration Update

As announced on 4th October 2017, an updated mineral resource estimate for the Kwale South Dune has been completed, incorporating the results of an extensional and infill drill programme completed earlier this year. An updated ore reserve based on the expanded South Dune resource will be completed in 2018.

The next phase of extensional exploration drilling at Kwale is anticipated to commence in the June quarter 2018 in the North-East Sector, adjacent to the Kwale Central Dune.

Kwale Phase 2 Project (“KP2”)

To offset declining ore grades from mid-2018, and to fully exploit the minerals separation plant (“MSP”) capacity, the implementation of the KP2 Project is now under development.

By increasing mining rates as ore grade declines, the Project aims to maintain heavy mineral concentrate feed to the MSP, and therefore final product volumes of ilmenite, rutile and zircon at around current levels for the remaining life of mine. This will be achieved by increasing the hydraulic mining capacity to three HMUs, each with a capacity of 800 tonnes per hour, along with commensurate increases in wet concentrator plant and water supply capacities. Construction is on track for completion in the June quarter of 2018. The three HMUs will ramp up to full capacity through the course of 2018, with dry mining gradually being phased out over the same period.

It increases the importance of, and value leverage from, potential mine life extensions emerging from the exploration programme that is underway.

Construction is on track for completion in the June quarter 2018.

Download the full quarterly activities report: Base Resources Quarterly Activities Report - December 2017