Operations Update

Record rutile production and further strengthening of rutile and zircon prices achieved this quarter. Highlights this quarter included ramping up and optimising of the wet concentrator plant (“WCP”) recoveries following commissioning of the Kwale Phase 2 Project and progress by Base Resources of a number of long lead activities for the Toliara Sands Project pre-feasibility study. Another good safety performance with no lost time injuries (“LTI”) brings the consecutive LTI free months to 52.

June 2018 Quarter Highlights
Key Indicator Unit Q1 2018 Q2 2018 Variance
Mining:
Ore Mined tonnes 1,883,159 3,543,430 88%
Ore Grade % HMC 6.88 6.36
Processing:
HMC Produced tonnes 125,298 192,559 54%
HMC Treated tonnes 180,128 192,375 7%
Ilmenite Recovery % 101 100
Rutile Recovery % 99 100
Zircon Recovery % 78 78
Ilmenite Produced tonnes 111,630 114,850 3%
Rutile Produced tonnes 21,634 24,453 13%
Zircon Produced tonnes 9,166 9,287 1%
Zircon Low Grade Produced* tonnes - - -
Shipments:
Ilmenite Shipped tonnes 140,665 107,170
Rutile Shipped tonnes 25,526 25,653
Zircon Shipped tonnes 9,884 9,007
Zircon Low Grade Shipped* tonnes - -

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

Supply constraints and strong demand have resulted in improved rutile and zircon prices. Softer demand led to a slight decrease of ilmenite prices in May which have since been steadied.

Ore mined rose by 88% from 1.8 to 3.5 million tonnes following the commissioning and ramp up of an additional hydraulic mining unit as part of the Kwale Phase 2 project. The average mined grade declined, as expected, from 6.9 to 6.4% as mining continued in the lower grade blocks of the Central Dune orebody.

The tailings storage facility (“TSF”) sand wall stacking, lining and slimes deposition continued as planned, with the final wall lift now nearing completion. Sand stacking continued in the mined-out area of the Central Dune. Rehabilitation of the TSF outer wall continued with good vegetation coverage achieved.

Good rainfall of 685mm was received during the quarter resulting in the Mukurumudzi Dam reaching its full capacity of 8.6GL and spilling in June.

The minerals separation plant (“MSP”)availability of 98% allowed 192,375 tonnes of heavy mineral concentrate to be processed resulting in record rutile production of 24,453 tonnes, 13% up on the prior quarter, while the recovery increased slightly to 100%.

Ilmenite production, at a recovery of 100%, was 114,850 tonnes, 3% above that of the prior quarter.

Zircon production, was steady at 9,287 tonnes at a recovery consistent with the prior quarter of 78%.

Bulk loading operations at the Likoni Port facility ran smoothly, dispatching over 130,000 tonnes of ilmenite and rutile during the quarter. Containerised shipments of rutile and zircon through the Port of Mombasa continued according to plan.

Kwale Phase 2 Project (“KP2”)

As ore grades decline from mid-2018, the mining rate and wet concentrator plant throughput must be increased to compensate. By increasing mining rates, KP2 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. Commissioning of a second HMU was completed during the June quarter and ramp up of mining and WCP throughout achieved design rates of 2,400tph. A third HMU will be commissioned in the following quarter, allowing for dry mining to be gradually phased out over the same period.

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 in the South-West Sector of Special Prospecting License (“SPL”) 173 carried out in 2017. An updated ore reserve based on the expanded South Dune resource is subject to finalisation of mining tenure arrangement, which are currently being progressed with the Ministry of Petroleum and Mining.

The next phase of extensional exploration drilling in SPL 173 commenced in April 2018 in the North-East Sector, adjacent to the Kwale Central Dune. A total of 274 holes for 3,835 metres have been drilled.

During the quarter the Company commenced a re-evaluation of the previously drilled North Dune, motivated by an improved economic environment, refined resource definition methodology and insights from five years of operations on the Central Dune. A total of 36 holes for 2,450 metres were drilled and a further 14,000 metres is planned for the coming quarter.

The Company’s Vanga SPL application has been approved by the Mineral Rights Board and is awaiting issuance. Once issued, the current drilling programme will be extended to incorporate this SPL.

Toliara Sands Project

Base Resources completed the acquisition of the Toliara Sands Project in Madagascar, considered to be one of the best mineral sands development projects in the world. It is underpinned by the Ranobe deposit that has a JORC 2012 Mineral Resource of 857 million tonnes at 6.2% heavy mineral, including 612 million tonnes at 6.7% heavy mineral in the Measured and Indicated Categories.

Base Resources plans to complete a full study phase ahead of a decision to proceed to construction in the second half of 2019 and the project could be expected to enter into production in the second half of 2021.

Current activities include preparations for the pre-feasibility and definitive feasibility studies, wet and dry plant testwork to inform process flow sheet design and an exploration programme aimed at defining the boundaries of the Mineral Resource, upgrading the existing Inferred Resource to Indicated status and completing an Ore Reserve estimate.

Download the full quarterly activities report: Base Resources Quarterly Activities Report - June 2018