Operations Update

Record zircon sales and further price increases for zircon and rutile achieved this quarter. Highlights this quarter were successful commissioning of the Kwale Phase 2 Project and completion by Base Resources of acquisition of the Toliara Sands Project in Madagascar. Another good safety performance with no lost time injuries (“LTI”) brings the consecutive LTI free months to 49.

March 2018 Quarter Highlights
Key Indicator Unit Q4 2017 Q1 2018 Variance
Mining:
Ore Mined tonnes 2,882,529 1,883,159 (35%)
Ore Grade % HMC 7.61 6.88
Processing:
HMC Produced tonnes 196,725 125,298 (36%)
HMC Treated tonnes 190,798 180,128 (6%)
Ilmenite Recovery % 100 101
Rutile Recovery % 100 99
Zircon Recovery % 78 78
Ilmenite Produced tonnes 119,209 111,630 (6%)
Rutile Produced tonnes 22,798 21,634 (5%)
Zircon Produced tonnes 9,569 9,166 (4%)
Zircon Low Grade Produced* tonnes - - -
Shipments:
Ilmenite Shipped tonnes 119,554 140,665
Rutile Shipped tonnes 25,377 25,526
Zircon Shipped tonnes 8,144 9,884
Zircon Low Grade Shipped* tonnes 3,287 -

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

Supply constraints and increased demand have resulted in improved ilmenite prices. Significant rutile price gains have also been seen while strong zircon demand has driven significant upward price movement.

Ore mined fell by 35% from 2.88 to 1.88 million tonnes as the mine and wet concentrator plant were shut down during the entire month of March to complete final equipment installation and piping tie-ins to integrate the Kwale Phase 2 upgrade. The average mined grade declined, as expected, from 7.6 to 6.9% as mining continued around the north-western fringes 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 in the mined-out area of the Central Dune commenced, representing the start of rehabilitation in this section. Rehabilitation of the TSF outer wall continued with good vegetation coverage achieved.

Above average rainfall of 162mm was received during the quarter and the Mukurumudzi Dam storage stands at a healthy 86% of capacity ahead of the expected April to June rainy season.

The minerals separation plant (“MSP”) underwent an extended planned maintenance shutdown of 4½ days in March to refurbish a number of major components that had reached the end of their service lives.

Consequently, rutile production, at 21,634 tonnes, was 5% down on the prior quarter, while the recovery at 99% remained at previous levels.

Ilmenite production, at a recovery of 101%, similarly affected by the MSP shutdown, was 111,630 tonnes, 6% below that of the prior quarter.

Zircon production, 4% down, was 9,166 tonnes at a recovery consistent with the prior quarter of 78%.

Bulk loading operations at the Likoni Port facility ran smoothly, dispatching 162,000 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. Construction is now essentially complete and commissioning to integrate the additional capacity into the existing infrastructure commenced in early April. 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.

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 will be completed in the June quarter of 2018.

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.

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 - March 2018