Operations Update

Continued improvements in ilmenite and zircon prices led to a record quarterly revenue. Production for the financial year 2017 was consistent with guidelines for all products. Another good safety performance; no lost time injury (“LTI”) this quarter bringing the consecutive LTI free months to 40.

June 2017 Quarter Highlights
Key Indicator Unit Q1 2017 Q2 2017 Variance
Mining:
Ore Mined tonnes 2,664,738 2,975,694 12%
Ore Grade % HMC 6.70 8.40
Processing:
HMC Produced tonnes 159,379 232,574 46%
HMC Treated tonnes 186,814 192,432 3%
Ilmenite Recovery % 101 101
Rutile Recovery % 99 98
Zircon Recovery % 74 73
Ilmenite Produced tonnes 112,368 119,364 6%
Rutile Produced tonnes 23,107 22,762 (1%)
Zircon Produced tonnes 8,212 8,375 2%
Zircon Low Grade Produced* tonnes 2,474 3,026 22%
Shipments:
Ilmenite Shipped tonnes 122,783 142,405
Rutile Shipped tonnes 21,416 27,779
Zircon Shipped tonnes 8,069 8,540
Zircon Low Grade Shipped* tonnes 10,041 10,000

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

The quarter was characterised by continuing improvement zircon markets, stabilising ilmenite prices and a positive outlook for rutile.

Ore mined increased from 2.66 to 2.98 million tonnes, while the mined grade improved from 6.7 to 8.4% as mining in higher grade zones of the Central Dune continued.

Hydraulic mining operations progressed according to plan and consistently achieved production rates in excess of the design 400 tonnes per hour. This operation will be upgraded to double the production rate during the September quarter.

Heavy mineral concentrate (“HMC”) production increased by 46% over the prior quarter. This was due a combination of the higher mined tonnage and ore grade and resulted in a 40,000-tonne increase in HMC stocks.

The tailings storage facility (“TSF”) sand wall stacking, lining and slimes deposition continued according to plan, with the final wall lift now underway. Once complete sand stacking will move to the mined out areas of the Central Dune as part of the ongoing rehabilitation programme. Rehabilitation of the TSF outer sand wall, where it has reached full height, is now being revegetated with promising results achieved to date.

Following severe drought conditions, which persisted through to April, exceptional rains received during May rapidly replenished the Mukurumudzi Dam to its full capacity of 8.6 gigalitres. By late-April storage had fallen to 2.6 gigalitres, but conservation measures ensured that operations were able to continue at full capacity throughout this period.

The mineral separation plant maintained an average feed rate of 92 tonnes per hour with good availability to increase processing of HMC by 3% to 192,432 tonnes.

Rutile production at 22,762 tonnes was 1% down on the previous quarter owing to marginally lower rutile content in the HMC treated.

Conversely higher ilmenite content in the HMC treated resulted in a 6% increase in production to 119,364 tonnes while recovery remained steady at 101%.

Despite a 1% drop in recovery, zircon production increased to 8,375 tonnes, up 2% on the previous quarter, mainly due to increased HMC throughput.

In addition to primary zircon, production of a lower grade zircon product (“zircon low grade”) commenced by re-processing zircon tails to produce a zircon rich concentrate. Reported zircon low grade production represents the equivalent zircon content of the concentrate.

Bulk loading operations at the Likoni Port facility continued to run smoothly, dispatching more than 178,000 tonnes of ilmenite, rutile and zircon low grade during the quarter. Containerised shipments of rutile and zircon through the Port of Mombasa continued according to plan.

Exploration Update

Having completed the aircore drilling programme in the SW Sector within Special Prospecting License 173 during the March quarter, work during this quarter comprised sample analysis, mineralogical studies and geological interpretation aiming at completion of an updated JORC compliant mineral resource estimate during the September quarter.

Preliminary drilling results show a substantial increase in the dimensions of the South Dune Deposit (950m at an average of 700m across strike) and the discovery of the Mafisini Deposit (1,240m and up to 480m in width), separated from the South Dune by a narrow alluvial valley.

South Dune Deposit

South Dune Deposit with estimated mineralised extensions in the SW Sector and along the eastern edge of the deposit.

Kwale Phase 2 Project (“KP2”)

KP2 Project provides an opportunity to significantly improve the financial returns for Kwale operations through further optimisation of the remaining mine life.

The key benefits include:

  • bringing forward of revenue by maintaining current production levels for the remainder of the mine life, overcoming declining ore grades in the current ore reserve through de constraining the mine and concentrator plant; and

  • faster mining and processing of ore reserves over a 24-month shorter period, eliminating approximately US$60 million in fixed costs, with a commensurate reduction in average operating cost per tonne produced and significantly enhancing project economics compared with the current mine plan.

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

The features, impacts and implementation plan for KP2 are further explained in the Company’s market announcement of 23 May 2017

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