Base Resources Regulatory News (BSE)

ASX, AIM and Media Release 20 January 2015 BASE RESOURCES LIMITED Quarterly Activities Report - December 2014 HIGHLIGHTS * Maiden corporately cash flow positive quarter. * An increase of 8% in production of final products quarter on quarter to 131,873 dmt. * Ilmenite circuit achieved an average MSP recovery of 106%. * Rutile circuit achieved a consistent MSP recovery of 94% throughout the quarter. * Ongoing process design enhancements and optimisation work achieving consistent improvements in zircon recovery throughout the quarter with MSP recovery in December of 53%. * Over 23,000 tonnes of rutile shipped. * No lost time injuries. * Completion of the rescheduling of the Kwale Project finance debt facilities. * US$20 million in additional funding secured. * Off-market takeover offer for World Titanium Resources Limited launched. Base Resources Limited (ASX & AIM: BSE) ("Base") is pleased to provide aquarterly production and ramp-up update at its Kwale Mineral Sands Operations("Kwale Operations") in Kenya, East Africa. With the consistent achievement ofdesign availabilities and throughputs in both the wet concentrator plant("WCP") and mineral separation plant ("MSP"), the focus has been firmly oncontinuing to drive product recoveries, with considerable success achieved. KWALE OPERATIONS Mined ore grades were lower at 7.5% heavy mineral ("HM") as mining proceededcloser to the perimeter of the Central Dune (8.4% HM during the previousquarter) while tonnage mined increased by 6% to 2.3Mt in the December quarter. Despite the higher mining tonnages and continued improvement in recoveries inthe concentrator (from 96% to 97%), Heavy Mineral Concentrate ("HMC")production declined by 4% to 165,953 tonnes as a result of the lower mined oregrades. WCP utilisation remained above plan at 84% for the quarter. Slime and sand deposition continued to operate according to plan and, byquarter end, sufficient storage capacity had been established to accommodatethe next 3.5 years' slime production. The onset of the "short rains" in October ensured the Mukurumudzi Dam remainedfull throughout the quarter. MSP throughput of 166,000 tonnes was in line with the previous quarter and feedrates remained at design levels of 80tph. MSP utilisation improved from 92% to94% over the quarter. Ilmenite production continued above design capacity, increasing 7% to 108kt dueto further improvement in recoveries. With some altered ilmenite species thatare not defined as "ilmenite" in the Resource being recovered to ilmeniteproduction, ilmenite recoveries (or yields) of over 100% are now consistentlybeing achieved. Rutile production increased 12% over the prior quarter, from16,612 tonnes to 18,672 tonnes with MSP recoveries consistently averaging 94%for the quarter. Further rutile recovery improvements are expected from ongoingdesign enhancements throughout 2015, including the installation of modifiedscreens scheduled towards the end of the March quarter. Zircon production isconsistent with the planned twelve month ramp-up to design capacity and averagerecoveries increased from last quarter's 47% to 50% this quarter, including 53%for December. The focus for zircon over the next quarter is on improvingrecoveries through improvements to the wet zircon piping and pumping systems toprovide greater control and flexibility. All availabilities, throughputs and recoveries are ahead of the ramp-up plan. Bulk loading at Base's Likoni Port facility continued to perform wellthroughout the December quarter, dispatching more than 76,000 tonnes during thequarter. In order to take advantage of considerable savings in freight rates,we are increasingly shipping 50,000 tonne cargoes. This change in shippingstrategy, combined with the normal seasonal slowdown towards year end, hasresulted in lower ilmenite sales during the quarter with additional salesvolume pushed into January. Ilmenite sales are expected to normalise in 2015 atapproximately 100,000 tonnes per quarter. Containerised shipments of rutile and zircon proceeded according to plan. SUMMARY March 2014 June 2014 September 2014 December 2014PHYSICAL DATA Quarter Quarter Quarter Quarter Ore mined (dmt) 1,940,951 1,759,211 2,191,455 2,328,746HMC produced (dmt) 113,196 141,753 172,885 165,953Production (dmt) Ilmenite 68,193 91,620 100,533 107,893 Rutile 8,843 15,221 16,612 18,672 Zircon 356 4,130 5,210 5,308Sales (dmt) Ilmenite 47,300 91,529 116,578 53,345 Rutile 0 14,005 12,923 23,328 Zircon 0 2,704 2,601 5,883 Cash operating costs for the quarter (inclusive of royalties) were US$14.4million or US$109 per tonne of product produced (rutile, ilmenite and zircon). SAFETY AND TRAINING No serious injuries occurred during the quarter. A comprehensive training and development program is underway aimed at asustainable workforce transition to national employees with leadershipdevelopment, apprenticeship programs and graduate traineeships underway. COMMUNITY AND ENVIRONMENT Agricultural trials, run in conjunction with partners Business for MillenniumDevelopment and DEG, have produced successful results for both potato andcotton crops. Leveraging the existing significant agricultural activity andexperience in Kwale County, these projects have the potential to deliversignificant improvement in livelihoods in the area through increased cropdiversity, enhanced agricultural practices, output aggregation and access tostable markets. Utilising the knowledge gained from the trial programmes, preparations areunderway to expand the number of local farmers involved in the program with theaim of producing commercial quantities of both crops. Further training of localfarmers for a poultry trial programme is now underway with the intention ofincreasing productivity and quality through modern chicken rearing techniquesfocussed on bio-controls and sustainability. MARKETING The global TiO2 pigment industry softened towards the end of the Decemberquarter as the northern hemisphere entered its usual seasonal slowdown.Inventories of ilmenite feedstocks are expected to remain at elevated levelsuntil the pigment market picks up late in the March quarter and through theJune quarter. The cyclical slowdown in the pigment sector in China during theDecember quarter (and in the lead up to Chinese New Year) has resulted inilmenite prices coming under renewed pressure. Output from some of theprincipal ilmenite sources for the Chinese market continues to be suppressedwhich should support pricing once demand regains pace (post Chinese New Year)and stocks are further worked down. Pricing of high grade titanium dioxide feedstock (including rutile) remainedrelatively stable through the December quarter but may come under some pressurein the early months of 2015. Zircon trade activity remained firm through the December quarter with stronglevels of enquiry being received from the market. Prices were stable throughoutthe December quarter and are expected to remain stable through the Marchquarter. There is potential for some zircon price growth in 2015 provided thatmajor producers continue to manage their production output in line with marketdemand. CORPORATE TAKEOVER OFFER FOR WORLD TITANIUM RESOURCES LIMITED Base launched an off-market takeover offer (the "Offer") for World TitaniumResources Limited ("World Titanium") with the Bidder's Statement beingdispatched to World Titanium shareholders, and the Offer formally opening, onthe 6th January 2015. On 5th January 2015, World Titanium announced that it had secured bindingundertakings to not accept the Offer from World Titanium shareholders withcombined holdings exceeding 60%. Following discussions with key World Titaniumshareholders, we have concluded that the Offer is now unlikely to succeedunless there is a significant change in circumstances. As previously announced, the Offer Price will not be increased and the Offerwill close at 7.00pm (WST) on 6th February 2015 and will not be extended unlessall remaining Conditions of the Offer are fulfilled or waived prior to thattime, or the Offer is subject to an automatic extension under the CorporationsAct. DEBT RESCHEDULING COMPLETED The restructure of the US$215 million Kwale Project debt facility ("ProjectDebt Facility") was completed in early December. The rescheduling has theprimary effect of realigning the Project Debt Facility repayment schedule toreflect the delay in commencement of sales from the Kwale Project to February2014 from the original expectation of October 2013 when the facility wasarranged in 2011. Under the terms of the restructure, all principal repayments and funding of thedebt service reserve account have been deferred by six months with somere-profiling to suit future cash flows. The first principal repayment isdeferred from December 2014 to June 2015 and the debt repayments during the2015 financial year are reduced from US$45.9 million to US$11.0 million. In addition, Base committed to contribute up to US$15 million in additionalliquidity by 30 June 2015 ("Liquidity Injection"), if required by any lender. ADDITIONAL US$20 MILLION DEBT FACILITY EXECUTED In December, Base executed a US$20 million unsecured debt facility with one ofits major shareholders, Taurus Funds Management ("Taurus Facility"). The TaurusFacility puts Base on a sound financial footing, providing a source ofadditional funding for the Kwale Project should it be needed, the means tosatisfy the US$15 million Liquidity Injection (refer above) and US$5 million incorporate funding. KWALE COUNTY MINERAL LEVY Base is currently continuing to work with both the Kwale County Government andthe Kenyan National Government to have the export levy purported to be imposedby the Kwale County withdrawn or rescinded (see ASX and AIM Release dated 5June 2014) on the basis that it is unconstitutional. Base remains comfortablewith its legal position and expects to have the matter resolved in the nearfuture. KENYAN VAT RECEIVABLE Base has a refund claim of approximately US$25 million for VAT paid in Kenya,most of which relates to the construction of the Kwale Project. This claim iscurrently proceeding through the Kenya Revenue Authority process. The KenyanCabinet Secretary to the Treasury has recently announced the Government ofKenya's intention to settle all outstanding VAT claims by April 2015. CLOSING CASH POSITION The closing cash balance (unrestricted) at 31 December of A$12.7 million waslower than expected and affected by several factors, including: * Reduced ilmenite sales as a consequence of a move to larger shipment sizes to take advantage of lower freight rates; * The cyclical impact of the northern hemisphere winter on demand, particularly for ilmenite; * Customer shipping schedules pushing sales later in the quarter and further into January; and * Impacts of tightened credit conditions in China impacting on both shipment timing and revenue receipt. These timing impacts have now largely resolved and not expected to be repeatedin the March quarter. In summary, at 31 December 2014: * Cash and cash equivalents (unrestricted) were A$12.7 million. * Debt drawn of US$215.0 million, undrawn debt of US$20.0 million. * 563,902,771 shares on issue. * 47,312,531 unlisted options. A full PDF version of this announcement is available at the Company's website:www.baseresources.com.au. ENDS For further enquiries contact: Base Resources LimitedTim CarstensManaging DirectorPhone: +61 (0)8 9413 7400 RFC Ambrian Limited (Nominated Adviser and Broker)As Nominated Adviser As BrokerAndrew Thomson or Trinity McIntyre Jonathan WilliamsPhone: +61 (0)8 9480 2500 Phone: +44 20 3440 6800 Africapractice (East Africa) (Kenyan Media Relations)David Maingi/ James Njuguna/Joan KimaniPhone: +254 (0)20 239 6899Email: jkimani@africapractice.com Tavistock Communications (UK Media Relations)Jos Simson / Emily Fenton / Nuala GallagherPhone: +44 (0) 207 920 3150 Cannings Purple (Australian Media Relations)Michael Vaughan / Warrick HazeldineEmail: mvaughan@canningspurple.com.auwhazeldine@canningspurple.com.auPhone: +61 (0)8 6314 6300 Corporate Details: Board of Directors:Andrew King Non-Executive ChairmanTim Carstens Managing DirectorColin Bwye Executive DirectorSam Willis Non-Executive DirectorMichael Anderson Non-Executive DirectorMike Stirzaker Non-Executive DirectorMalcolm Macpherson Non-Executive DirectorWinton Willesee Company Secretary Principal & Registered Office: Contacts:Level 1 Email: info@baseresources.com.au50 Kings Park Road Phone: +61 (0)8 9413 7400West Perth Fax: +61 (0)8 9322 8912WA 6005 Share Details:As at 31 December 2014, there were 563,902,771 ordinary shares on issue. Substantial Shareholders:Pacific Road Capital 20.4%Taurus Funds Management 12.4%Sustainable Capital 9.5%L1 Capital 7.8%Acorn Capital 7.6%Aterra Investments 5.5%Genesis Asset Managers 5.0% Unlisted Share Options:Options expiring July 2015 ex A$0.09Options expiring July 2015 ex A$0.25Options expiring December 2018 ex A$0.40 Share Registry:ASXComputershare Investor Services Pty LtdLevel 2, 45 St Georges TerracePERTH WA 6000Enquiries: 1300 850 505 / +61 (3) 9415 4000www.computershare.com.au AIMComputershare Investor Services PL CThe PavilionsBridgwater RoadBRISTOL BS99 6ZZEnquiries: +44 (0) 870 702 0003www.computershare.co.uk Tenement Schedule:Special Mining Licence 23, 100% interest, Kwale, KenyaExploration Licence 173, 100% interest, Kwale, Kenya