Kenya – Australia’s latest global player in the mineral sands market, Perth-based Base Resources, says it has commenced evaluating acquisition opportunities as it nears the completion of a production optimisation programme for its US$310 million Kwale mine.
Base is also confident of meeting, restructuring and refinancing its overhanging debt obligations by the 30 September deadline with initial payments already made.
Addressing the third and final day in Perth today of the Paydirt 2015 Africa Down Under Conference, Base MD Tim Carstens, said mineral sands market conditions through 2015 had been challenging.
However, the company continued to deliver a strong operational performance at Kwale as it pushed its optimisation programme for the mine’s ilmenite, rutile and zircon output beyond 460 000 t on an annualised rate and also included acquisitions in its forward growth pathway.
“Our ilmenite is exceeding design output rates and the other two are lifting so our focus is now on maximising both short and longer term throughput at Kwale,” Carstens said.
“Despite the tough market, we have taken action to position for growth and we think we are comfortably on track with that. Put simply, it’s been all about improving our recovery rates.”
“Importantly, Base is now delivering sound operating margins of around $130/t, we have receipted the first of our $25 million in Value Added Tax (VAT) claim refunds from the Kenyan Government and there are significant VAT amounts still to come.
“The refund claims relate to both the construction of the Kwale project and the period since operations commenced.
“We are also well progressed in refinancing our debt obligations – an historic legacy from four years ago – to better suit the current price environment.”
Carstens said while Base was well grounded in its existing contracts, moving larger new volumes continued to be “painful” and it would be essential to establish new customer relationships in line with the higher Kwale production objectives.
Base commenced exports from Kwale early in 2014. The mine is located 10 km inland from the Kenyan coast and 50 km south of Mombasa, the principal port facility for East Africa.
Kwale has a current mine life of 13 years, and features a high grade ore body with a high value mineral assemblage.
Carstens told delegates Kwale had emerged as a robust project, and was being ramped up to an annual production of 80 000 t of rutile, 360 000 t of ilmenite and 30 000 t of zircon, making Base a globally significant producer of mineral sands products.
There was also exploration potential which had not been tapped, in the immediate surrounds of the mine.
The company has a dedicated debt facility which requires certain project completion milestones to be met by the end of September this year. It paid an initial down-payment of $11 million in June.
Carstens said the company had pleasingly and successfully passed the operational components of Kwale’s “Project Completion” tests in July including set physical and economic tests over a continuous 90 day test period:
- mining production throughput;
- ore grade and ore reserve reconciliation;
- concentrator and mineral separation plant throughput;
- individual product recoveries;
- product quality against offtake contract requirements;
- minimum quantities of each product shipped;
- adequacy of both water and power supply over both the test period and the planned future operation; and
- operational practices meeting international standards.
The company was now focused on finalising the remaining regulatory and compliance components of Project Completion and progressing refinancing options.
“We are pursuing a refinancing of the current debt facility with the objective of securing a repayment profile more appropriate to the cash flows in the current challenging market environment and which would ensure a robust financial footing from which to grow the business, compared to the original market and project environment when this facility was first negotiated four years ago,” he concluded.