Mining operations at Kwale continued according to plan on the South Dune orebody with mined tonnage increasing to 4.6 Mt (last quarter: 3.9 Mt) due to higher mining faces reducing the downtime associated with relocating mining units.
The heavy mineral (HM) grade of ore mined was also higher at 3.68% (last quarter: 3.16%). This was driven by the mine path as well as better grade than predicted by the resource model in some areas mined.
Wet concentrator plant (WCP) production of heavy mineral concentrate (HMC) was higher at 142kt (last quarter: 104kt) due to a combination of higher mined tonnes and HM grades.
HMC stocks increased to 14kt at quarter end (last quarter: 5kt). Sand tails continued to be deposited into the mined-out Central Dune area and significant progress was made with rehabilitation of the mined-out areas of the South Dune, with 49 ha provisionally rehabilitated in the quarter.
Total mineral separation plant (MSP) feed tonnage was higher than the prior quarter, due to improved HMC availability, while recoveries were generally steady.
Consequently, production of all final products increased compared to the prior quarter.
Bulk loading operations at the Company’s Likoni Port facility continued to run smoothly, dispatching a combined 64kt of bulk ilmenite and rutile during the quarter (last quarter: 85kt).
Containerised shipments of rutile and zircon through the Mombasa Port proceeded according to plan.
Total operating costs of US$16.8 million were marginally higher (last quarter: US$16.6 million) due to higher volumes mined and processed. Increased production levels resulted in lower unit operating costs of US$161 per tonne produced (rutile, ilmenite, zircon and low-grade zircon) (last quarter: US$189 per tonne).
Unit cost of goods sold is influenced by both the underlying operating costs and product sales mix. Operating costs are allocated to each product based on revenue contribution, which sees the higher value rutile and zircon products attracting a higher cost per tonne than the lower value ilmenite.
Therefore, the greater the sales volume of rutile and zircon relative to ilmenite in a quarter, the higher both unit revenue per tonne and unit cost of goods sold will be.
Ilmenite, and most of the rutile, is sold in bulk, with typical shipment sizes of 50-54kt for ilmenite and 10-12kt for rutile, which means any given quarter will usually contain either one or two bulk rutile and ilmenite sales.
Zircon is sold in smaller parcels and sales generally align with production volume. Product sales mix will therefore vary depending on the number of bulk shipments of ilmenite and rutile in each quarter.
Cost of goods sold of US$207 per tonne sold (operating costs, adjusted for stockpile movements, and royalties) increased due to the higher proportion of rutile and zircon in the sales mix in the quarter (last quarter: US$192 per tonne).
Average unit revenue increased to US$464 per tonne (prior quarter: US$413 per tonne) due to sales mix and increased ilmenite prices. From the combination of these factors, the revenue to cost of goods sold ratio for the quarter increased to 2.2 (last quarter: 2.1).
FY21 production guidance
Base Resources’ production guidance for financial year ended 30 June 2021 (FY21) remains unchanged, albeit with ilmenite currently forecast to be towards the upper end of the guidance range.
However, due to the ongoing inherent uncertainties associated with the COVID-19 pandemic, a halt to, or curtailment of, operations at some point in the future remains possible.
In such an event, the Company may update or withdraw its FY21 production guidance, as appropriate in the circumstances.
Kwale Operations FY21 production guidance remains at:
- Rutile – 70,000 to 80,000 t
- Ilmenite – 270,000 to 300,000 t
- Zircon – 23,000 to 27,000 t
The FY21 production guidance is based on the following assumptions:
- Mining of 17.2 Mt at an average HM grade of 3.44%, with all remaining FY21 volume coming from Ore Reserves
- Average MSP feed rate of 67 tph
- Average MSP product recoveries of 100.5% for rutile, 100% for ilmenite and 84% for zircon
Base Resources continues to closely monitor the COVID-19 pandemic and its impacts on the Company’s business, people and wider stakeholders.
The Company’s Kwale Operations in Kenya continues to operate under a suite of mitigations aimed at protecting the health and safety of our employees and neighbouring communities, including modified workplace practices and a focus on hygiene and social distancing.
The Company is also assisting governments and communities in both Kenya and Madagascar with several initiatives, primarily involving the construction of hygiene facilities, distribution of food and provision of medical supplies and equipment.
- Kwale Operations has maintained operational consistency through the quarter with health and safety protocols in place to minimise the risk of COVID-19 to personnel and surrounding communities
- Ongoing firm demand from customers in the quarter supported further ilmenite price increases, while zircon and rutile prices have stabilised
- Kwale North Dune PFS progressed and is scheduled for release early in the June quarter
- Exploration drilling re-commenced in the North Vanga region near Kwale Operations
- Discussions with the Government of Madagascar on Toliara Project fiscal terms continue to progress
- Activities to support vulnerable local communities affected by COVID-19 in Kenya and Madagascar continued