Base Resources says operations continued according to plan on the South Dune ore-body with mined tonnage of 3.9 Mt at a grade of 3.16% heavy mineral.

Mined tonnage was lower than previous quarters due to a planned eight-day stoppage in July to move the mining collection hopper further south, which also required the installation of a third slurry booster pump.

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As outlined in its 2021 financial year production guidance, ore grade is forecast to be lower during FY21, averaging 3.24% HM with the first half of FY21 expected to see the lowest grades before improving in the second half.

Wet concentrator plant (WCP) production of heavy mineral concentrate (HMC) was lower at 104 kt due to a combination of lower mined tonnes and HM grades.

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HMC stocks were reduced to 5kt at quarter end (last quarter: 16kt). Sand tails continued to be deposited into the mined-out Central Dune area and significant progress was made with rehabilitation work on minedout areas of the South Dune, with 50 hectares shaped and revegetated during the quarter.

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Total mineral separation plant (MSP) feed tonnage was lower than the prior quarter, constrained by available HMC, while recoveries were slightly higher. Consequently, production of all final products decreased compared to the prior quarter.

Bulk loading operations at the Company’s Likoni Port facility continued to run smoothly, dispatching more than 85 kt of bulk ilmenite and rutile during the quarter (last quarter: 125kt).

Containerised shipments of rutile and zircon through the Mombasa Port proceeded according to plan.

Total operating costs of US$16.6 million were marginally lower (last quarter: US$17.2 million) due to lower processing, port and
rehabilitation provision charges.

Despite the lower total operating costs, the reduced production levelsresulted in higher unit operating costs of US$189 per tonne produced (rutile, ilmenite, zircon, and low-grade zircon) (last quarter: US$153 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$192 per tonne sold (operating costs, adjusted for stockpile movements, and royalties) increased marginally due to higher unit operating costs, offset in part by the higher proportion of ilmenite in the sales mix compared to rutile in the quarter (last quarter: US$189 per tonne).

For the same reason average unit revenue decreased to US$413 per tonne (prior quarter: US$479 per tonne). From the combination of these factors, the revenue to cost of goods sold ratio for the quarter decreased to 2.1 (last
quarter: 2.5).

Toliara Project development – Madagascar

In November 2019, the Government of Madagascar required the Company to temporarily suspend on-the-ground activity on the Toliara Project while discussions on fiscal terms applying to the project were progressed.

Activity remains suspended as Base Resources continues to engage the Government in relation to the country’s Large Mining Investment Law (LGIM) regime, fiscal terms applicable to the Toliara Project and the lifting of the on-the-ground suspension with encouraging progress made, including the lodgement of the formal application for LGIM certification (the large scale mining fiscal and legal stability regime).

As noted in the Company’s FY20 Full Year Results announcement, with the suspension of activity, international travel restrictions and broader COVID-19 measures and impacts both in Madagascar and globally, the final investment decision (FID) to proceed with development of the Toliara Project has been delayed with FID now unlikely to occur before September 2021.

Further guidance on a revised FID date will be provided when the suspension of activity has been lifted and there is greater clarity on the trajectory of global economic activity, the resumption of international travel and financial market conditions.