REG-Base Resources Limited: Decision to proceed with the Bumamani Project

Base ResourcesAnnouncement

20/06/2022 07:15

AIM and Media Release 

20 June 2022

BASE RESOURCES LIMITED
Decision to proceed with the Bumamani Project

Key outcomes
* A decision to proceed with development of the Bumamani Project has been made
following consideration of the Bumamani DFS outcomes.
* This will extend the life of Kwale Operations by 13 months to December 2024,
once land access arrangements are finalised.
* An additional 17.9 million tonnes of Ore Reserves are expected to be mined
to produce an estimated 42,000 tonnes of rutile, 171,000 tonnes of ilmenite
and 20,000 tonnes of zircon.
* Proceeding with the Bumamani Project is a significant further step towards
extending mine life at Kwale Operations and maintaining operational
continuity, providing additional time to develop other opportunities in Kenya
and the region.
* Production guidance released for FY23, incorporating mining of the Bumamani
Project: * Rutile – 62,000 to 73,000 tonnes
* Ilmenite – 260,000 to 310,000 tonnes
* Zircon – 22,000 to 27,000 tonnes
African mineral sands producer and developer, Base Resources Limited (ASX &
AIM: BSE) (Base Resources or the Company) is pleased to announce that a
decision to proceed with development of the Bumamani Project has been made
after a definitive feasibility study (the Bumamani DFS) confirmed its economic
viability.   

The decision means that life at Base Resources’ 100% owned and operated
mineral sands operations in Kwale County, Kenya (Kwale Operations) will be
extended by 13 months to December 2024 once land access arrangements are
finalised.

The Bumamani Project comprises higher-grade subsets of the Bumamani and Kwale
North Dune deposits (see Figure 1) and the Bumamani DFS confirmed the
viability of mining these areas concurrently with the Kwale South Dune
deposit.    

Mining at the Kwale North Dune is expected to commence in March 2023.

Graphics/figures referenced in this release have been omitted.  A full PDF
version of this release, including all graphics/figures, is available from the
Company’s website:  www.baseresources.com.au.

FY23 production guidance

The Company’s 2023 financial year (FY23) production guidance is shown below,
together with its FY22 production guidance which is unchanged from that last
reported.  The FY23 production guidance is lower than that for FY22 as a
consequence of the planned commencement of mining in the lower HM grade Kwale
North Dune orebody from March 2023 and normal uncertainties associated with
mining a new orebody.

 PRODUCTION GUIDANCE (tonnes)  FY22  Guidance Range  FY23  Guidance Range  
 Rutile                          73,000 to 83,000      62,000 to 73,000    
 Ilmenite                       310,000 to 340,000    260,000 to 310,000   
 Zircon                          24,000 to 28,000      22,000 to 27,000    

The FY23 production guidance is supported by the Bumamani DFS and is based on
the following assumptions:
* Land access arrangements are finalised in time to enable mining at the Kwale
North Dune to commence in March 2023.
* Mining of 16.5Mt at an average HM grade of 3.51%.
* Heavy mineral concentrate (HMC) produced by the wet concentrator plant of
571kt.
* HMC fed into the mineral separation plant (MSP) of 556kt.
* MSP product recoveries of 101% for rutile, 101.5% for ilmenite and 84.5% for
zircon.
Summary of the Bumamani DFS outcomes

The Bumamani DFS was undertaken following an earlier pre-feasibility study
(Bumamani PFS) which supported mining higher-grade subsets of the North Dune
and Bumamani deposits(1) (referred to as the P199 and Bumamani pits). 
Following the pit optimisation stage of the Ore Reserves estimation process
undertaken for the Bumamani DFS, additional material to that considered for
the Bumamani PFS was shown to be economically extractable and was added to the
scope of the Bumamani DFS.  The area added is a subset of the Kwale North
Dune referred to as the P200 pit (refer to Figure 1).

The Bumamani DFS forecasts net positive, post-tax, cash flows from mining the
Bumamani Project.  The other key outcomes, together with the assumed product
prices, for the Bumamani DFS are set out in table 1 below.

Table 1: Bumamani DFS key outcomes.

 Outcome / Assumption                                                   Units  Bumamani DFS 
 Operations life extension                                             Months            13 
 Ore mined                                                     Million tonnes          17.9 
 Ore Grade                                                               % HM           2.1 
 Upfront capex                                                   US$ millions          28.1 
 Rutile produced                                              Thousand tonnes            42 
 Ilmenite produced                                            Thousand tonnes           171 
 Zircon produced                                              Thousand tonnes            20 
 Operating cost per tonne mined, inclusive of 5% royalty                US$/t          4.64 
 Operating cost per tonne produced, inclusive of 5% royalty             US$/t        266.38 
 Rutile price – average over LOM                                    US$/t FOB         1,811 
 Ilmenite price – average over LOM                                  US$/t FOB           285 
 Zircon price – average over LOM                                    US$/t FOB         2,021 
 Study margin of error band                                                 %      -5 / +15 

[Note (1): For further information about the Bumamani PFS, refer to Base
Resources’ market announcements on 3 September 2021 “Bumamani PFS supports
extension of Kwale mine life to mid-2024” and “Further supporting
information for Bumamani PFS”, available at
https://baseresources.com.au/investors/announcements/.]

Mining

The Bumamani DFS considered mining the Kwale North Dune Ore Reserves, which
are estimated at 13.9 million tonnes (Mt) (8.3Mt Proved and 5.6Mt Probable) at
an average heavy mineral (HM) grade of 2.1% for 0.29Mt of contained HM, and
the Bumamani Ore Reserves, which are estimated at 3.9Mt (2.6Mt Proved and
1.3Mt Probable) at an average HM grade of 2.3% for 0.09Mt of contained
HM(2).  Together, these Ore Reserves estimates total 17.9Mt at an average HM
grade of 2.1% for 0.38Mt of contained HM (with 10.9Mt or approximately 61%
Proved and 6.9Mt or approximately 39% Probable).  

The mining method planned for the Bumamani DFS is hydraulic mining, utilising
Kwale Operations’ existing hydraulic mining units (HMUs).  This mining
method has been successfully used at Kwale Operations since 2016.  It is
non-selective, with HMUs using high pressure water jets to sluice the entire
ore face, creating an ore slurry which can then be pumped to the wet
concentrator plant.

To maximise mining rates and better manage tailings, the Bumamani DFS
established that the Bumamani Project will be mined concurrently with the
Kwale South Dune deposit, commencing from March 2023.  Four existing HMUs
will be utilised, instead of three (as is current mining practice at Kwale
South Dune), with two continuing to mine at Kwale South Dune and two at the
Bumamani Project pits.  After the transition to four HMUs, in both areas, one
HMU will operate at full capacity of up to 800 tph and one at half capacity of
up to 400 tph to give a total feed rate of up to 2,400 tph, consistent with
the present feed rate at Kwale South Dune.  HMUs are capable of mining at
either up to 400 or 800 tph by operating one or two high pressure monitors,
each capable of up to 400 tph. 

A shutdown of mining operations and the wet concentrator plant is scheduled
for February 2023 to relocate the HMUs and associated pumping infrastructure,
after which mining at P199 will commence.  Following depletion of P199
(anticipated in February 2024), mining equipment will relocate to P200 while
mining continues at Kwale South Dune.  When mining completes at Kwale South
Dune in May 2024, mining equipment will be relocated to the Bumamani pit.

Figure 2 summarises the planned mining schedule incorporating the Bumamani
Project, compared to the mine plan if mining at the Bumamani Project does not
occur. 

Figure 3 shows the planned mining schedule at the Bumamani Project across
seven stages.  Mining is scheduled at P199 and P200 concurrently with mining
at Kwale South Dune for stages 1-5, following which (and for the last two
stages) mining occurs solely at the Bumamani pits.

[Note (2): For further information, refer to Base Resources’ market
announcement on 20 June 2022 “Maiden Kwale North Dune and Bumamani Ore
Reserves estimates” available at
https://baseresources.com.au/investors/announcements/.]

Tailings

The majority of fine tailings will be accommodated within Kwale Operations’
current tailings storage facility while coarse tailings will be used for land
rehabilitation across Kwale Operations.  It is anticipated that approximately
25% of the fine tailings from all mining will be co-disposed with the coarse
tailings to create a water retention layer as part of land rehabilitation,
which is the current practice at Kwale Operations.  Coarse tailings disposal
will commence in the P199 mined out void as soon as space is available and
will subsequently move to P200 when space is available.  From commencement of
P199 mining, approximately 30% of coarse tails production will be placed in
these pit voids.  Figure 4 depicts the planned tailings schedules for the
Bumamani DFS.  

Processing

Material mined will be processed through Kwale Operations’ existing wet
concentrator plant and mineral separation plant.  Recovery factors assumed
were the same as those currently experienced at Kwale Operations and are set
out in Table 2 below.  They are also supported by the metallurgical testwork
carried out on the Kwale North Dune. 

The metallurgical testwork comprised wet concentrator and mineral separation
plant tests on bulk samples collected from two 61cm diameter holes drilled in
the Kwale North Mineral Resource, as part of the earlier Kwale North
pre-feasibility study.  One hole is adjacent to P199 while the other hole is
in P200.  Discrete ore zones were sampled (Ore1, Ore4 and Ore5) from each
hole.  The samples were dried and shipped to Brisbane, Australia for
processing through IHC Robbins’ laboratory.  Samples of the fine tailings
generated by IHC Robbins were sent to Outotec Metso for thickener testwork. 
The results of the testwork were not materially different to the run of mine
results being achieved from mining the Kwale South Dune deposit.  No
metallurgical testwork was completed on the Bumamani deposit, however, it
exhibits similar characteristics (including particle size) to ore currently
mined at Kwale South Dune and is expected to achieve similar processing
results, including mineral recoveries, as those achieved from mining the Kwale
South Dune ore. 

Table 2: Bumamani DFS recovery assumptions.

 Description                                      Units  Bumamani DFS  (consistent with current) 
 Concentrate grade                                    %                                     85.0 
 HM recovery – wet concentrator plant                 %                                     79.5 
 Rutile recovery – wet concentrator plant             %                                     88.9 
 Ilmenite recovery – wet concentrator plant           %                                     90.0 
 Zircon recovery – wet concentrator plant             %                                     94.7 
 Rutile recovery – mineral separation plant           %                                    101.0 
 Ilmenite recovery – mineral separation plant         %                                    101.5 
 Zircon recovery – mineral separation plant           %                                     84.5 

Marketing

The chemical specifications of products from the Bumamani Project are the same
as existing Kwale Operations production and the Bumamani DFS assumes the same
price forecast applicable to Kwale Operations products. 

The assumed product prices were derived from Base Resources’ internal price
forecasts for the proposed period of extraction, based on supply/demand
analysis and taking into account relevant data from independent industry
consultants, TZMI, and are not materially different from TZMI’s average
forecast prices over the same period.

Infrastructure and capital and operating costs

As Kwale Operations is an operating mine, all the major infrastructure already
exists – 132 kV power line and transformer yard, 8Gl water dam, water bores,
export facility, processing plants, offices, maintenance workshops, laboratory
and camp.  The cost of additional roads, powerlines, pumps and pipelines
required to service the proposed pits have been allowed for in the capital
expenditure estimate.  Figure 5 shows the locations of new mine
infrastructure, including a new community road to replace those intersected by
the pits, with all infrastructure implemented in a staged approach as required
by the mine plan.

Capital cost is estimated at US$28.1 million, including the acquisition of
land and the additional mine services and infrastructure that will be
required. The Bumamani DFS capital cost estimate is higher than that of the
Bumamani PFS, primarily due to inclusion of the P200 area and related field
services and land acquisition costs. Capital costs will be funded from
internally generated cash flows.

Operating cost per tonne mined is expected to be consistent with current Kwale
Operations performance but operating costs per tonne produced are expected to
be higher due to the lower production volumes, a consequence of the lower
heavy mineral grade of the Bumamani Project relative to the Kwale South Dune.

Implementation schedule

Implementation is planned in three stages:
* Stage 1 – (7 months) land acquisition, resettlement and completion of all
construction work, including mining earthworks and installation of new field
services to the P199 mining area.
* Stage 2 – (1 month) relocation of two HMUs, plus associated plant, and
field services from Kwale South Dune to P199, including a 2-week shutdown for
tie-ins followed by commissioning and start-up.
* Stage 3 – following the start-up of P199, field services will be extended
to P200 and the Bumamani pit, as required by the mine plan, and consists of
mining earthworks, relocation and installation of pipelines, booster stations
and power supply lines.
Legal, community and environment

The Company has secured the right to mine the Bumamani Project, following the
recent extension of the boundary of Special Mining Lease 23 (SML 23) to
incorporate that project.  The extension was effected by a formal deed of
variation between the Company’s wholly-owned Kenyan subsidiary, Base
Titanium Limited, and the Government of Kenya acting through the Ministry of
Petroleum and Mining.  In accordance with the terms of SML 23, a royalty of
5% is payable to the Government of Kenya. 

The Resettlement Action Plan for landowners in the Bumamani Project areas has
been approved by the National Environmental Management Authority (NEMA) and is
currently being implemented.  The socio-economic baseline study has confirmed
landowner eligibility and, following an extensive consultation and negotiation
process, compensation rates have been agreed.  Asset valuation is underway
following which, individual compensation agreements will be signed and
relocation implemented.  Broader community consultation programs have been
running for the duration of the current mining operation, assisting with
two-way information sharing and management of stakeholder expectations. 

The key regulatory approval in addition to the SML 23 extension, being that
in respect of the Environmental and Social Impact Assessment (ESIA), was
issued on 23 August 2021 by NEMA following extensive public consultation and
environmental impact assessments.An environmental management plan was also
approved as part of the ESIA. The only other authorisation required to mine
the Bumamani Project is that for silt trap construction as a control measure
for sedimentation with no issues expected in obtaining this authorisation.

Key risks and sensitivities

Completing the necessary land acquisitions at reasonable prices within a
timeframe that does not impact the implementation schedule and commencement of
mining at the Bumamani Project in March 2023, has been identified as a key
risk.  The Company is confident that this risk will not give rise to material
impacts on implementation of the Bumamani Project given progress made to date
and further planned mitigations.  However, given the requirement for
engagement with and action by landowners, residual risk remains.  Inaction on
the part of landowners and any emerging project opposition could stem from,
among other things, the upcoming Kenyan general election in August 2022.  The
inability to commence mining at the Bumamani Project by March 2023 as planned
would impact project economics.

The key sensitivity to the Bumamani Project achieving forecast net positive,
post-tax cash flows is product prices, which are subject to many variables
outside the control of Base Resources and the assumed average product prices
may not reflect realised prices.  If all other financial and operating
outcomes were as forecast, realised prices for the full product suite would
need to be 29% lower than forecast for the Bumamani Project to not be net cash
flow positive. 

Other factors which could negatively affect cash flows include an increase in
operating costs or an increase in land acquisition costs, though these are
moderated by the Company’s experience managing Kwale Operations and the
progress made in the land acquisition process.

Ore Reserves estimates and production and forecast financial information

The information included in this announcement about the estimated Ore Reserves
for the Kwale North Dune and Bumamani deposits has been extracted from Base
Resources’ ASX announcement titled “Maiden Kwale North Dune and Bumamani
Ore Reserves estimates” dated 20 June 2022, which is available at
https://baseresources.com.au/investors/announcements/.  Base Resources
confirms that it is not aware of any new information or data that materially
affects the information included in that announcement and all material
assumptions and technical parameters underpinning the estimates continue to
apply and have not materially changed.

The estimated Ore Reserves for the Kwale North Dune and Bumamani deposits
underpin the Bumamani DFS and the anticipated production and financial
outcomes from that study.  These Ore Reserves estimates were prepared by
Competent Persons in accordance with the requirements of the JORC Code.  The
proportions of Probable and Proved Ore Reserves underpinning the Bumamani DFS
and the anticipated production outcomes are disclosed in the main body of this
announcement.  The material assumptions on which Bumamani DFS production and
financial outcomes disclosed in this announcement are based are also disclosed
in the main body of this announcement.

Forward Looking Statements

The Bumamani DFS is based on technical, economic and other conditions and
information as at the date of this announcement, which may be subject to
change.  Accordingly, the information and conclusions presented in this
announcement should be viewed in this light. Information in this announcement
should also be read in conjunction with other announcements made by Base
Resources to ASX.

Certain statements in or in connection with this announcement contain or
comprise forward looking statements.  Such statements may include, but are
not limited to, statements with regard to capital cost, operating cost, future
production and available grades, product prices, and financial performance and
may be (but are not necessarily) identified by the use of phrases such as
“will”, “expect”, “anticipate”, “believe” and “envisage”.
By their nature, forward looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will occur in
the future and may be outside Base Resources’ control.  Accordingly,
results could differ materially from those set out in the forward-looking
statements as a result of, among other factors, changes in economic and market
conditions, success of business and operating initiatives, changes in the
regulatory environment and other government actions, fluctuations in product
prices and exchange rates and business and operational risk management.  Some
risks that could impact Base Resources' ability to achieve the outcomes or
results expressed or implied by such statements are disclosed in this
announcement. Subject to any continuing obligations under applicable law or
relevant stock exchange listing rules, Base Resources undertakes no obligation
to update publicly or release any revisions to these forward-looking
statements to reflect events or circumstances after today's date or to reflect
the occurrence of unanticipated events.

ENDS.

For further information contact:

 James Fuller, Manager Communications and Investor Relations  UK Media Relations             
 Base Resources                                               Tavistock Communications       
 Tel: +61 (8) 9413 7426                                       Jos Simson and Gareth Tredway  
 Mobile: +61 (0) 488 093 763                                  Tel: +44 (0) 207 920 3150      
 Email: jfuller@baseresources.com.au                                                         

This release has been authorised by the Board of Base Resources.

About Base Resources

Base Resources is an Australian based, African focused, mineral sands producer
and developer with a track record of project delivery and operational
performance.  The Company operates the established Kwale Operations in Kenya
and is developing the Toliara Project in Madagascar.  Base Resources is an
ASX and AIM listed company.  Further details about Base Resources are
available at www.baseresources.com.au

PRINCIPAL & REGISTERED OFFICE
Level 3, 46 Colin Street
West Perth, Western Australia, 6005
Email:  info@baseresources.com.au
Phone: +61 8 9413 7400
Fax: +61 8 9322 8912

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Phone: +61 8 9480 2500

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Phone: +44 20 7523 8000
 



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