22nd Sep 2015 10:04
LONDON (Alliance News) - Base Resources Ltd on Tuesday said its pretax loss widened in the recently completed financial year despite reporting a substantial rise in revenue as a result of the company completing its first full year of production, which was offset by a large pile of debt adding to its financing costs.
The miner reported a USD16.0 million pretax loss in the year ended June 30, widening from the USD14.0 million loss booked a year earlier despite revenue leaping to USD145.5 million from USD29.1 million.
The loss widened primarily due to finance costs rising to USD29.3 million from only USD4.4 million the year before. Profit before tax and finance costs came in at USD13.3 million, compared to a USD9.6 million loss a year ago.
Amid the significant rise in revenue caused by the company's first full year of production, its gross profit rose to USD30.8 million from USD3.4 million a year earlier.
Base Resources flagship asset is the Kwale mineral sands project in Kenya, which entered production in late 2013. The company produces ilmenite, zircon and rutile from the operation.
Ilmenite production in the year rose to 427,655 tonnes from 165,352 tonnes, whilst rutile production increased to 71,537 tonnes from 24,216 tonnes. Zircon production also experienced a lift to 22,416 tonnes from only 4,486 tonnes a year earlier.
Base said rutile production in the year was ahead of its expectations as it aims to get production up to 80,000 tonnes per year before the end of the 2015 calendar year. Ilmenite production was "well above design capacity" and zircon production "improved steadily throughout the year".
As a result, ilmenite sales rose to 373,046 tonnes from 138,829 tonnes, and rutile sales increased to 76,801 tonnes from 14,005 tonnes. Zircon sales followed suit and rose to 21,287 tonnes from 2,704 tonnes.
The primary uses of ilmenite and zircon is for feed stock for the production of titanium dioxide pigment, which is then used in a variety of applications including the manufacture of paint, sunscreen and food colouring.
Base said pigment demand in 2015 and 2016 is currently expected to grow at a "modest rate" of 3% per year, whilst prices for ilmenite and rutile to be "largely dependent on developments within the pigment market".
"Ilmenite prices stabilised in the latter half of 2014 with reports of price increase being achieved by Chinese domestic ilmenite producers. However, increased pigment competition through late 2014 and into 2015 saw renewed pressure on ilmenite prices and is likely to see ilmenite prices remain at low levels through until at least the peak demand season in mid-2016," said the company in a statement.
Rutile prices have seen gradual erosion through the 2015 financial year and this pricing pressure is expected to also remain through until at least mid-2016, it added.
Total debt at the end of the financial year stood at USD292.6 million, rising considerably from USD232.5 million at the end of June 2014. The rise in debt follows on from the company realigning its debt repayments to match the start of sales from the Kwale project, which resulted in the company deferring debt payments for a six month period.
"Base is currently in the process of seeking to refinance the Kwale project debt facility, which would deliver a repayment profile more appropriate to the cash flow forecast of the Kwale project. Confirmations of credit approval have been received from the majority of lenders, with remaining lenders credit approval processes in progress. Completion of the refinancing is subject to the agreement and execution of final terms and documentation," the company said.
Base shares were down 6.7% to 3.50 pence per share on Tuesday morning.
By Joshua Warner; [email protected]; @JoshAlliance
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