Annual Financial Report

ASX, AIM and Media Release 16 September 2014 BASE RESOURCES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2014 Base Resources Limited (ASX:BSE, AIM:BSE) ("Base") is pleased to provide thefollowing extracts from the Company's Annual Report for the year ended 30 June2014, being the: 1. Review of Operations 2. Financial Position 3. Consolidated Statement of Profit or Loss and Other Comprehensive Income 4. Consolidated Statement of Financial Position 5. Consolidated Statement of Changes in Equity 6. Consolidated Statement of Cash Flows These extracts should be read with reference to the notes contained in the fullversion of the Annual Report, a copy of which is available at the Company'swebsite: www.baseresources.com.au. 1. REVIEW OF OPERATIONS During 2014, the Group successfully completed development of the Kwale MineralSands Project at a cost of US$310 million. Mining and heavy mineral concentrateproduction commenced in October 2013 followed by the first ilmenite and rutilefinished products in December 2013. Zircon production commenced in February2014 at the same time as the first bulk shipment of 20,000 tonnes of ilmenitewas exported from our owned and operated Likoni port and ship loading facility.Bulk rutile and containerised zircon sales began in April 2014. Safety performance throughout the construction project was exemplary with 6.5million manhours worked injury free and only two LTI's for the entire project.This achievement is even greater considering that at the peak there were up to2,400 workers on site with 1,000 of these recruited from the local community,many of whom had never had a job before. Heading into production safetycontinued to be an area of intense focus with over 26,000 hours invested inoperational readiness training prior to start up. The Lost Time Injuryfrequency rate for the 12 months to June 2014, covering both the constructionproject and commencement of operations, is 0.3 per million man hours, wellbelow Australian mining industry averages. Ilmenite production has reached design capacity and is exceeding expectations,whilst rutile and zircon production is consistent with a planned twelve monthramp-up to design capacity. Further plant modifications and optimisation areexpected to increase rutile and zircon production to design output over thebalance of the 2015 financial year. The Group completed six bulk shipments of ilmenite, totalling more than 138,000tonnes, and two bulk shipments of rutile of approximately 14,000 tonnes duringthe year. The Group completed 12 individual shipments of containerised zirconduring the year, totalling approximately 2,700 tonnes. The first containershipment of rutile was made in July 2014 and this will be followed by a regularcontainer shipping schedule. All three products continue to be delivered to ouroff-take partners on a regular basis as well as the occasional sale on the spotmarket where surplus volume permits. SUMMARY OF PHYSICAL DATA 2014 Ore mined (dmt) 4,532,154 Heavy mineral concentrate produced (dmt) 296,750 Production (dmt) Ilmenite 165,352 Rutile 24,216 Zircon 4,486 Sales (dmt) Ilmenite 138,829 Rutile 14,005 Zircon 2,704 The global titanium dioxide pigment industry continued to show signs ofimprovement through the latter part of the financial year. Recent feedback fromChina suggests that pigment demand had improved, and prices achieved by Chinesepigment producers commenced a gradual uplift during the final quarter.Inventories of titanium dioxide feedstock are being gradually worked down, butare likely to remain at elevated levels for the remainder of the 2014 calendaryear. Pricing of high grade titanium dioxide feedstock appeared to stabilisethrough the latter half of the financial year and the Group now expects pricesto remain relatively flat for the remainder of 2014. Ilmenite prices continuedto be under pressure through the financial year, but recent reports of reducedoutput in some of the main ilmenite-producing regions may indicate that priceswill stabilise at, or near, current levels. Zircon trade activity continued to firm through the financial year. Stocks ofzircon held by producers continued to be run down and prices have remainedrelatively flat since the early stages of the calendar year 2014. There areincreasing signs that the zircon market has reached the bottom of the cycle andis turning towards a firm recovery. With this expected strength in the zirconmarket over the coming months there may be support for zircon price improvementtowards the beginning of 2015. On the corporate front, Malcolm Macpherson was appointed to the Board in July2013, bringing significant additional mineral sands, African and corporatedevelopment experience to the company. The appointment of Mr Macpherson comesas part of our development of a team at all levels of the organization with therequisite capability to deliver on the significant opportunities in front ofus. 2. FINANCIAL POSITION The net assets of the Group have decreased by $15 million from $218 million at30 June 2013 to $203 million at 30 June 2014, due to the net loss in the year. In October 2013, a US$20 million extension of the existing cost overrunfacility was drawn down. Additionally, the Group extended its existing projectfinance facility agreements by an additional US$25 million in order to increasethe working capital buffer during the ramp up phase of the Kwale Mineral SandsProject. These funds were drawn down in January 2014. Total debt drawn at 30June 2014 is US$215 million and the Group has cash reserves of $21 million. The Group's working capital, being current assets less current liabilities, hasdecreased from $88 million at 30 June 2013 to $15 million at 30 June 2014,largely due to the use of funds to complete the development of the KwaleProject and scheduled project debt repayments commencing from December 2014. The Group is currently seeking to restructure the Kwale Project FinanceFacility to reflect the delay in first sales from the schedule originallycontemplated when the facility was arranged in 2011. Proposed terms for thedebt restructure have been commercially agreed with all Lenders and areprogressing through Lender credit approval processes. Under the terms of therestructure, all principal repayments will be deferred by six months with somere-profiling to suit future cash flows. If the restructure is implemented asproposed, the first principal repayment will be deferred from December 2014 toJune 2015 and the current portion of borrowings will be reduced from $50million to $12 million. In the Directors' opinion there are reasonable grounds to believe that theGroup will be able to pay its debts as and when they become due and payable. 3. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Year For the Year Ended Ended 30 June 2014 30 June 2013 A$000s A$000s Sales revenue 29,115 - Cost of sales (14,831) -Amortisation and depreciation (9,031) -Royalties (1,875) - Profit from operations 3,378 - Corporate and external affairs (8,706) (7,058)Community development costs (2,298) -Product marketing (738) (400)Other expenses (1,261) (217) Loss before financing income and income tax (9,625) (7,675) Financing (costs) / income (4,351) 1,017Loss before income tax (13,976) (6,658) Income tax expense (94) (4) Net loss for the year (14,070) (6,662) OTHER COMPREHENSIVE INCOMEItems that may be reclassified subsequently to profit or loss:Foreign currency translation differences - (2,031) 16,462 foreign operationsTotal other comprehensive (loss) / income (2,031) 16,462 for the yearTotal comprehensive (loss) / income for the (16,101) 9,800 year NET (LOSS) / EARNINGS PER SHARE Cents CentsBasic (loss)/ earnings per share (cents per share) (2.50) (1.25)Diluted (loss)/ earnings per share (cents per share) (2.50) (1.25) 4. CONSOLIDATED STATEMENT OF FINANCIAL POSITION As at As at 30 June 2014 30 June 2013 A$000s A$000s CURRENT ASSETSCash and cash equivalents 20,945 98,123Trade and other receivables 33,265 6,131Inventories 20,049 60Other current assets 3,007 2,159Total current assets 77,266 106,473 NON CURRENT ASSETSCapitalised exploration and evaluation 1,120 1,981Capitalised mine development - 281,390Property, plant and equipment 386,153 12,259Inventories 1,106 -Restricted cash 5,406 5,478Other receivables - 16,229Total non-current assets 393,785 317,337 TOTAL ASSETS 471,051 423,810 CURRENT LIABILITIESTrade and other payables 11,322 17,396Borrowings 49,887 -Provisions 1,180 712Total current liabilities 62,389 18,108 NON-CURRENT LIABILITIESOther payables - 1,089Borrowings 177,667 178,851Provisions 21,696 2,163Deferred revenue 5,181 5,474Other liability 1,106 -Total non-current liabilities 205,650 187,577 TOTAL LIABILITIES 268,039 205,685 NET ASSETS 203,012 218,125 EQUITYIssued capital 213,669 213,669Reserves 16,085 17,128Accumulated losses (26,742) (12,672)Total equity 203,012 218,125 5. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued Accumulated Share Foreign Total losses based currency capital payment reserve translation reserve A$000s A$000s A$000s A$000s A$000s Balance at 1 July 2012 175,719 (6,010) 1,219 (1,098) 169,830Loss for the year - (6,662) - - (6,662)Other comprehensive profit - - - 16,462 16,462Total comprehensive profit - (6,662) - 16,462 9,800/ (loss) for the year Transactions with owners, recognised directly in equity Shares issued during the 37,726 - - - 37,726 period, net of costsShares issued on exercise 224 - - - 224 of optionsShare based payments - - 545 - 545Balance at 30 June 2013 213,669 (12,672) 1,764 15,364 218,125 Balance at 1 July 2013 213,669 (12,672) 1,764 15,364 218,125Loss for the year - (14,070) - - (14,070)Other comprehensive loss - - - (2,031) (2,031)Total comprehensive loss - (14,070) - (2,031) (16,101) for the year Transactions with owners, recognised directly in equity Share based payments - - 988 - 988Balance at 30 June 2014 213,669 (26,742) 2,752 13,333 203,012 6. CONSOLIDATED STATEMENT OF CASH FLOWS For the Year For the Year Ended Ended 30 June 2014 30 June 2013 A$000s A$000sCASH FLOWS FROM OPERATING ACTIVITIESReceipts from customers 22,442 -Payments in the course of operations (26,087) (6,504)Other 12 -Net cash used in operating activities (3,633) (6,504) CASH FLOWS FROM INVESTING ACTIVITIESInterest receipts 355 1,961Payments for exploration and evaluation (199) (1,239)Purchase of property, plant and equipment (5,137) (11,349)Proceeds on disposal of property, plant - 4 and equipmentPayments for mine development (111,673) (219,044)Research and development incentive claim 5,030 - receivedPayments to restricted cash - (5,478)Security deposits (348) 47Net cash used in investing activities (111,972) (235,098) CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares - 40,000Payment of share issue costs - (2,274)Proceeds from exercise of share options - 126Proceeds from debt financing 48,654 186,133Debt finance service costs and facility (9,991) (1,873) feesNet cash provided by financing activities 38,663 222,112 NET INCREASE (DECREASE IN CASH HELD) (76,942) (19,490) Cash at beginning of year 98,123 105,806Effect of exchange fluctuations on cash held (236) 11,807Cash at end of year 20,945 98,123 ENDS For further enquiries contact: Base Resources LimitedTim CarstensManaging DirectorEmail: [email protected]: +61 (0)8 9413 7400 RFC Ambrian Limited (Nominated Adviser and Broker)As Nominated Adviser As BrokerAndrew Thomson or Trinity McIntyre Jonathan WilliamsPhone: +61 (0)8 9480 2500 Phone: +44 20 3440 6800 Africapractice (East Africa) (Kenyan Media Relations)David Maingi/ James Njuguna/Joan KimaniPhone: +254 (0)20 239 6899Email: [email protected] Tavistock Communications (UK Media Relations)Jos Simson / Emily Fenton / Nuala GallagherPhone: +44 (0) 207 920 3150 Cannings Purple (Australian Media Relations)Annette Ellis / Warrick HazeldineEmail: [email protected]@canningspurple.com.auPhone: +61 (0)8 6314 6300 Corporate Details: Board of Directors: Andrew King Non-Executive ChairmanTim Carstens Managing DirectorColin Bwye Executive DirectorSam Willis Non-Executive DirectorMichael Anderson Non-Executive DirectorTrevor Schultz Non-Executive DirectorMalcolm Macpherson Non-Executive DirectorWinton Willesee Company Secretary Principal & Registered Office: Contacts:Level 1 Email: [email protected] Kings Park Road Phone: +61 (0)8 9413 7400West Perth Fax: +61 (0)8 9322 8912WA 6005