Annual Financial Report

ASX, AIM and Media Release 30 August 2013 BASE RESOURCES LIMITED ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED 30 JUNE 2013 Base Resources Limited (ASX:BSE, AIM:BSE) ("Base") is pleased to provide thefollowing extracts from the Company's Annual Financial Report for the year ended 30 June2013, 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 The Company has made significant progress in the development of the KwaleMineral Sands Project during the year with the overall development currentlyapproximately 95% complete. The Kwale Project is expected to commenceproduction of heavy mineral concentrate in Q3 2013 and finished products in Q42013 with first bulk shipments to commence in the 2nd half of Q4 2013. A number of the work packages are now complete including the power line, accessroad, camp and the mining fleet is commissioned and fully operational. The Mukurimudzi dam diversion channel was closed in April ahead of the wetseason and now holds 5.9 gigalitres of water, which is more than sufficient forthe first year's production requirements. Construction of the main embankmentto the final elevation is now complete and the spillway construction is in itsfinal stages. Onshore construction works of the Likoni port facility are well advanced withthe storage shed complete and administration buildings progressing. Followingconstruction and trial assembly in South Africa, the ship loader is undergoingfinal erection on the wharf platform and is on target for completion prior tothe first planned bulk shipment in the December quarter of 2013. The Mineral Separation Plant ("MSP") completion is expected to be delayed byapproximately 4 weeks as a consequence of slower than anticipated structural,mechanical and pipework installation. In response, the MSP completion andramp-up schedule has been revised to prioritise the ilmenite and rutilecircuits ahead of the zircon circuit in order to minimise the cashflow impactsof the delay. Safety performance continues to be an area of intense focus and effort withparticular emphasis on system development, training and supervisoraccountability. The Lost Time Injury frequency rate for the constructionproject is currently 0.2 per million man hours with over 5.6 million hoursworked since the last (and only) lost time injury in July 2012. The short term market for titanium dioxide feedstocks showed some signs ofimprovement through the later part of the 2013 financial year with some of themajor pigment producers reporting a significant reduction in final productstocks. Continued strength in the US housing market together with improvementin the Chinese housing sector provides support for market conditions tocontinue improving through the second half of 2013. However, ilmenite andrutile stock levels in the supply chain are considered likely to maintainsubdued pricing for the remainder of 2013. Market conditions for zircon remained firm through the June quarter of 2013.Demand from Chinese customers, in particular, increased significantlythroughout the first half of 2013 calendar year. Some of the major zirconproducers, including Iluka Resources Limited, managed to reduce zircon stocksthrough the first half of the 2013 calendar year and have advised customersthat the availability of zircon for prompt sales is diminishing. While zircondemand through the September quarter, and the remainder of the second half of2013 calendar year, is expected to remain firm, a recovery in pricing will bedependent on the pace of stock re-balancing throughout the supply chain. The long term outlook for all mineral sands products remains very positive.Enquiry levels for Base's products remains strong and recently Base has enteredthree new, three year, take or pay offtake agreements with leading Chineseofftakers which secure a large portion of the previously uncontracted salesvolumes for ilmenite and zircon. In October 2012, in response to an increase in the capital cost estimate forthe Kwale Project following the completion of the detailed design, the Companycompleted a A$40 million share placement and entitlement offer in order to meetthe additional funding requirements. This funding completed Base's equitycontribution for the Kwale Project and allowed Base to commence utilisation ofthe Kwale Project debt facilities. The first drawdown on the Kwale Project debt facilities was completed inNovember 2012 with a further two drawdowns prior to year end. Total debt drawnat 30 June is US$170 million, inclusive of the original US$20 million costoverrun facility. A further US$20 million extension to the cost overrunfacility has been secured but remains undrawn, with utilisation subject toreceiving the consent of the Commissioner of Mines & Geology to the resultantextension of security interests. As a consequence of the anticipated delay in the start-up of the MSP, thetiming of product shipments, continued subdued product prices expected in theDecember quarter of 2013 and an increased forecast capital cost of US$305million, Base considers it prudent to increase the funding buffer available forworking capital and will be pursuing a further extension of the existing debtfacilities. In July 2013, Malcolm Macpherson was appointed to the Board, bringingsignificant additional mineral sands, African and corporate developmentexperience to the company. The appointment of Mr Macpherson comes as part ofour development of a team at all levels of the organization with the requisitecapability to deliver on the significant opportunities in front of us. 2. FINANCIAL POSITION The net assets of the Group have increased by A$48 million from A$170 millionat 30 June 2012 to A$218 million at 30 June 2013. This net increase isprimarily due to the A$40 million capital raising completed in October 2012 tomeet the additional funding of the development of the Kwale Project. The Group's working capital, being current assets less current liabilities, hasdecreased from A$101 million at 30 June 2012 to A$88 million at 30 June 2013,largely due to the use of funds in the development of the Kwale Project. In June 2013, the third drawdown of US$46 million was completed on the KwaleProject debt facilities. Total debt drawn at 30 June is US$170 million,inclusive of the original cost overrun facility. The Company had cash reservesof A$98 million at 30 June. A further US$20 million extension to the costoverrun facility which was finalised in May 2013 remains undrawn, withutilisation subject to receiving the consent of the Commissioner of Mines andGeology to the resultant extension of security interests. In the Directors' opinion there are reasonable grounds to believe that theGroup will be able to pay its debts as and when they become due and payable. 3. CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME For the Year For the Year Ended Ended 30 June 2013 30 June 2012 A$ A$ Other income 14,751 - Directors' and related fees (2,255,816) (1,518,476)Employee benefits expense (1,135,430) (415,213)Consultant fees (1,504,874) (1,452,419)Administrative expense (1,639,093) (1,056,482)Accounting, audit and related services fees (395,358) (412,094)Share based payment expense (462,370) (312,610)Depreciation (96,285) (35,627)Write down of exploration costs - (394,114)Other expenses from ordinary activities (199,988) (142,543)LOSS BEFORE FINANCING INCOME AND INCOME TAX (7,674,463) (5,739,578)Financing income, net 1,017,446 6,079,031(LOSS) / PROFIT BEFORE INCOME TAX (6,657,017) 339,453Income tax benefit / (expense) (4,148) (8,240)NET (LOSS) / PROFIT FOR THE YEAR (6,661,165) 331,213 Other Comprehensive IncomeItems that may be reclassified subsequently toprofit or loss: Foreign currency translation differences - 16,461,585 (372,255) foreign operationsTOTAL OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 16,461,585 (372,255)TOTAL COMPREHENSIVE INCOME/ (LOSS) FOR THE YEAR 9,800,420 (41,042) NET(LOSS)/EARNINGS PER SHARE Cents CentsBasic (loss)/earnings per share (cents per share) (1.25) 0.08Diluted (loss)/earnings per share (cents per share) (1.25) 0.08 4. CONSOLIDATED STATEMENT OF FINANCIAL POSITION For the Year For the Year Ended Ended 30 June 2013 30 June 2012 A$ A$ CURRENT ASSETSCash and cash equivalents 98,122,682 105,805,685Other receivables 6,131,329 1,530,313Other 2,219,196 2,019,898Total current assets 106,473,207 109,355,896 NON CURRENT ASSETSCapitalised exploration and evaluation 1,980,899 653,514Capitalised mine development 281,390,117 62,132,204Property, plant and equipment 12,259,327 1,699,808Capitalised borrowing costs - 7,506,115Restricted cash 5,478,394 -Other receivables 16,228,748 2,292,213Other - 36,553Total non-current assets 317,337,485 74,320,407TOTAL ASSETS 423,810,692 183,676,303 CURRENT LIABILITIESTrade and other payables 17,396,187 7,974,515Provisions 712,230 208,966Total current liabilities 18,108,417 8,183,481 NON-CURRENT LIABILITIESOther payables 1,088,900 -Borrowings 178,850,990 -Provisions 2,162,752 714,990Deferred revenue 5,474,500 4,948,046Total non-current liabilities 187,577,142 5,663,036TOTAL LIABILITIES 205,685,559 13,846,517 NET ASSETS 218,125,133 169,829,786 EQUITYIssued capital 213,668,499 175,718,629Reserves 17,127,328 120,686Accumulated losses (12,670,694) (6,009,529)Total equity 218,125,133 169,829,786 5. CONSOLIDATED STATEMENT OF CHANGES IN EQUITY Issued Accumulated Share based Foreign Total capital losses payment currency reserve translation reserve A$ A$ A$ A$ A$ BALANCE AT 1 JULY 2011 21,882,774 (6,340,742) 799,630 (726,172) 15,615,490Profit for the year - 331,213 - - 331,213Other comprehensive loss - - - (372,255) (372,255)Total comprehensive - 331,213 - (372,255) (41,042)profit / (loss) for theyear Transactions with owners recognised directly in equityShares issued during the 153,835,855 - - - 153,835,855period, net of costsShare based payments - - 419,483 - 419,483BALANCE AT 30 JUNE 2012 175,718,629 (6,009,529) 1,219,113 (1,098,427) 169,829,786 BALANCE AT 1 JULY 2012 175,718,629 (6,009,529) 1,219,113 (1,098,427) 169,829,786Loss for the year - (6,661,165) - - (6,661,165)Other comprehensive loss - - - 16,461,585 16,461,585Total comprehensive - (6,661,165) - 16,461,585 9,800,420profit / (loss) for theyear Transactions with owners recognised directly in equityShares issued during the 37,725,870 - - - 37,725,870period, net of costsShares issued on exercise 224,000 - - - 224,000of optionsShare based payments - - 545,057 - 545,057BALANCE AT 30 JUNE 2013 213,668,499 (12,670,694) 1,764,170 15,363,158 218,125,133 6. CONSOLIDATED STATEMENT OF CASH FLOWS For the Year For the Year Ended Ended 30 June 2013 30 June 2012 A$ A$CASH FLOWS FROM OPERATING ACTIVITIESPayments in the course of operations (6,503,805) (5,784,659)Deferred revenue received - 4,948,046Income tax paid (Kenya) - (8,240)Net cash generated by/(used in) operating activities (6,503,805) (844,853) CASH FLOWS FROM INVESTING ACTIVITIESInterest receipts 1,961,443 4,667,662Payments for exploration and evaluation (1,239,367) (3,436,361)Purchase of property, plant and equipment (11,349,156) (1,642,214)Proceeds on disposal of property, plant & equipment 4,028 -Payments for mine development (219,044,275) (46,109,762)Payments to restricted cash (5,478,394) -Security deposits 46,808 (680,700)Net cash used in investing activities (235,098,913) (47,201,375) CASH FLOWS FROM FINANCING ACTIVITIESProceeds from issue of shares 40,000,000 162,304,403Payment of share issue costs (2,274,130) (8,468,549)Proceeds from exercise of share options 126,000 -Proceeds from debt financing 186,133,000 -Debt finance facility fees (1,872,822) (7,434,020)Net cash provided by financing activities 222,112,048 146,401,834 Net increase in cash held (19,490,670) 98,355,606Cash at beginning of year 105,805,685 7,284,459Effect of exchange fluctuations on cash held 11,807,667 165,620CASH AT THE END OF THE YEAR 98,122,682 105,805,685 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 Tavistock Communications (UK Media Relations)Jos Simson / Jessica Fontaine / Emily FentonPhone: +44 (0)20 7920 3157 Cannings Purple (Australian Media Relations)Annette Ellis / Warrick HazeldineEmail: [email protected]/ [email protected]: +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 DirectorMichael Macpherson, Non-Executive DirectorWinton Willesee, Non-Executive Director/ Company Secretary Principal & Registered Office: Contacts:Level 1 Email: [email protected] Kings Park Road Phone: +61 (0)8 9413 7400West Perth WA 6005 Fax: +61 (0)8 9322 8912