Quarterly Activities Report

ASX, AIM and Media Release 30 January 2014 BASE RESOURCES LIMITED QUARTERLY ACTIVITIES REPORT - December 2013 HIGHLIGHTS * Following commissioning of the mining unit and wet concentrator in early October, production at the Kwale Project commenced during the quarter producing 42,472 tonnes of heavy mineral concentrate. * Ilmenite and rutile production through the mineral separation plant commenced in December ready for bulk shipments to commence in February. * Fourth US$20 million drawdown on the Kwale Project Debt Facility completed in October 2013. * Further US$25 million extension to the Kwale Project Debt Facility secured in December 2013 to provide an increase in the working capital buffer during the ramp up phase. Base Resources Limited (ASX & AIM: BSE) ("Base" or the "Company") is pleased toprovide a quarterly production and commissioning update at its Kwale MineralSands Project ("Kwale Project" or the "Project") in Kenya, East Africa. Allwork packages are now complete and operational, with the exception of thezircon circuit of the mineral separation plant ("MSP") which is currentlyundergoing feed commissioning. The Project will commence bulk product shipmentsfrom February 2014. KWALE PROJECT Following commissioning of the dry mining unit ("DMU") and wet concentrator inearly October, the production of heavy mineral concentrate ("HMC") commenced.Optimisation of these circuits continued throughout the quarter resulting in asteady increase in throughput, recoveries, availability and runtime towardsdesign targets. The DMU proved extremely effective with the Caterpillar D11T dozers performingto expectation. Slimes separation and disposal and sand tails stacking hasproceeded and performed according to plan. Wet concentrator production andperformance has been ramping up consistently and is in line with ramp upexpectations. MONTH ORE MINED ORE MINED HMC PRODUCED (dmt) (tph) (dmt) October 105,304 586 4,080 November 275,315 685 10,163 December 451,373 941 28,229 Total Quarter 831,992 783 42,472 Commissioning of the MSP commenced in December with the main focus on balancingand debottlenecking in order to progress the ramp-up to achieve nameplatethroughput. Ilmenite production is on track in terms of both tonnage andquality to achieve the first bulk shipment in February 2014, slightly laterthan planned. Ramp up of rutile production has been slower due to an initialfocus on the front end ilmenite circuit as well as the rectification of anumber of plant bottlenecks. The first bulk rutile shipment is scheduled forMarch. Trucking of bulk ilmenite and rutile to stockpile at the Likoni port facilitycommenced during the quarter and has proceeded without incident. Construction work at the Kwale processing plant is winding down. Over 80% ofthe contractor workforce has demobilised and outstanding activity comprisesmainly remedial work and commissioning of the wet and dry zircon circuits.Zircon production is expected to commence slightly behind schedule in earlyFebruary. Construction works at the Likoni port facility are complete with the60,000 tonne capacity storage shed receiving both ilmenite and rutile product. SAFETY PERFORMANCE With an excess of 20,000 hours of operational readiness training completedprior to start up, the Company's safety performance has been maintained throughthe transition from construction into operations with only minor first aidinjuries reported. The lost time injury frequency rate ("LTIFR") is currently0.18 per million man hours following a lost time injury (the Projects second)during the quarter when a diver, welding underwater, was stung by a stonefish. COMMUNITY AND ENVIRONMENT With construction scaling back, many local workers are being demobilised. Baseis continuing to conduct demobilisation workshops to assist these workers learnskills that will improve their employability. Rehabilitation of construction areas following contractor demobilisation isongoing, with successful revegetation and indigenous tree planting taking placeacross all areas. A road safety campaign was carried out early in the quarter with theinvolvement of the mineral haulage contractor, aimed at sensitising communitiesalong the transport corridor on road safety in preparation for the mineraltransport that commenced in December. Construction of social infrastructure continued during the quarter with theMagaoni Health Centre nearing completion. Construction of three boreholes toprovide clean water to villages near the mine site has commenced afterreceiving regulatory approval in the September quarter. A further programme torehabilitate existing hand-pump boreholes for villages on the western side ofthe mine property is planned for the coming quarter. BUDGET The estimated cost at completion for the Project is currently US$310 million,of which US$300 million had been incurred to 31 December 2013. FINANCING In December 2013, Base executed documentation to extend its existing projectfinance facility agreements by a further US$25 million. The additional projectfinance facility will increase the working capital buffer during the ramp upphase of the Kwale Project. The key terms of the additional facility areconsistent with the exisiting facility. Subsequent to quarter end, the additional US$25 million project financefacility was drawn in January 2014, bringing the total Kwale Project debtfacilities drawn to US$215 million. MARKETING The short term market for titanium dioxide feedstocks continued to show signsof improvement through the December quarter with reports from major pigmentproducers suggesting that pigment demand has improved, and stock levels andplant utilisation rates have started to normalise, through H2, 2013. However,supply of titanium dioxide feedstock into the market through the latter part ofthe December quarter out-paced demand and resulted in further price weaknesstowards year end. Construction indices in the major markets of USA, China and Europe have beentrending strongly positive for the past 6-9 months which suggests that 2014will see further improvement in pigment demand. Price improvement for ilmeniteand rutile in 2014 will be dependent on the pace of stock re-balancing betweenproducers and consumers. Demand for zircon was firm in the major markets of China and USA throughout2013, although some user segments (such as zirconium chemicals) remainedsubdued. Unfavourable economic conditions continued to persist in other majormarkets, Europe in particular, which suppressed demand in all user segments inthose markets for much of the year. Overall, it is expected that global zircon consumption for 2013 has exceeded2012 and this positive trend is expected to continue through 2014. Althoughzircon pricing remained relatively stable for much of 2013, the rate of supplyinto the market through the December quarter exceeded that of demand and forceda drop in pricing by year end. Base has agreed sales schedules with all customers for 2014 and is currentlyfinalising shipping and logistics arrangements for the initial shipments in Q1,2014. CORPORATE In summary, at 31 December 2013: * Cash and cash equivalents were A$33.3 million. * Debt drawn of US$190.0 million. * 561,840,029 shares on issue. * 16,600,000 unlisted options. A full PDF version of this announcement is available at the Company's website:www.baseresources.com.au. 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 Tenement Schedule: TENEMENT NUMBER INTEREST LOCATION Special Mining Licence 23 100% Kwale - Kenya Exploration Licence 173 100% Kwale North - Kenya 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 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