Quarterly Activities Report

ASX, AIM and Media Release 30 July 2013 BASE RESOURCES LIMITED QUARTERLY ACTIVITIES REPORT - June 2013 Highlights * Kwale Project is 87% complete with mining and concentrate production scheduled to commence in Q3 2013. * Commissioning of the Mineral Separation Plant expected to be delayed by 4 weeks into the 4th quarter. * Power line and substation completed and energised. * Mukurumudzi Dam embankment completed and holding more than sufficient water for the first year's production requirements. * Entire operational management team in place. * Third US$46 million drawdown on the Kwale Project Debt Facility completed. Base Resources Limited (ASX & AIM: BSE) ("Base") has made further significantprogress in the development of the Kwale Project during the quarter, completingthe power line, closing the Mukurumudzi Dam embankment, and advancing overalldevelopment to 87% complete. KWALE PROJECT IMPLEMENTATION The June quarter has seen substantial construction activity, most notably onthe process plant and port facilities. With the overall development 87%complete, the Kwale Project is expected to commence production of heavy mineralconcentrate ("HMC") in Q3 2013 and finished products in Q4 2013 with first bulkshipments to commence in the 2nd half of Q4 2013. Project elements The development approach for the Kwale Project is for the project to beseparated into six discrete contract packages, as well as a number of smallerowner's projects, with an integrated management team overseeing their executionand integration. This approach has been adopted to ensure that "best of breed"expertise is applied to what are technically diverse and effectively separateproject elements and risk is more effectively minimized and managed. The sixcontract packages, each covered by an EPCM (or EPC for CP3) contract and theirstatus are: CP1 - Processing Plants (Ausenco) * Overall progress is at 84% complete. * The mining unit and concentrator are on schedule to commence HMC production during Q3 2013. * The Mineral Separation Plant ("MSP") completion is expected to be delayed by approximately 4 weeks as a consequence of slower than anticipated structural, mechanical and pipework installation. * In response, the MSP completion and ramp-up schedule has been revised to prioritise the ilmenite and rutile circuits ahead of the zircon circuit in order to minimise the cashflow impacts of the delay. CP2 - Marine Facilities (WSP Group) * The overall progress to date is 90% complete and on target for delivery prior to the first planned bulk shipment in Q4 2013. * Onshore construction works are well advanced with the storage shed complete and administration buildings progressing. * Following construction and trial assembly in South Africa, the ship loader arrived in Mombasa and final erection on the wharf platform is underway. CP3 - Power Line (CG Global) * The project is complete, commissioned and providing power for construction. CP4 - Mukurumudzi Dam (Wave) * Overall delivery is 89% complete. * The water capacity in the dam is currently at 5.9GL, which is more than sufficient for the first year's production requirements. * Construction of the main embankment to the final elevation is now complete. * The spillway construction is in its final stages. CP5 - Tailings Storage Facility (Wave) * Overall progress at 79% complete. * While construction works are behind schedule, forecast completion date is still in advance of the required date for plant commissioning. CP-6 - Access Road, Construction Camp and Shared Facilities (Howard Humphries) * The road construction and A14 road junctions are complete. * Phase two of the construction camp and associated infrastructure is complete with 695 people currently accommodated. Owners Projects In addition, a suite of owner's projects are being managed directly by the Baseoperations team. The dozer trap mining unit is on site with assembly andcommissioning on target for completion in Q3. The full mobile fleet has beendelivered, commissioned and is in operation in construction support andtraining activities. The full senior operations management team are in place and 90% of alloperational employees are either in-place or have accepted positions.Pre-commissioning training is well advanced. Safety Performance 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 project iscurrently 0.2 per million man hours with over four million hours worked sincethe last (and only) lost time injury in July 2012. Community and Environment The Base Labour Recruitment Centre has now registered over 12,000 job seekersfrom Kwale and Likoni which has been used to recruit much of the constructionand operational workforces. Around 2,200 people were employed on the project atthe peak of construction activity with approximately 90% of these being Kenyannationals, of which 40% were from the local communities surrounding theproject. As Project contractors reach completion of their packages, planning isunderway to manage the demobilisation of workers in these local communities. Community infrastructure works continued during the quarter with rehabilitationwork on Muslim Primary School in Likoni. Following completion of the MagaoniSecondary School in Q1 2013, there are now 45 students enrolled with Phase IIworks scheduled for Q3 2013. The proposed Miembeni feeder school has beenapproved by the local authorities pending identification of a suitable, centrallocation to provide optimal access for the community. The community have beenrequested to provide land for this purpose. Construction of Phase I of theMagoni health centre has commenced with completion expected in Q4 2013. Threeexisting drinking water boreholes have been rehabilitated and applications fordrilling of three additional boreholes in villages near the mine site have beensubmitted. This infrastructure will improve water quality in the area andprovide more reliable supplies. Bwiti Dispensary was officially opened by theHon. Mwashetani, MP for Lunga Lunga Division, with provision of medicines byBase. Infrastructure projects now complete include four schools, a community hall,three water schemes, a dispensary as well as road and access improvements. Afurther primary school and health dispensary will be constructed at locationsagreed in conjunction with the Mining Project Liaison Committee and incollaboration with local communities. Budget The anticipated delay in the completion of the MSP and increases in the cost ofthe ship loader have been the principal contributors to an increase in thetotal forecast capital cost for the project of around 2% to US$305 million. To 30 June, US$249 million has been incurred. Financing In June, the third drawdown of US$46 million was completed on the Kwale Projectdebt facilities. Total debt drawn at 30 June is US$170 million, inclusive ofthe original $20 million cost overrun facility. A further $20 million extensionto the cost overrun facility which was finalised early in the June quarterremains undrawn, with utilisation subject to receiving the consent of theCommissioner of Mines & Geology to the resultant extension of securityinterests which we have been advised to expect shortly. As a consequence of the anticipated delay in the start-up of the MSP, thetiming of shipments, continued subdued product prices expected in Q4 2013 andthe increase in forecast capital cost, Base considers it prudent to increasethe funding buffer available for working capital and will be pursuing a furtherextension of the existing debt facilities. Marketing The short term market for titanium dioxide feedstocks showed some signs ofimprovement through the June quarter with some of the major pigment producersreporting a significant reduction in final product stocks. Continued strengthin the US housing market together with improvement in the Chinese housingsector provides support for market conditions to continue improving through thesecond half of 2013. However, ilmenite and rutile stock levels in the supplychain are considered likely to maintain subdued pricing for the remainder of2013. Market conditions for zircon remained firm through the June quarter. Demandfrom Chinese customers, in particular, increased significantly throughout thefirst half of 2013. Some of the major zircon producers, including IlukaResources Limited, managed to reduce zircon stocks through the first half of2013 and have advised customers that the availability of zircon for promptsales is diminishing. While zircon demand through the September quarter, andthe remainder of the second half of 2013, is expected to remain firm, arecovery in pricing will be dependent on the pace of stock re-balancingthroughout the supply chain. The long term outlook for all mineral sands products remains very positive.Enquiry levels for Base's products remains strong and Base is now well advancedin finalising additional off-take contracts for both ilmenite and zircon. Kenyan Exploration Projects As part of the Kwale Project acquisition, Base acquired an option to purchasethree further exploration projects - Kilifi, Mambrui and Vipingo. As reportedpreviously, on 28 December 2012, the then Kenyan Minister of Environment &Mineral Resources published a gazette notice purporting to cancel the threeexploration licenses covering these projects. The Company has taken theappropriate legal action to protect the rights and has received a court orderstaying the cancellation pending a hearing. Base continues to pursue the matterand is confident of a positive outcome. Exploration activity during the quarter was focused on enhancing the KwaleNorth Dune resource estimate. Drilling comprised 5,474 meters in 111 holes totest depth, grade, geo-metallurgical domains and assemblage. Analysis of theresults is nearing completion and an updated resource estimate is scheduled forcompletion in the September quarter .The North Dune is not currently includedin the Kwale Project. Corporate In summary, at 30 June 2013: * Cash and cash equivalents were A$98.1 million. * Debt drawn of US$170.0 million. * 561,840,029 shares on issue. * 16,600,000 unlisted options. A full PDF of the announcement including recent images depicting thesignificant progress achieved at the Kwale Project is available at theCompany'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 Caspar Shand-KyddPhone: +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]@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 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 Fax: +61 (0)8 9322 8912WA 6005 About Base Resources Base Resources Limited is an ASX and AIM listed (BSE) resources developer, witha portfolio of assets in Africa. Its flagship project is the Kwale MineralSands Project ("Kwale") in Kenya, East Africa. Kwale is fully funded and withconstruction nearing completion, the project is on schedule to commenceproduction and shipment of a high-value assemblage of rutile, ilmenite andzircon minerals in the latter half of 2013. Kwale is expected to generate a cash surplus of more than US$1 billion over its13-year mine life. With a front-ended production profile forecast to deliver anenviable cash flow of more than US$500 million in the first 5 years ofoperations, Kwale will provide a strong foundation for Base's emergence as asignificant global resources company.