Quarterly Activities Report

ASX, AIM and Media Release 25 July 2014 Quarterly Activities Report June 2014 HIGHLIGHTS: * Bulk rutile and containerised zircon shipments commenced in April * Design through puts, plant availability and runtime now being consistently achieved * Recoveries progressively improving towards design targets with ongoing implementation of process design enhancements and optimization * No lost time injuries occurred * First quarter of positive operating cash flows * Achievement of "Commercial Production" for accounting purposes with effect from 1 April Base Resources Limited (ASX & AIM: BSE) ("Base") ("Base" or the "Company") ispleased to provide a quarterly production and ramp-up update at its KwaleMineral Sands Operations ("Kwale Operations" ) in Kenya, East Africa. Followingthe completion of commissioning in the March quarter, the focus has been ondebottlenecking and metallurgical optimisation of the mineral separation plant("MSP") circuits towards achieving design throughput, recoveries, availabilityand run-time. With significant success achieved in relation to runtime andthroughput, the focus is now firmly on the progressive improvement inrecoveries. KWALE OPERATIONS Mining activities delivered steadily increasing feed grades as the mine pathapproached the central, high grade, section of the Central Dune. Tonnages wererestricted due to a planned program of rectifying the concentrator spiralcollection launders under a defects liability claim. This was, however,compensated for by the higher grade areas which maintained heavy mineralconcentrate output to plan with the mined ore grade increasing from 6.4% to8.1% heavy mineral over the quarter. This rectification work was successfullycompleted by the end of June. Heavy Mineral Concentrate ("HMC") production continued to increase over thequarter as a function of higher ore grades and improved recoveries. ValuableHeavy Mineral ("VHM") recoveries in the concentrator improved by 3.5% over theprevious quarter to 93.8%. Slime and sand deposition continued to operate according to plan. By the end ofthe quarter, stacking of the second 5 metre sand wall lift was underway. Excellent rains during May filled the Mukurumudzi Dam to its 8.6GL capacityand, at the end of June, the spillway was still flowing. Mineral separation plant ("MSP") throughput of 152,777 tonnes was 38% above theprevious quarter's 110,860 tonnes and feed rates were consistently at designlevels of 80tph during the quarter. MSP availability increased from 72% to 87%over the quarter, providing a stable operation on which to undertake furtherrefinement testwork and plant optimisation over the next few quarters. Ilmenite production has reached design capacity and is exceeding expectations.Zircon production is consistent with a planned twelve month ramp-up to designcapacity. Rutile production ramp-up has been hampered by wet gravity circuitlosses (feed preparation and zircon wet plants) which are expected to belargely resolved during the September quarter. Further plant modifications andoptimisation are expected to increase production to design output over thebalance of the 2015 financial year. Early results from this work have beenencouraging with MSP recoveries of 85% and 51% achieved in the month of July todate for rutile and zircon respectively. Bulk loading at Base's fully owned and operated Likoni Port facility continuedto perform to expectations throughout the June quarter. Base completed fourbulk shipments of ilmenite (a total of more than 90,000 tonnes) and two bulkshipments of rutile (a total of approximately 14,000 tonnes) during the Junequarter. A further bulk shipment of 10,000 tonnes of rutile scheduled for lateJune was delayed into the first week of July by the late arrival of the vessel. Base commenced container shipments of zircon in April and completed a total of12 individual shipments (a total of approximately 2,700 tonnes) through theJune quarter. The first container shipment of rutile was dispatched in earlyJuly and this will be followed by a regular container shipping schedule. SUMMARY PHYSICAL DATA March 2014 Quarter June 2014 Quarter Ore mined (dmt) 1,940,951 1,759,211HMC produced (dmt) 113,196 141,753 Production (dmt) Ilmenite 68,193 91,620 Rutile 8,843 15,221 Zircon 356 4,130 Sales (dmt) Ilmenite 47,300 91,529 Rutile 0 14,005 Zircon 0 2,704 SAFETY PERFORMANCE No serious injuries or incidents occurred during the quarter. Positiveperformance indicators have been the focus this quarter with over 800 formalinspections and hazard reports submitted. The annual Department of Safety andHealth compliance audit was conducted during the quarter resulting in afavorable report. Occupational health monitoring together with occupationalhealth programs were also implemented this quarter and these included noisemapping and monitoring, dust monitoring, radiation monitoring and heat stressmapping. COMMUNITY AND ENVIRONMENT Agricultural trials have been implemented on seven farms throughout KwaleCounty for a series of projects being conducted in conjunction with Businessfor Millennium Development. Potato and cotton trials began in time for seasonalrains and germination has been achieved, whilst commercial poultry productionis in the planning stage. Leveraging the existing significant agriculturalactivity and experience in Kwale County, these projects have the potential todeliver significant improvement in livelihoods in the area through increasedcrop diversity, enhanced agricultural practices, output aggregation and accessto stable markets. Base's collaboration with Little Sports Organisation in providing after-schoolsports to primary children, aimed at teaching life skills through play andsports activities, is continuing to prove a success. Planning has beencompleted to expand the programme to over 20 schools from July 2014. On the environmental front, the effectiveness of the recent rehabilitation ofconstruction areas and stabilisation of slopes was demonstrated recently withthe onset of the wet season. All embankments and rehabilitated constructionareas have remained stable. MARKETING The global pigment industry continued to improve throughout the June quarter.Recent feedback from China suggests that Chinese pigment demand had improved,and the prices achieved by Chinese pigment producers commenced a gradualuplift, during the quarter. Inventories of titanium dioxide feedstock are beinggradually worked down but are likely to remain at elevated levels for theremainder of 2014. Pricing of high grade titanium dioxide feedstock (includingrutile) appeared to stabilise through the June quarter and Base now expectsprices to remain relatively flat for the remainder of the year. Ilmenite pricescontinued to be under pressure through the June quarter but recent reports ofreduced output in some of the main ilmenite-producing regions may indicate thatprices will stabilise at, or near, current levels. Zircon trade activity continued to firm through the June quarter. Stocks ofzircon held by producers continued to be run down and prices have remainedrelatively flat since the early stages of 2014. There are increasing signs thatthe zircon market has reached the bottom of the cycle and is turning towards afirm recovery. With this expected strength in the zircon market over the comingmonths there may be support for zircon price improvement towards the end of2014 or the beginning of 2015. CORPORATE "Commercial Production" The achievement of "Commercial Production" by an operation in ramp-uprepresents the point at which revenue and costs are no longer capitalised anddepreciation of the asset commences. It is achieved when the plant is producingat commercial levels and the Board believes there will be no impediments to theplant reaching its intended operating capacity per design specifications (i.e.when the Board feel the plant is capable of operating as intended.) The Kwale processing plant achieved the "Commercial Production" milestone witheffect from 1 April 2014. DEBT RESCHEDULING Base is currently working with the syndicate of lenders that has provided theKwale Project debt facility to realign the repayment schedule to reflect thedelay in commencement of sales to February 2014 from the original expectationof October 2013, with a satisfactory outcome expected in the next couple ofmonths. KWALE COUNTY MINERAL LEVY Base is currently continuing to work with both the Kwale County Government andthe Kenyan National Government to have the export levy purported to be imposedby the Kwale County withdrawn or rescinded (see ASX Release dated 5 June 2014)on the basis that it is unconstitutional. Base is comfortable with its legalposition and expects to have the matter resolved in the near future. In summary, at 30 June 2014: • Cash and cash equivalents were A$20.9 million. • Debt drawn of US$215.0 million. • 561,840,029 shares on issue. • 16,600,000 unlisted options. A full PDF version of the 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 LocationSpecial Mining Licence 23 100% Kwale, KenyaExploration Licence 173 100% Kwale, 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 Share RegistryASXComputershare Investor Services Pty LtdLevel 245 St Georges TerracePerth WA 6000Enquiries: 1300 850 505 / +61 (3) 9415 4000www.computershare.com.au AIMComputershare Investor Services PL CThe PavilionsBridgwater RoadBristol BS99 6ZZEnquiries: +44 (0) 870 702 0003www.computershare.co.uk