Quarterly Activities Report

ASX, AIM and Media Release 8 October 2014 QUARTERLY ACTIVITIES REPORT - SEPTEMBER 2014 HIGHLIGHTS * 10% increase in production of final products quarter on quarter to 122,355 dmt. - Ongoing process design enhancements and optimisation work achieving consistent improvements in rutile recovery throughout the quarter with MSP recovery in September of 90%. - WCP and MSP availabilities for the quarter well above expectations at 87% and 92% respectively. * Over 130,000 tonnes of ilmenite, rutile and zircon shipped in the quarter. * Containerised rutile sales commenced in July. * No lost time injuries. * Credit approval received for restructure of debt facilities. Base Resources Limited (ASX & AIM: BSE) ("Base" or the "Company") is pleased toprovide a quarterly production and ramp-up update at its Kwale Mineral SandsOperations ("Kwale Operations" ) in Kenya, East Africa. Following thecompletion of commissioning in the March quarter, strong focus has beenmaintained on availability, throughput and recovery optimisation in both thewet concentrator plant ("WCP") and mineral separation plant ("MSP") withconsiderable success achieved. KWALE OPERATIONS Mined ore grades remained high at 8.4% heavy mineral ("HM") as mining proceededthrough the centre of the Central Dune (8.1% HM during the previous quarter).Following completion of concentrator spiral launder modifications at the end ofthe June quarter, tonnage mined improved by 25% from 1.8mt to 2.2mt in theSeptember quarter. Heavy Mineral Concentrate ("HMC") production increased by 22% to 172,885 tonnesand Valuable Heavy Mineral ("VHM") recoveries in the concentrator improved by3% to 96%. WCP utilisation increased from 79% to 87%. Slime and sand deposition continued to operate according to plan. By the end ofthe quarter, stacking of the third 5 metre sand wall lift was underway on theperimeter of the tailings storage facility ("TSF"). Unseasonal rains during the quarter maintained the full 8.6GL water capacity atthe Mukurumudzi Dam. MSP throughput of 164,000 tonnes was 7% above the previous quarter and feedrates were consistently at design levels of 80tph or higher during the quarter.MSP utilisation improved substantially from 87% to 92% over the quarter. Ilmenite production continued at or above design capacity. Zircon production isconsistent with the planned twelve month ramp-up to design capacity and averagerecoveries increased from last quarter's 35% to 47% this quarter. Rutileproduction ramp-up continued with significant success being achieved and a goodunderstanding gained of the metallurgical characteristics of the various oretypes. Rutile production increased 9% over the prior quarter, from 15,221tonnes to 16,612 tonnes with MSP recoveries averaging 86% for the quarter, andincreasing to 90% for the month of September. Further rutile recoveryimprovements are expected to come from screen optimisation during the Decemberquarter and ongoing design enhancements. The focus over the next quarter forzircon is on improving recoveries through final product handling design changesto allow better grade control. Bulk loading at Base's Likoni Port facility continued to perform wellthroughout the September quarter, dispatching more than 130,000 tonnes duringthe quarter, with a further 10,000 tonne rutile bulk shipment leaving shortlyafter quarter end. Base commenced container shipments of rutile in July and completed a total of 7individual shipments (a total of approximately 3,100 tonnes) through theSeptember quarter and 12 shipments of containerised zircon (a total ofapproximately 2,600 tonnes). SUMMARY PHYSICAL Mar-14 Jun-14 Sep-14DATA Quarter Quarter Quarter Ore mined (dmt) 1,940,951 1,759,211 2,191,455 HMC produced (dmt) 113,196 141,753 172,885 Production (dmt) Ilmenite 68,193 91,620 100,533 Rutile 8,843 15,221 16,612 Zircon 356 4,130 5,210 SAFETY AND TRAINING No serious injuries occurred during the quarter. A serious potential incidentinvolving a permit to work breach occurred, which resulted in a number ofcorrective actions being implemented post investigation. A HazOp study wascompleted for all aspects of the Kwale operation from the mine through to theport. Positive performance indicators continue to be a focus and a safety forumwas held with all managers and superintendents with a number of initiatives nowbeing actioned with positive outcomes are already evident. A comprehensive training and development program is underway aimed at asustainable workforce transition to national employees with leadershipdevelopment, apprenticeship programs and graduate traineeships underway. COMMUNITY AND ENVIRONMENT Agricultural trials run in conjunction with partners Business for MillenniumDevelopment and DEG, are progressing well with harvesting of a good qualitypotato crop underway and cotton plants nearing maturity. Leveraging theexisting significant agricultural activity and experience in Kwale County,these projects have the potential to deliver significant improvement inlivelihoods in the area through increased crop diversity, enhanced agriculturalpractices, output aggregation and access to stable markets. The Magaoni Health Centre, a joint project between the community, who donatedthe land, and Base was completed during the quarter and the official openingceremony was attended by the Governor of Kwale. A number of other communityconstruction projects were completed during the quarter including the MagaoniSecondary School multi-purpose hall, a joint project between Base and theAusenco Foundation. On the environmental front, site revegetation is continuing with increased treeplanting from our extensive indigenous tree nursery. Local community basedorganisations have been assisted with training to establish their ownindigenous species nurseries and educated on the importance of maintaining thelocal eco-system as opposed to introducing exotic species. MARKETING Sales of all products have continued to progress in line with expectationsthrough the September quarter. The first container shipments of rutilecommenced in early July as planned and have been continuing on a steady basis.A total of six consignments (a total of 126,000 tonnes of ilmenite and rutile)were loaded onto bulk vessels during the quarter. A further bulk shipment of10,000 tonnes of rutile was due to load in late September, but delays in thearrival of the ship pushed it to early October. The majority of ilmeniteshipments occurred in the second half of the quarter. The global TiO2 pigment industry recovered further throughout the Septemberquarter. The Chinese pigment market continued its upward momentum withincreases in both volumes and sales prices, including a notable increase inpigment exports. Inventories of titanium dioxide feedstock continue to beworked down but are likely to stay at elevated levels for the remainder of2014. Pricing of high grade titanium dioxide feedstock (including rutile) hasremained stable for the past two quarters and should continue to do so for theremainder of the year. Ilmenite prices appeared to have reached a bottom duringthe start of the September quarter. Recent feedback from China suggests thatprices achieved for small volume sales, by domestic ilmenite producers,marginally increased in the latter part of the quarter. Output from some of themain ilmenite-producing regions continues to be suppressed which should supportongoing price stability at, or near, current levels. Zircon trade activity remained firm through the September quarter. Stocks ofzircon held by producers continued to be depleted and prices have remainedrelatively flat since the early stages of 2014. It appears more certain thatthe zircon market has reached the bottom of the cycle and is trending towards afirm recovery. The ongoing improvement in market conditions should supportzircon price improvement towards the end of 2014 or the beginning of 2015.However, any such price recovery will be largely dictated by the supply-sideresponse of the major zircon producers. CORPORATE DEBT RESCHEDULING Confirmation of credit approval for the restructure of the Kwale Project debtfacility ("Debt Facility") has been received from all lenders. The reschedulinghas the primary effect of realigning the Debt Facility repayment schedule toreflect the delay in commencement of sales from the Kwale Project to February2014 from the original expectation of October 2013 when the facility wasarranged in 2011. Under the approved terms of the restructure, all principal repayments andfunding of the debt service reserve account will be deferred by six months withsome re-profiling to suit future cash flows. Once implemented, the firstprincipal repayment will be deferred from December 2014 to June 2015 and thedebt repayments during the 2015 financial year will be reduced from US$45.9million to US$11.0 million. The finalisation of the restructure is subject to the agreement and executionof final documentation, which is expected to be concluded over the next twomonths. 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 and AIM Release dated 5June 2014) on the basis that it is unconstitutional. Base remains comfortablewith its legal position and expects to have the matter resolved in the nearfuture. Political considerations are the prime impediment to the definitiveresolution of this issue. CLOSING CASH POSITION Due to the timing of bulk ilmenite shipments during the quarter, the value oftrade receivables grew by US$11.5 million, resulting in the Company's cashposition at 30 September 2014 falling to A$10.9 million. Cash receipts fromcustomers during October will return the cash position to normal operatinglevels. In summary, at 30 September 2014: • Cash and cash equivalents (unrestricted) were A$10.9 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 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