AIM and Media Release
21 March 2019
BASE RESOURCES LIMITED
Toliara Project PFS confirms status as a world-class mineral sands
development
Highlights
- Post-tax / pre-debt (real) NPV @ 10% discount rate of
US$671m, measured at FID
- Revenue to cost of sales ratio of 3.06
- Stage 1 capex cost of US$439m –
to establish a 13Mtpa mining processing operation
- Stage 2 capex cost of US$67m -
increases operation to 19Mtpa
- Mineral Resources forming basis of PFS comprise of 588Mt @ 6.6%
Heavy Mineral, from existing Measured & Indicated resources,
for an initial LOM of 33 years
- Mineral Separation Plant recoveries of 93.9% ilmenite, 79.0%
zircon and 73.7% rutile
- Annual averages (excluding first and last partial operating
years):
- Production of 806kt ilmenite (sulphate, slag and chloride),
54kt zircon and 8kt rutile
- Revenue US$254m – 62% ilmenite,
34% zircon and 4% rutile
- Operating costs of US$77m or
US$82m incl. 2% royalties
- Non-operating costs of US$7m
(community, external affairs, marketing etc.)
- EBITDA US$165m, NPAT US$110m
- Free cash flow US$133m
- An animated video of the Toliara Project can be viewed at
www.baseresources.com.au
African mineral sands producer Base Resources Limited
(ASX & AIM: BSE) (Base Resources or the Company)
is pleased to release the outcomes of the Pre-Feasibility Study
(PFS) on its Toliara Project in Madagascar. The PFS
confirms the Company’s view that this is a world class mineral
sands project with estimated post-tax/pre-debt (real)
NPV10 of US$671 million
and a sector leading average revenue to cost ratio of 3.06 over the
33-year initial mine life.
Managing Director of Base Resources,
Tim Carstens, said:
“We are delighted to be able to share these PFS findings.
They confirm our long-held view, which informed the project’s
acquisition by Base Resources in early 2018, that the Toliara
Project is one of the best mineral sands development opportunities
in the world.”
“The release of the PFS findings today is a significant
milestone for Base Resources as it provides a clear basis for
understanding our value proposition as we progress towards becoming
a multi-operation mining company.”
Executive Director Operations and
Development of Base Resources, Colin Bwye, said:
“Base Resources’ Toliara Project PFS
work has been completed to a high standard with the assistance of a
group of highly experienced independent consultants, including:
Mineral Technologies, Lycopodium, IHC Robbins, Aurecon and
PRDW.”
“The team is already working on the Definitive Feasibility Study
which we aim to complete by the end of 2019, ahead of a planned
final investment decision in Q1 2020. This could see us in
operation at Toliara by the end of 2021. In full production,
the Toliara Project will export over 860kt of product, generating
around US$250m of revenue and NPAT of
US$110m annually. The PFS
presents an initial 33-year mine life, however, with only 46% of
the existing Ranobe deposit Mineral Resources being utilised, there
is significant potential to extend this further, which will be
investigated with further drilling during the DFS.”
“Importantly, the project will bring significant stimulus to the
Malagasy economy, particularly for the communities near the planned
operation, with an estimated construction workforce peaking at
1,600 and an ongoing operational workforce of over 1,100.
Consistent with our approach at the Company’s Kwale Operations in
Kenya, we will strive to ensure as
much local content as possible, creating many more indirect
employment opportunities, as well as implementing a suite of high
impact community development initiatives.”
Investment evaluation
NPV10 (at a discount rate of 10%), post tax,
real |
US$
millions |
671 |
NPV8 (at a discount rate of 8%), post
tax, real |
US$
millions |
926 |
NPV12 (at a discount rate of 12%), post
tax, real |
US$
millions |
483 |
NPV10 – TZMI Q1-2019 price forecast,
post tax, real |
US$
millions |
737 |
IRR |
|
% |
22.4 |
Initial (Stage 1)
Capex |
|
US$
millions |
439 |
Stage 2 Capex |
|
US$
millions |
67 |
Capital Payback Period
(Stage 1 and 2) |
|
Years |
4.0 |
LOM Operating Costs +
Royalties |
|
US$/t
ore mined |
4.49 |
LOM Operating Costs +
Royalties |
(A) |
US$/t
produced |
95 |
LOM Revenue |
(B) |
US$/t
produced |
292 |
LOM Cash Margin |
(B-A) |
US$/t
produced |
197 |
LOM Revenue: Cost of
Sales Ratio |
(B/A) |
Ratio :
1 |
3.06 |
LOM Free Cash
Flow |
|
US$
millions |
3,696 |
* Alternative NPV
calculations are provided for illustrative and comparative purposes
only. Base Resources considers a 10% discount rate to be the
most appropriate for evaluation purposes.
Mining and Production Profile
Production
Profile |
Life of Mine (LOM) |
FY2022 |
FY2023 |
FY2024 |
FY2025 onward |
|
Total |
annual
ave* |
Ops Yr1 |
Ops Yr2 |
Ops
Yr3 |
annual ave† |
Ore mined (Mt) |
588 |
18.3 |
8.7 |
12.9 |
12.9 |
18.7 |
HM% |
6.6% |
6.6% |
8.1% |
9.1% |
9.7% |
6.4% |
HMC produced (kt) |
37,110 |
1,155 |
654 |
1,130 |
1,222 |
1,154 |
Period |
33
years |
31
years |
1
year |
1
year |
1
year |
29
years |
Produced (kt): |
|
|
|
|
|
|
Sulphate ilmenite |
9,362 |
293 |
112 |
294 |
300 |
293 |
Slag ilmenite |
8,977 |
281 |
108 |
282 |
288 |
281 |
Chloride ilmenite |
7,396 |
232 |
88 |
233 |
237 |
231 |
Total
ilmenite |
25,736 |
806 |
308 |
809 |
825 |
805 |
Zircon |
1,730 |
54 |
14 |
53 |
61 |
54 |
Rutile |
266 |
8 |
2 |
8 |
7 |
8 |
* Does not include
the first and last years of operation as these are both partial
operating years.
† Does not include
the last year of operation as this is a partial operating year.
Graphics referenced in this release have been omitted. A
full PDF version of this release, including all graphics, is
available from the Company’s website:
www.baseresources.com.au.
Toliara Project Pre-Feasibility Study
- Summary Outcomes
Disclaimer & Important Notices
This document has been prepared by Base Resources. The
information included in this document relates to the outcomes of
the Pre-Feasibility Study for the Toliara Project and is, by its
nature, preliminary information and conclusions presented should be
viewed in this light. Base Resources has used reasonable
endeavours to ensure this document is based on information that was
current as of the date of the document. Statements contained
in this document represent the reasonable judgments of Base
Resources within the time and budget context of preparation of the
Pre-Feasibility Study using the information available at the time
of its preparation.
Information in this document should be read in conjunction with
other announcements made by Base Resources and this document is
to be read in its entirety, including detail of the material
assumptions and underlying methodologies for deriving the forecast
financial information and production targets, including material
price assumptions and operating cost assumptions.
This document has been prepared in accordance with the
requirements of the JORC Code 2012 and rules of applicable stock
exchanges. The estimated Mineral Resources underpinning
production targets in this document have been prepared by a
competent person in accordance with the requirements of the JORC
Code 2012.
No representation or warranty, express or implied, is made as to
the fairness, accuracy or completeness of the information contained
in this document (or any associated presentation, information or
matters). To the maximum extent permitted by law, Base
Resources and its related bodies corporate and affiliates, and
their respective directors, officers, employees, agents and
advisers, disclaim any liability (including, without limitation,
any liability arising from fault, negligence or negligent
misstatement) for any direct or indirect loss or damage arising
from any use or reliance on this document or its contents,
including any error or omission from, or otherwise in connection
with, it.
Certain statements in or in connection with this document
contain or comprise forward looking statements. Such
statements may include, but are not limited to, statements with
regard to capital cost, operating cost, capacity, future production
and available grades, forecast global supply, product prices, sales
projections and financial performance and may be (but are not
necessarily) identified by the use of phrases such as “will”,
“expect”, “anticipate”, “believe” and “envisage”. Base
Resources has concluded that it has a reasonable basis for
providing these forward-looking statements and the forecast
financial information included in this document and the supporting
slides. This includes a reasonable basis to expect that Base
Resources will be able to fund development of the Toliara Project
when required. The detailed reasons for these conclusions are
disclosed below. By their nature, forward looking
statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future
and may be outside Base Resources’ control. Accordingly,
results could differ materially from those set out in the
forward-looking statements as a result of, among other factors,
changes in economic and market conditions, success of business and
operating initiatives, changes in the regulatory environment and
other government actions, fluctuations in product prices and
exchange rates and business and operational risk management.
Subject to any continuing obligations under applicable law or
relevant stock exchange listing rules, Base Resources undertakes no
obligation to update publicly or release any revisions to these
forward-looking statements to reflect events or circumstances after
today's date or to reflect the occurrence of unanticipated
events.
Nothing in this document constitutes investment, legal or other
advice. You must not act on the basis of any matter contained
in this document, but must make your own independent investigation
and assessment of Base Resources and obtain any professional advice
you require before making any investment decision based on your
investment objectives and financial circumstances.
This document does not constitute an offer, invitation,
solicitation, advice or recommendation with respect to the issue,
purchase or sale of any security in any jurisdiction. In
particular, this document does not constitute an offer to sell, or
a solicitation of an offer to buy, securities in the United States or to any ”US Person” (as
defined in the US Securities Act of 1933). This document may
not be distributed or released in the
United States or to, or for the account of, any US
Person.
Introduction
To fully capitalise on Base
Resources’ capability built from the Kwale development in
Kenya, Base Resources acquired the
Toliara Project in January 2018.
Project development immediately commenced - identifying value
adding options and evaluating them before selecting the best
options to progress through the pre-feasibility study.
- Base Resources acquired the Kwale Mineral Sands Project in
Kenya in mid-2010 and over the
ensuing three years successfully funded, engineered, constructed,
and commissioned the project.
- In late 2013, mining started at Kwale Operations and the final
completion test was completed, and normal operations were
established by mid 2015.
- To fully capitalise on Base Resources’ organisational
capability, business model and financial platform built at Kwale
Operations, Base Resources has been seeking the right growth
opportunity from which to drive shareholder value and, after
extensive evaluation of many opportunities, in early 2018 acquired
the Toliara Project in Madagascar.
- Project development of the Toliara Project immediately started
following a clearly defined Base Resources Project Development
System.
- A concept study that tabled a number of options was completed
in April 2018. These options were
evaluated during the first part of the Pre-Feasibility Study
(PFS) and the selected option(s) were then engineered to a
higher certainty level to confirm the business case of the Toliara
Project.
PFS Objectives
- Confirm the business case for further investment.
- Determine the single most valuable option to be detailed
further and optimised in the Definition Phase.
- Identify any emerging fatal flaws and critical issues.
- Assess and provide mitigation plans for risks.
- Prepare a detailed workplan for the Definition Phase.
- Progress all long lead-time work.
All references in this document to $ are to US
Dollars.
The world class mineral sands Ranobe
deposit is located in south west Madagascar, 55km north of the regional port
town of Toliara, 18km inland, approximately 640km southwest of
Antananarivo, the capital of
Madagascar
The Toliara Project
- The Ranobe deposit, which is the basis for the Toliara Project,
is situated immediately west of a prominent north-south
escarpment.
- The mineralised dune is approximately 16km long, 1 to 2km wide
and averages 20 to 30m in thickness.
The heavy mineral (HM) mineralisation (including ilmenite, rutile
and zircon) extends from the surface.
History
- Madagascar Resources NL (MRNL) started exploring
for minerals in Madagascar in 1995
and discovered several zones of HM mineralisation.
- In 2003, Ticor Ltd (now Exxaro Resources) negotiated an
option over the project. Drilling occurred at Ranobe and
Basibasy and a pre-feasibility study commenced on the Ranobe
deposit. Between 2005 and July 2009,
a bankable feasibility study was commenced, but was not completed
(strategic focus shifted).
- MRNL, which became World Titanium Resources Limited
(WTR) in 2011, engaged TZMI to undertake a comprehensive
review of the project, resulting in a definitive engineering study
being completed in September
2012.
- A concept to produce only an ilmenite and non-magnetic
concentrate as the saleable product (at a time of weak overall
market conditions) was developed.
- In early 2016, African Minerals and Exploration Development
(AMED) Fund II purchased a majority stake in WTR and
subsequently increased the project scale from a mining rate of
8Mtpa to 12Mtpa. A feasibility study was completed by Hatch.
- Base Resources acquired the project in January
2018. The Toliara Project is held by Base Resources’ Malagasy
subsidiary, Base Toliara SARL (Base Toliara).
Geology and Mineral Resources
Located 55 kms north of the town of
Toliara, the Ranobe deposit comprises three mineralised units.
Deposit Geology
- Upper sand unit (USU) - a well sorted fine-grained
unconsolidated aeolian sediment containing approximately 5% slime
or clay (SL) and approximately 6% HM, mainly ilmenite,
zircon and rutile.
- Intermediate clay sand unit (ICSU) - a thin unit of high
slime content with a dark red to orange brown sandy clay and clayey
sand material averaging 4% HM and 25% SL deposited in a low energy
lagoonal environment.
- Lower sand unit (LSU) -
orange brown to yellow brown medium grained quartz sand with
moderately low slimes content. It averages 4% HM and 6% SL.
Onlaps the limestone basement.
- The resource thickness generally increases to the west.
A mining lease exists over the
entirety of the current Ranobe deposit Mineral Resources
estimate.
Tenure
- The instrument securing the resource is Permis D’Exploitation
37242 (PE 37242), which is a mining lease under Malagasy
law.
- PE 37242 has a term of 40 years from 21
March 2012 (the date of grant of the original
pre-consolidation mining lease). PE 37242 may be renewed in
units of 20 years thereafter.
- PE 37242 permits exploitation of ilmenite, zircon, leucoxene,
rutile, guano, basalt, and limestone.
Drilling
- The Ranobe Deposit has had five reverse circulation drilling
exploration programs, the first four by Toliara Sands (or its
predecessors) and the last by Base Toliara.
- All drilling programs used Wallis
Drilling to perform the drilling.
- Further drilling is planned (approximately 20,000m) to commence during the DFS to complete
mineralogy definition, convert Inferred resource to Indicated
category, explore western extensions and for better boundary
definition.
Historical Drilling
Program |
Company |
# Holes |
# Metres |
2001 |
Toliara Sands |
121 |
3,081 |
2003 |
Toliara Sands |
400 |
9,424 |
2005 |
Toliara Sands |
288 |
6,135 |
2012 |
Toliara Sands |
363 |
8,088 |
2018 |
Base Toliara |
78 |
3,617 |
Total |
|
1,250 |
30,345 |
The Mineral Resource estimate stands
at 1,290Mt at 5.1% HM and 6.4% SL, including 790Mt at 5.8% HM in
the Measured & Indicated categories.
Resource
- An independent (IHC Robbins) November
2018 JORC compliant Mineral Resources estimate at a HM
cut-off grade of 1.5%, which approximates the economic
cut-off.
- The mineral assemblage is dominated by ilmenite with
significant zircon, rutile and leucoxene contribution.
- The USU Measured and Indicated subset of the Mineral Resources
estimate is 720Mt of material @ 6.1%
HM.
Ranobe deposit Mineral Resources
estimate at 1.5% HM cut-off grade
Category |
Measured |
Indicated |
Total
M&I |
Inferred |
Total USU |
Indicated |
Inferred |
Total ICSU |
Total |
Zones |
Upper
Sandy Unit |
Intermediate Clay Sandy Unit |
USU + ICSU |
Tonnes |
420 |
300 |
720 |
420 |
1,140 |
73 |
79 |
150 |
1,290 |
HM % |
6.6 |
5.3 |
6.1 |
4.1 |
5.3 |
3.2 |
3.1 |
3.2 |
5.1 |
HM tonnes |
28 |
16 |
44 |
17 |
61 |
2.4 |
2.5 |
4.8 |
66 |
Slimes % |
3.8 |
3.9 |
3.9 |
3.9 |
3.9 |
26 |
25 |
25 |
6.4 |
OS % |
0.1 |
0.2 |
0.1 |
0.2 |
0.2 |
2.6 |
2.1 |
2.4 |
0.4 |
Ilmenite % of
HM |
75 |
72 |
74 |
70 |
73 |
71 |
71 |
71 |
72 |
Rutile* % of
HM |
2.0 |
2.1 |
2.0 |
2.1 |
2.0 |
2.2 |
2.3 |
2.2 |
2.1 |
Zircon % of
HM |
5.9 |
5.7 |
5.8 |
5.4 |
5.7 |
5.6 |
5.8 |
5.7 |
5.7 |
Table subject to rounding
differences
*Rutile reported in the table is
rutile + leucoxene mineral species.
For further detailed information on
the Ranobe deposit Mineral Resources, refer to Base Resources’
market announcements of 23 January
2019 “Updated Ranobe Deposit Mineral Resources (corrected)”
available at
https://www.baseresources.com.au/investor-centre/asx-releases/.
Base Resources confirms that it is not aware of any new information
or data that materially affects the information included in that
market announcement and all material assumptions and technical
parameters underpinning the estimates in that market announcement
continue to apply and have not materially changed.
Mineral Resources basis of PFS
The total mining inventory, being the
Mineral Resources that form the basis of the PFS, stands at 588Mt
at 6.6% Heavy Mineral, from Measured and Indicated USU material
only.
Mineral Resources for the purposes of the PFS
The internal mining inventory utilised for the purposes of the
PFS was prepared on the following basis:
- The internal mining inventory was derived from the IHC Robbins
JORC compliant Mineral Resources estimate (Measured & Indicated
USU only).
- The Resource model was optimised to generate pit shells via
industry standard Lerch Grossman
algorithm, having considered the following modifying factors (which
are materially consistent with those described further in the
Marketing, Product Recoveries and Operating Costs
analyses):
- Base Resources’ internal product pricing forecasts.
- PFS test-work derived recoveries.
- Operating costs based on Kwale Operations’ experience, adapted
for the Toliara Project.
- A shortlist of four pit shells (60%, 65%, 70% and 75% of
revenue) were scheduled at high level and input into the detailed
financial model to select the optimum pit.
- 70% revenue pit shell selected on the basis of better financial
metrics (weighted towards NPV and revenue:cost ratio) and a
detailed block model and mining schedule was then developed.
This included planned dilution of approximately 5% of sub-economic
material near the pit floor to cater for mineable pit floor slopes,
which results in some mining blocks partly comprising material from
lower geological units.
- A 95% mining recovery has been applied to the total volume of
the scheduled mining blocks in recognition of mining losses near
pit edges and floor which, on balance, offsets the dilution
material tonneage.
The outcome of the above is an internal mining inventory of
588Mt of which 367Mt is classified as Measured and 220Mt is classified as Indicated. With
further planned drilling and resource definition during 2019
expected to add to the mining inventory, a JORC compliant Ore
Reserve is proposed to be generated prior to FID.
Toliara Project PFS Mining
Inventory
Category |
Mining
Inventory |
M&I† |
Conversion |
|
Measured |
Indicated |
Total
M&I† |
Resources |
|
Zone |
USU |
USU |
USU |
USU |
|
Tonnes
(Mt) |
367 |
220 |
588 |
720 |
82% |
HM % |
6.9 |
6.0 |
6.6 |
6.1 |
|
HM tonnes
(Mt) |
25 |
13 |
39 |
44 |
89% |
Slimes % |
4.7 |
5.3 |
4.9 |
3.9 |
|
OS % |
0.3 |
0.5 |
0.1 |
0.3 |
|
Ilmenite % of
HM |
75 |
73 |
74 |
74 |
|
Rutile* % of
HM |
1.9 |
2.1 |
2.0 |
2.0 |
|
Zircon % of
HM |
5.9 |
5.7 |
5.9 |
5.8 |
|
Table subject to rounding
differences
*Rutile reported in the table is
rutile + leucoxene mineral species.
† Measured and Indicated Mineral
Resources.
Refer further to page 7 for detail of
the Ranobe deposit Mineral Resources estimate.
Mining Approach
The selected mining method is
conventional dozer trap with in-pit tailings deposition, enabling a
short 3-4 year cycle from initial clearing to final
rehabilitation.
Planned mining activity cycle
- Scrub clearing – removal of trees and scrub by dozers,
front end loader (FEL) and dump truck. Stockpiled for
community use or mulching.
- Topsoil stripping – via FEL, dozer and dump truck with
dust suppression and grader use. Stockpiled for later
rehabilitation or directly placed onto rehabilitation areas.
The aim is to preserve seed viability by minimizing time in
stockpile.
- Mining – via D11 dozers, in 200m x 100m blocks,
into the dozer-trap mining unit (DMU) with some excavator
assistance. Run of mine feed (ROM) enters the
DMU through a grizzly (~400mm screen), passes up the DMU conveyor
which discharges to a slurry area where water is added, and then
screened at 4mm. The screen undersize is pumped to the wet
concentration plant (WCP). Oversize is disposed of in
the pit void.
- Coarse tailing – Quartz sand separated by the WCP is
pumped, initially to an out of pit storage facility and later to
the mining pit void where a moveable tails stacker de-waters the
slurry. Water is recovered and pumped back to the WCP.
Sand is stacked to a height approximating the planned finished
level, and worked by dozer into fine tails evaporation ponds.
- Fine tailing – Flocculated clay tailings from the
thickener at the WCP is pumped to evaporation ponds built on coarse
tails. Initially, until enough coarse tails area is
available, some ponds will be constructed on ore, and the dried
tails removed to allow mining later on. The tails ponds will
be filled to a depth of ~1.5m and when dry the clay will be about
~0.4m thick.
- Landform reconstruction and topsoil return – The
desiccated fine tails are worked by dozer into the coarse tails to
make a nominal 2m thick water
retention layer at the surface, graded into final landform and
topsoil replaced on top via FEL, dump truck and dozer or
grader. Then the area will be ready for rehabilitation.
- The process from scrub clearing to final rehabilitation is
expected to take 3-4 years
Mining Schedule
Mining will involve D11 dozers
feeding a DMU to deliver 13Mtpa to the WCP in the first 3.5 years
before increasing to 19Mtpa for the remaining of the mine life.
Mining Schedule
- Stage 1: 0-3.5 years - Single DMU and Wet
Concentration Plant (WCP), D11 dozer fleet of 3 feeding the initial
wet concentrator plant (WCP1) at 1,750tph, or 13Mtpa. Mining
of high grades (avg 9.1% HM).
- Stage 2: 3.5-32.5 years – Additional DMU (DMU2)
and WCP (WCP2) operating at 825 tph. Combined mining rate of
2,475tph or 19Mtpa, total D11 fleet of 4. Avg grade of 6.4%
HM.
- 1,750tph WCP1 moves in operating years 11, 19,
29.
- 825tph WCP2 does not move.
- The increase to a 19Mtpa mining rate is subject to obtaining
appropriate environmental permitting.
Water Consumption
- Stage 1: 660m3
per hour.
- Stage 2: 882m3
per hour.
- Approved bore-field abstraction: 886 m3 per hour.
Metallurgical Testwork and Flowsheet
Design
Building on historical testwork, the
primary focus of the 2018 metallurgical testwork program was to
advance flowsheet design for the WCP and MSP and estimate the
resultant recoveries and final product qualities.
Wet Concentrator Plant
- In early 2018, Base Toliara generated 3 bulk samples
(Low grade - 4.8% HM, Medium grade – 8.2% HM, High Grade – 10.5%
HM) to represent a range of ore grades on which to base the WCP
design.
- Base Resources’ resource mineralogy methodology,
MinModel, was adapted for the Ranobe deposit and used to estimate
WCP performance during the testwork to ensure consistency between
Resource definition and process design selection.
- The selected three stage spiral wet gravity circuit was
tested on the three bulk samples using a combination of MG12 and
VHG spirals. This was performed by Mineral Technologies in
Brisbane.
- The testwork results were modelled using industry proven
programs to determine the flowsheet design, mass balance and
resultant performance metrics.
- Heavy Mineral Concentrate (HMC) samples were produced
from these bulk samples for further confirmatory MSP testwork and
market sample generation - to be undertaken during the DFS.
- Pilot tests on oversize removal, fines removal and fines
thickening were also undertaken to verify design.
Mineral Separation Plant
- In 2013, previous owners, World Titanium Resources, generated
bulk HMC samples from two test pits. Two of these were used for
design testwork and to estimate recoveries.
- A comprehensive and iterative series of tests were completed to
establish flowsheets for each stage consistent with the design
intent:
- Feed preparation – removal of coarse and fine quartz
using wet gravity.
- Ilmenite circuit – produce three ilmenite products under
varying ore / market conditions and generate a non magnetic stream
– magnetic and electrostatic separation.
- Wet Non-Magnetic circuit – remove residual quartz to
enable efficient rutile separation – wet gravity separation.
- Rutile circuit – produce a rutile product and a non
conductor zircon stream – electrostatic separation.
- Wet zircon circuit – remove alumina silicates – wet
gravity separation.
- Dry zircon circuit – remove Fe and Ti contaminants to
produce a zircon product – electrostatic and magnetic
separation.
Product Recoveries
An extensive suite of testwork was
undertaken that provides a sound basis for product recovery
estimation.
Wet Concentrator Plant
- Testwork on each of the low, medium and high grade bulk samples
was used to generate a model (Mineral Technologies) from which the
WCP recoveries (ilmenite, rutile and zircon) were estimated.
- High-grade scenario recoveries were assumed after further
reducing them (ilmenite, rutile and zircon) by 1.5% to allow for
plant operations not being run continuously at peak
conditions.
- Insufficient data and accuracy was available for leucoxene
recovery estimation using the MinModel mineralogy method and the
Mineral Technologies WCP simulation. This was calculated based on
the non-mag TiO? recovery.
Mineral Separation Plant
- Ilmenite recovery – derived from the MSP testwork and
calculated on a contained basis, an average total recovery (from
two bulk samples processed) of 93.6% was established.
- The proportion of each ilmenite product produced
(sulphate, slag and chloride) used testwork results adjusted for
product quality targets using a mathematical model with
interpolation algorithms. The quality targets and splits were
optimised for NPV.
- Rutile recovery – derived from the MSP testwork
and calculated on a contained basis, giving an average total
recovery (from two bulk samples processed) of 59.5%.
- Zircon recovery - derived from the MSP testwork, a
recovery was calculated for each sub circuit that were multiplied
together to give an overall zircon recovery of 79.0%.
- Leucoxene is also recovered to a HiTi stream which is
redirected to both rutile and ilmenite products.
- Leucoxene recovery - derived from the MSP testwork, a
leucoxene recovery of 53.4% was calculated. No
leucoxene is produced as a finished product, instead it is
distributed to ilmenite and rutile, 76% and 24% respectively. This
increases the recoveries of ilmenite product and rutile product by
0.3% and 14.2% respectively in the MSP.
WCP Recoveries
|
Low Grade
Ore |
Medium Grade
Ore |
High Grade
Ore |
Avg |
PFS Design |
Rutile |
97.1 |
95.8 |
93.8 |
95.6 |
92.4 |
Zircon |
98.5 |
98.6 |
98.7 |
98.6 |
97.2 |
Ilmenite |
97.1 |
96.6 |
96.4 |
96.7 |
95.0 |
Leucoxene |
85.0 |
80.0 |
70.0 |
78.3 |
75.0 |
% HM in
HMC |
91.0 |
91.0 |
91.0 |
91.0 |
91.0 |
MSP Recoveries
|
Low Grade
Ore |
Medium Grade
Ore |
High Grade
Ore |
Avg |
PFS Design |
Rutile |
97.1 |
95.8 |
93.8 |
95.6 |
92.4 |
Zircon |
98.5 |
98.6 |
98.7 |
98.6 |
97.2 |
Ilmenite |
97.1 |
96.6 |
96.4 |
96.7 |
95.0 |
Leucoxene |
85.0 |
80.0 |
70.0 |
78.3 |
75.0 |
% HM in
HMC |
91.0 |
91.0 |
91.0 |
91.0 |
91.0 |
Ilmenite Splits
Ilmenite |
Proportion
% |
Target
%TIO2 |
Sulphate
ilmenite |
36.5 |
48.3 |
Slag
ilmenite |
35.0 |
50.5 |
Chloride
ilmenite |
28.4 |
57.0 |
Process Engineering - DMU
The processing plants designed during
the PFS include the two mining units and associated pumping system,
two wet concentrator plants (1750tph and 825tph), 140tph mineral
separation plant, water circuit, tails disposal and electrical
reticulation.
Dozer-Trap Mining Unit (DMU)
- The existing Kwale Operations DMU built by Piacentini,
which is now redundant, will be refurbished and relocated to
Toliara (1750tph). A second and smaller DMU (825tph) will be
built and commissioned in year 3.5.
- A 4mm screen will be installed on the DMU hopper to
remove all +4mm material in the mining area.
- ROM booster pumps are required to pump ore to the WCP
from the DMU when the distance between the two plants is greater
than ~600m.
- Each DMU is designed to be relocatable (using D11 dozers),
which is anticipated to be every 2-4 weeks
Process Engineering - WCP
The processing plants designed during
the PFS include the two mining units and associated pumping system,
two wet concentrator plants (1750tph and 825tph), 140tph mineral
separation plant, water circuit, tails disposal and electrical
reticulation.
Wet Concentrator Plant (WCP)
- The flowsheet developed is a simple three stage
spiral circuit and produces a total mineral concentrate grade
>90%.
- De-sliming cyclone and thickening circuit designed for
wide range of ore clay content.
- Triple start MG12 spirals were selected for the rougher
(2.5 tonnes per start) and scavenger (2.3 tonnes per start)
duties. This combines two traditional separation stages into a
single stage which reduces pumping and plant footprint (reducing
capex as well as opex).
- The cleaner spirals are twin start VHG.
- Design incorporates a constant density surge tank that
will provide a one hour buffer between DMU and WCP.
- HMC is pumped to the MSP surge tank with standby capacity to
stack HMC at each WCP.
- WCP1 is designed with some modular elements to
facilitate relocation in future years (11, 19 and 29).
Process Engineering - MSP
Extensive design optimisation was
undertaken to balance plant availability (by reducing number of
drives), operating costs and capital costs.
Mineral Separation Plant (MSP)
- Ilmenite (sulphate, chloride, slag), rutile and zircon final
products will be produced at the MSP.
- Ongoing test work program at IHC Robbins to
verify the flowsheet.
- Tall building (~50m) design adopted with multiple
machine floors to reduce operating cost (reduced materials handling
equipment and drives).
- The MSP is not relocatable and all major mine infrastructure
is located at the MSP site (including power generation,
administration, workshops, stores and camp).
- Final products will be stored in 1000t bins (500t for
rutile). Additional site storage is provided for the three
ilmenite products (two weeks’ production).
- Tails from the MSP are pumped back to the WCP to
be disposed with the main tails lines.
Electrical
- Majority of the power requirements are in pumping.
- Site HV reticulation is at 11kV.
Control Systems
- Fully automated supported by instruments measuring
density, flow, level, temperature, tonnage etc..
- The operator interface system is typical of SCADA (supervisory
control and data acquisition) systems. The SCADA monitors and
controls instruments in the plant through a programmable logic
controller located in instrument junction boxes inside each
switchroom.
PFS design outputs
- A number of deliverables were produced as part of the PFS
design progression:
- Processing plant 3D models
- Process design criteria [2]
- Process flowsheets [9]
- Mechanical equipment list [2]
- WCP and MSP general arrangement drawings [53]
- MSP earthworks arrangement drawings [36]
- Electrical load list [2]
- Single line diagrams [24]
Marketing – Product Quality
Testwork indicates the targeted
specifications for all products are achievable and suitable for a
wide range of applications.
Ilmenite Quality
- Producing three ilmenite products with qualities that
specifically target different ilmenite markets maintains
flexibility and optimizes overall revenue value.
- Processing plant design flexibility and testwork indicates that
qualities can be adjusted to respond to ore variations and market
requirements.
- Sulphate ilmenite – similar quality to Kwale Operations
ilmenite which suits a major portion of accessible market for
sulphate pigment production in China.
- Slag ilmenite – a higher TiO2 (>50%) makes
this attractive to chloride and sulphate slag producers.
- Chloride ilmenite – a >57% TiO2 suits
direct feed chloride pigment production as well as Chinese slag
production.
- Initial marketing samples for all ilmenite products have been
sent to customers for assessment. Feedback to date, confirms
suitability for target applications.
Zircon Quality
- Testwork indicates that a good standard grade zircon product
(>65.5% ZrO2+HfO2 and <600ppm U+Th)
will be produced.
- The quality is acceptable to all key end use sectors,
particularly in China.
- Elevated levels of U+Th (above an industry norm of 500 ppm for
premium zircon) may limit access to some geographic markets (e.g.
Japan and USA will not currently be
accessible).
Rutile Quality
- Testwork to date indicates that a rutile suitable for chloride
pigment production will be produced.
- A TiO2 of 95.0% is able to be produced (with an
option to go down to 93.5% if significant recovery benefits can be
achieved). DFS testwork to confirm final specifications.
Indicative Product Specifications
Ilm % |
Kwale
Typical |
Sulphate
Ilmenite |
Slag
Ilmenite |
Chloride
Ilmenite |
TiO2 |
48.2 |
48.3 |
50.5 |
57.0 |
Cr2O3 |
0.09 |
0.1 |
0.1 |
0.1 |
CaO |
< 0.01 |
n/a |
n/a |
< 0.01 |
MgO |
0.8 |
0.6 |
0.5 |
0.3 |
MnO |
0.6 |
0.8 |
1.0 |
1.5 |
Fe2O3 |
20.0 |
18.9 |
26.6 |
30.7 |
FeO |
25.5 |
29.6 |
18.6 |
6.0 |
U + Th |
60ppm |
35ppm |
63ppm |
177ppm |
Zircon % |
|
ZrO2+HfO2 |
> 65.5 |
TiO2 |
< 0.15 |
Fe2O3 |
< 0.15 |
Al2O3 |
< 1.3 |
U + Th |
< 600ppm |
Infrastructure
Existing infrastructure required for
the development of the Toliara Project is limited. The project
scope addresses this through building a product haul and access
road, a dedicated export facility, a hybrid power plant, a bore
field for water supply and a permanent camp.
Existing Infrastructure
- Toliara has an existing container port able to accommodate
coastal vessels, an airport with scheduled domestic and
international flights and good mobile and data communications.
- The RN9 national route, although upgraded and sealed during the
last few years, is not suitable for abnormal construction loads
(northern section) or road train product haulage. The bridge over
the Fiherenana river has limited capacity.
- There is no electrical power grid in the vicinity of the mine.
Power supply at Toliara is limited and unreliable and currently not
adequate for the new export facility site.
- There is limited existing accommodation at Toliara for the
anticipated non-local construction and initial operations personnel
requirements.
- There is no suitable sewage treatment facilities in the area
but there is a recycling plant some 10 kms north of Toliara.
- Toliara has a diesel bulk storage facility at the port but
currently no HFO storage capacity.
Roads
- Initial construction access will be via the RN9 and by
upgrading an existing road westwards and then extending it to the
planned mine site. Early haul road construction (see below)
will allow later construction access (particularly for the larger
abnormal loads).
- A 45 km long, sealed, dedicated, haul and permanent access
road, including a new 630 metre long concrete bridge over the
Fiherenana river, will be built. Provision is made for
several community crossing points as well as a safe RN9 cross over.
The bridge will be designed to withstand 1:100 year floods.
Sufficient engineering design and
market testing has been undertaken to ensure PFS accuracy level
Capex and Opex estimates for the new infrastructure
requirements.
Water
- Ground water modelling (by Knight Piesold) has confirmed the
ability to sustainably source the required make-up water for the
19Mtpa from two borefields within the mining permit area.
- Raw water requirement is 882m3/hr. The net groundwater
abstraction associated with this equates to approximately 9% of the
estimated recharge.
- Installation of production bores to enable step testing is
planned during the DFS / FEED phase.
Power
- Power for the mine site will be supplied by an Independent
Power Producer (IPP). Generation will be based on a hybrid
HFO, solar PV and battery system located near the MSP and camp.
Design will aim at optimising solar contribution.
- Total installed power (Stage 1 and Stage 2) is estimated at 18
MW with an average usage of ~ 12MW.
- Stage 1 (1st 3.5 years) installed power is estimated
at 14.5 MW with an average usage of ~ 9.5MW.
- Export facility power will be self generated using high speed
diesel generators with a small contribution of solar for the
offices.
Camp
- An operations camp will be constructed to house up to 668
persons during construction or 234 during operations for expatriate
and non-local skilled personnel. Malagasy labour and off-site
contractors will be housed in the local communities. Local
workforces will be bused in daily.
- Early camp construction is aimed to maximise local content
utilising longer lasting block building methodology.
Waste Treatment
- A sewage treatment plant will be constructed at the mine
complex and serve the process plant, mine complex buildings and
camp. Conservancy tanks will be utilised at remote sites such as
the export facility and sewage transported to the sewage treatment
plant for treatment.
Mine Complex
- Provision has been made for fencing, security, offices,
workshops, laboratories, stores, change houses, ablution blocks,
control rooms, weighbridge, clinics and first aid facilities, water
storage dams and tanks, firefighting systems, storm water
management, landscaping etc all as required for future
operations.
Product Haulage
- Approximately 860kt of product annually will be hauled from
mine to the export facility by a transport contractor utilising 90
tonne triple trailer road trains operating 12 to 13 hours per day
on a seven days a week basis.
Export Facility
- An export facility at Batterie Beach will include a storage
shed for 135kt of ilmenite, 10kt of rutile, with a separate shed to
store 15kt of zircon.
- Ground improvement is required for the shed
foundations.
- Material handling operations will utilise front end loaders
fitted with push arms, similar to Kwale Operations.
- A 550m long jetty with conveyor
will load vessels up to Ultramax draft (63kt) moored on a
multi-buoy mooring berth.
- A medium size tug and a mooring line handling vessel are
provided for.
Marketing Outlook – Sulphate TiO2
Feedstock
Future sulphate feedstock supply
deficit is forecast, providing robust support for development of
the Toliara Project.
Sulphate and Slag Ilmenite
- Longer term there is an emerging supply gap forecast, which is
assumed to be filled by the Toliara Project and other new
greenfield projects.
- Medium term outlook subject to high cost “swing” supply
(concentrates and Vietnam). Prices
in the range of $180 to $230 (FOB) are generally required to stimulate
swing supply.
- Demand for sulphate ilmenite as a feedstock for chloride
feedstock production is expected to grow strongly on the back of
substantial new planned chloride slag production.
- Future chloride feedstock deficits, unless filled, will drive
more sulphate pigment production and therefore accelerate sulphate
ilmenite demand.
Marketing Outlook – Chloride TiO2
Feedstock
Future chloride feedstock supply
deficit is forecast, providing robust support for the development
of the Toliara Project.
Chloride Ilmenite and Rutile
- Longer term deficits for chloride pigment feedstocks are
forecast, which support a positive outlook for rutile and chloride
ilmenite from the Toliara Project.
- Toliara Project chloride ilmenite will add ~ <3% to overall
chloride feedstock supply.
- Demand for chloride ilmenite, driven by major pigment or
feedstock producers, would easily absorb this and these producers
have the capacity (and preference) to consume much more chloride
ilmenite than is currently forecast to be available.
- Rutile is a preferred high grade feedstock for chloride pigment
production and the relatively small quantities produced from the
Toliara Project will be easily absorbed.
Marketing Outlook - Zircon
Future zircon supply deficit is
forecast, providing robust support for the development of the
Toliara Project.
Market Outlook – Zircon
- Significant new supply is needed from new supply to meet
forecast zircon demand.
- There is limited opportunity of “swing” supply from
concentrates and major suppliers to manage this in the medium
term.
- In the long term there are emerging shortages forecast.
Marketing - Pricing
Product pricing forecasts through to
2030 are derived from Base Resources’ internal supply/demand
analysis before moving to TZMI’s long term inducement prices from
2035.
PFS forecast product prices
- Base Resources’ internal price forecast for each product is
used until 2030.
- From 2035 prices are assumed to be the long-term inducement
prices, as forecast by TZMI, re-based to 2019 real. The
exception to this is chloride ilmenite, which is derived from the
TZMI long-term inducement rutile price on a historical relative
economic value basis, using a discount multiple of 4.7, consistent
with Base Resources’ internal price forecast methodology, resulting
in a lower price than forecast by TZMI.
- Prices transition between 2030 and 2035 in a straight
line.
- All prices are FOB, real 2019, after adjusting for expected
product quality.
Base Resources’ internal supply/demand
analysis and price forecast methodology
Base Resources’ internal price forecast is derived from
continuous supply and demand analysis. In broad terms, when a
supply deficit is forecast prices are predicted to trend upwards
and when a supply surplus is forecast, prices trend
downwards. However, the direction and extent of forecast
price movements also take into consideration:
- Industry inventory levels relative to levels considered to be
normal.
- Estimated “floor” and “ceiling” prices derived from historical
precedents, for example, where low price levels would threaten the
economic viability of many producers or excessively high prices
encourage product substitution to take significant effect.
- The anticipated behaviour of key suppliers actively managing
production to support prices.
Base Resources’ internal supply and demand analysis utilises
historical production and consumption data. Base Resources’
forecast product demand utilises TZMI’s five year demand
outlook before transitioning to a steady annual growth rate,
generally consistent with global GDP growth forecasts, adjusted for
product specific considerations where applicable.
Over the short term, Base Resources’ supply forecast is
generally aligned with TZMI’s five year outlook for existing
producers, but Base Resources forms its own view on the anticipated
timing of new brownfield and greenfield projects coming into
production. Base Resources’ medium to long term supply
forecast is based on the company’s internal view of future
production from existing operations as well as new brownfield and
greenfield projects. For each new project forecast to
commence production in the future, Base Resources considers the
stage of development, estimated economics, mine life, applicable
risks and the forecast market supply gap to determine a likely
start-up date.
Product
Prices
USD |
Average
2022 – 2030 |
Average
2031-2034 |
From
2035 |
LOM
Average |
Sulphate ilmenite |
$154 |
$174 |
$183 |
$174 |
Slag ilmenite |
$162 |
$183 |
$193 |
$183 |
Chloride ilmenite |
$241 |
$256 |
$233 |
$238 |
Rutile |
$1,267 |
$1,321 |
$1,142 |
$1,198 |
Zircon |
$1,822 |
$1,650 |
$1,450 |
$1,576 |
Execution Strategy
Toliara Project is a complex
“greenfields” project that will be constructed on a remote
site in a developing country with limited construction
resources. The execution strategy factors this in,
incorporates Base Resources’ experience delivering and operating
Kwale Operations and ensures a well defined approach through
distinct project development phases.
Toliara Project Execution
Strategy
- A number of factors drive the preferred strategy:
- Complex scope (mineral sands) and long life requires
continual owners input to ensure an enduring, fit for purpose and
world class design is delivered.
- Remoteness of the project and the country risk
limits the appeal of “lump sum” contracts (to a limited contractor
market for complex processing plants) making this a high cost
option with minimal increase in certainty.
- Government and community engagement and approval
processes are more effectively conducted by Base Resources due to
the complexity, risk, and existing/future relationships.
- Utilising Base Resources’ knowledge gained through Kwale
Operations project delivery and operation.
- Outsourcing or fixed price where Base Resources doesn’t
have the requisite knowledge (e.g. power supply) or competitive
value is tied to a contractor's unique methods or capability (e.g.
marine and power).
- The preferred broad delivery approach is as follows:
- Mining – Owner Implementation.
- Processing plants and field services – EPCM.
- Infrastructure – EPCM.
- Jetty, shiploader and marine infrastructure (export facility) –
EPC.
- Power supply – IPP.
Project Development Phases
- Definition Phase (DFS) defines the selected
investment option further, ensures requisite scope definition,
confirms the business case and plans for the Execution Phase.
- FEED and Early Works. To meet the overall schedule the
export facility shed piling, road, bridge, jetty and power plant
construction are proposed to start immediately following FID.
Therefore construction (of the camp) as well as FEED work needs to
start prior to FID.
- Final Investment Decision (FID). The Board considers the
DFS, market conditions and funding availability in order to make a
FID. Three months are allowed between the end of the DFS and
FID (March 2020).
- Implementation is planned in two stages.
- Stage 1 includes DMU1, WCP1, MSP, roads, bridge and
export facility and all of the associated infrastructure and is
scheduled over 24 months from April 2020 to March 2022.
- Stage 2 comprises the construction of a second DMU and
WCP during the 2024 calendar year.
- Transport and logistics will be a significant component
of the Toliara Project and an experienced logistics contractor will
be engaged to manage freight forwarding, clear customs and organise
road transport to site.
Construction Workforce
The construction effort will be
spread over a wide geographic area covering the MSP, WCP, mine
infrastructure, road, bridge and export facility. These works
will be performed by multiple civil, Structural Mechanical &
Pipework (SMP), Electrical & Instrumentation (EI) and Marine
contractors, with a workforce peaking at 1,600.
- Peak workforce of approximately 1,600 personnel excluding Base
Toliara’s operational, community, environmental and administration
personnel.
- Approximately 700 to 800 non-local Toliara contractor personnel
(including expatriates) along with 600 to 700 local unskilled
workers will be on site for over 15 months.
- The camp facilities to be completed early and are sized to
cater for the non-local workforce and supervisory staff working on
the process plant site facilities.
- Local Toliara people and the contractors working on facilities,
other than the process plant site construction activities, will be
accommodated within the existing Toliara and local towns.
Operational Workforce
A detailed manning ramp-up plan has
been developed using Kwale Operations experience to estimate the
requirements for the operational phase. A total of 778
employees is forecast for start-up at October 2021, plus an
additional 253 contractors (combined workforce of 1,031).
Oct 2021
Start-up |
No. of
People |
Unskilled |
333 |
Semi-skilled |
277 |
Professional |
45 |
Supervisors |
76 |
Superintendents |
33 |
Managers |
14 |
Total
Employees |
778 |
Contractors |
253 |
Combined
workforce |
1,031 |
- A combined workforce of 1,031 is expected to be in place for
the late 2021 start up, increasing to 1,140 once the second mining
unit and concentrator is installed.
- 610 unskilled and semi skilled people are expected to be
employed mainly sourced from the local Toliara region. 71
expatriates are estimated to be required at start up in 2021
reducing to 27 by the time the second mining unit and concentrator
are in operation.
- Accommodation objectives balance a number of factors including
community impact, benefit to the community, availability of
accommodation, fit for work imperative, attraction and retention of
requisite capability.
- On-site camp accommodation is planned for expatriate FIFO,
shift workers working night shifts, rostered emergency response
teams, apprentices, clinicians, on call tradespeople and
consultants.
- Malagasy employees from outside the Toliara region are expected
to relocate to the surrounding communities.
Operational Management and
Readiness
Early capability and capacity
building programs are underway in order to develop Toliara regional
skills in semi-skilled, skilled and professional categories prior
to the operational phase.
Operating Philosophy
- Most parts of the operation will be owned and operated by Base
Toliara. Where specific skills are required on support
services to allow Base Toliara to focus on core activities, or
there is a financial benefit, the activity is outsourced:
- Mining – owner operator.
- Processing – owner operator.
- Administration – owner operator.
- Product transportation – contractor.
- Export facility operation (Land) – owner operator.
- Export facility operation (Marine) – owner operator or
contractor (TBC).
- Power generation – Independent Power Provider (IPP).
- Laboratory Services – contractor.
- Camp services – contractor.
Operating and Construction
Readiness
The skills required to commission, start up and continuously
operate the Toliara Project are not readily available in Toliara
and need to be augmented with specific mining and processing
training and work experience in order to reach acceptable
capability.
A comprehensive early capacity building program is
underway:
- Registering of > 5000 local people for traineeships –
February 2019.
- Progressing approximately 1000 people through a selection
process to select between 200 and 500 people to train –
April 2019.
- Commencing construction and operational traineeships.
Planned traineeships over the next three years
include:
- Heavy Mobile Equipment – Operators.
- Apprentices – Kenya and
Madagascar.
- Graduates – Kenya (Mets/Chem
Engineers, Mining Engineers, Mechanical Engineers (planners),
Safety and Environmental Professionals).
- Wet Trades.
- Basic safety training.
- Language skills and soft skills.
- Camp operations.
- Lifting.
- Marine.
- HDPE.
- Supervisor.
Stakeholder Engagement
Stakeholder Mapping
Stakeholder mapping is undertaken to understand the potential
for persons, organisations and institutions to play a supportive or
disruptive role in development of the Toliara Project. The process
of identifying the various stakeholders requires in-depth analysis
of the stakeholders’ ability to influence Toliara Project
development and implementation.
A stakeholder mapping exercise, concentrating on high-level
stakeholders, was completed immediately following project
acquisition by Base Resources. In conjunction with previous
mapping performed during the Environmental and Social Impact
Assessment (ESIA) study by WTR, Base Resources has been able to
establish a sound understanding of the “on ground” situation in the
Toliara Project area. A further stakeholder mapping exercise
is currently being undertaken to provide more insight into local
communities and the dynamics shaping communities’ perceptions and
influence. This is planned for completion by end Q2 2019.
Consultation Process
Community consultation programs have been commenced to improve
information sharing and bring communities and other stakeholders
closer to the project. The structural elements of the
Community Stakeholder Engagement Plan (CSEP) are being developed
with some activities already underway. An overview of the
CSEP process and participants is as follows:
- The SCRC (or the Regional Coordination Committee in
English) was established by the Government to manage stakeholder
engagement during the WTR era and assist with organising WTR’s
activities such as exploration and ESIA studies. It comprises
45 members and sits monthly to discuss progress, grievances and
give feedback. The Chief of Region (the senior most
administrative position in the region) is the Chairman. Its
current function remains focusing on high-level communication and
information sharing amongst regional players.
- The Resettlement Working Groups (RWGs – one for the mine
site and the other representing those along the haul road and at
the export facility site) are committees that have been established
to bring together communities that will be subject to resettlement
requirements of the project, enabling them to participate in
decision making process and provide input into how to achieve
positive outcomes for the process. These committees consist
of communities that will be directly affected by resettlement and
relevant government agencies that have a participatory role in
delivering positive resettlement outcomes aligned to IFC
Performance Standard 5 – Involuntary Resettlement.
Land Acquisition
Foreign controlled companies are not
permitted to own land in Madagascar, but can obtain surface rights
through a lease arrangement with the Government.
A high level overview of the process of obtaining surface rights
is:
- Establish title/ownership – only a small number of land parcels
required for the Toliara Project have an existing title (106 of
1041), the rest are held through customary interests.
Completed
- Agree/determine land value. There are two options
available for this, both of which are being progressed in
parallel:
- Private treaty negotiations directly with landowners. In
progress
- Compulsory acquisition of land through process called
Declaration of Public Utility (DUP), described further
below. In order to call upon the Government to acquire land
under the DUP, Base Toliara must have first attempted to reach
agreement via private treaty negotiations. In progress
- As Base Toliara can’t own land, it must fund the Government (on
the basis of values determined above) to:
- Acquire land titles where available; or
- Acquire the customary interests where no land title
exists.
- Where the Government acquires customary interests, a title must
be created for that land in the name of the State.
- Negotiate a lease with the Government for the surface rights to
the land held by the Government.
Subsequently, a total of 20 households on the land to be
acquired for the Toliara Project will be relocated in compliance
with IFC Standards. The above process does not extend to
dealing with livelihood replacement, the relocation of tombs and
other requirements under IFC Standards which Base Resources seeks
to comply with. Activities of the RWG run in parallel seeking
to ensure legal and IFC compliance.
Land Acquisition – DUP Process
An overview of the Declaration of
Public Utility (DUP) process:
- The process commences with public notification of the intention
to undertake compulsory acquisition. Completed
- Affected persons are given 30 days to register their interest.
Completed
- Following this, the DUP Decree is issued and land parcel
identification and socio-economic studies are completed.
Completed (The DUP Decree for the haul road and export
facility was issued on 15 April 2018
and the mine site issued on 19 July
2018).
- A list of land interests is prepared and posted in the
community for a 30 day public review period. Completed
18 February 2019
- Following the review process the issuance of the Act of
Transferability confirms land parcels impacted by the Project. This
Act must be issued within 12 months of issuance of the DUP Decree
or it expires. Application in progress
- Concurrently the Evaluation and Compensation Committee
(CAE) is established to manage the final steps. The
CAE is responsible for confirmation of eligibility of landowners of
each of the parcels listed and the evaluation of any associated
private assets. Following this, negotiation of compensation
rates is undertaken, culminating in agreed amounts for the various
assets involved. CAE established – eligibility and values being
determined
- Once compensation amounts are finalised the CAE will advise
Base Toliara of the total cost of compensation.
- Following payment of the compensation amount to the Government,
the compulsory acquisition is finalised by transfer of title to the
Government.
Community Development and Local
Content
Community Development
Base Resources recognises that community development plays a
significant role in building positive relationships with local
people and ensuring they also benefit from development of the
Toliara Project mineral resource.
Base Resources’ approach is focused on reaching out to
communities in specific areas of development:
- The health sector.
- Education programs.
- Community infrastructure.
- Livelihood enhancement projects.
A Community Development Management Plan for the Toliara Project
will be developed based on a needs assessment carried out in
consultation with affected communities, NGOs and regional
authorities.
Funding for community development activities will be by way
of:
- Malagasy law requires distribution of 70% of mineral royalties
to communities in the impacted region, specifically those communes
affected by the Project.
- Annual community development expenditure of $2 million from commencement of operations.
- Expenditure of $2.5 million prior
to the commencement of operations.
Employment & Local Content
The affected communities will be prioritised for employment
during both construction and operations stages. To facilitate
this, community training programs have commenced. Though not
all who participate in this training will be employed by the
Project, it will give people, particularly youth, valuable skills
to secure employment elsewhere.
Base Resources has developed a Labour, Recruitment and Influx
Management Plan (LRIMP) which has been approved for use by
the Committee for Transparency in Recruitment (CTR), a regional
committee set up to oversee the Toliara Project recruitment
process. The LRIMP identifies job seekers and prioritises
them based on impact (i.e. if they were resettled) and their
proximity to the Project. A lower priority is assigned to
those living further away.
This system is also a commitment under the ESIA approval process
outlining the need for both skills development and local employment
prioritisation as mitigation for social impacts.
The procurement of goods and services from locally based
organisations to allow for greater benefits through direct and
indirect job creation and helping to build the local economy.
Local businesses will be given training on Base Resources’ minimum
standards to prepare them for tendering and possible selection as a
supplier or contractor.
Environment
Environmental Setting
Madagascar is the world’s
fourth largest island, and is recognised as one of the world’s top
ten hotspots for biodiversity, owing to its unique biota and the
high degree of threat to its natural habitats.
It is estimated that there are about 10,000 plant species on the
island. Of these, 80% or more occur nowhere else. Human settlement
commenced in Madagascar just 2,000
years ago and has resulted in the clearing of much of the island’s
forest habitats.
Madagascar is globally
important in terms of its biodiversity, it is within the
Madagascar and Indian Ocean
Islands Biodiversity Hotspot as designated by Conservation
International. Despite tremendous biological interest, knowledge of
the faunal biodiversity in the region is still hampered by
unresolved taxonomic problems and poor sampling.
The Toliara Project area falls into the Madagascar Spiny Thicket
Ecoregion, which is divided into succulent woodlands and
Madagascar spiny thickets. The
total size of the ecoregion is 124,000km2, and it falls
into the deserts and succulent shrublands habitat type of
Madagascar, and is a Critically
Endangered region.
The spiny thicket is exceptional in this regard, with 95% of all
plant species, and 48% of the genera being endemic to this
ecoregion. The thicket is dominated by members of the endemic
Didiereaceae family.
Fauna is also important for this region, with Madagascar and the Spiny Thicket Ecoregion,
with high levels of endemicity. The conservation of forested
habitats is a priority as they are subject to the greatest threats
(slash-burn agriculture and charcoal production). There are few
protected areas covering the ecoregion, and very little is known
about the biodiversity and ecology of the region.
Reserves protect approximately 3% of the region, leaving the
rest susceptible to degradation. The main threats include
charcoal production, logging for construction, grazing of domestic
animals (primarily zebu cattle, but also goats) and agriculture.
Invasive plant species also cause a loss of habitat, as does
illegal collecting of endemic and endangered species for commercial
trade.
A Rare Opportunity to Make a
Significant Contribution to Conservation
The environmental setting of the Toliara Project within a
Biodiversity Hotspot and one of the ecoregions of the Madagascar and Indian Ocean Islands supporting
a rich fauna and flora with high levels of endemism presents a
significant opportunity for Base Resources to make a meaningful
contribution to the region’s biodiversity and conservation efforts
through:
- Targeted environmental programs.
- Collaboration with conservation partners – Government
Environmental Departments, Research Institutions, NGOs and
communities.
- Collaborations with regional, national and international
researchers such as Missouri Botanical Garden.
Regulatory Framework
- Environment Permit No 55-15/MEEMF/ONE/DG/PE granted and
valid.
- Approved Environmental Management Plan (EMP) in place.
- The Construction Environment and Social Management Plan (ESMP),
to be prepared during DFS and submitted to Office National Pour
l'Environement (ONE) three months prior to commencement of
construction, will present project changes for Stage 1 of the
Project. Future changes will be presented during subsequent
Construction and Operational ESMPs prepared ahead of future
phases.
- Operational ESMPs will be prepared and submitted to ONE three
months prior to commencement of operations.
Base Resources is committed to
international best practice
The Toliara Project will develop and operate a comprehensive
Environmental and Social Management System (ESMS) developed to meet
the requirements of:
- Base Resources policies.
- Malagasy legislative requirements.
- International best practice, including:
- Equator Principles.
- IFC Performance Standards.
- EHS Guidelines.
Environmental and Social Management
System
- ESMS will give effect to Base Resources’ commitments.
- ESMS based on a “Plan-Do-Check-Act” business performance
improvement cycle utilising risk and impact assessment as a key
tool.
- ESMS components will include:
- Baseline studies – update of previous studies, new studies and
modelling.
- Comprehensive environmental monitoring program, including an
ecological monitoring program.
- Environmental programs to support Base Resources’ commitment to
improving biodiversity, promoting conservation and
sustainability.
- Establishment of an indigenous tree nursery to research
propagation methods of the region’s unique flora.
- Establishment of biodiversity corridors.
- Offset and reforestation programs.
Government and Political
Overview
Madagascar is a country with a
heightened degree of political risk, with a history of regular
events of instability, most recently with the political crisis in
2009. Madagascar does not
have a history of civil war and most of its troubles are
characterised by political paralysis rather than widespread
violence.
The recently concluded Presidential elections (December 2018) were relatively free from social
unrest, regarded as materially free and fair and the result met
with general acceptance, including by the key opposition
candidates. Consequently, the new President can be considered
to have a clear mandate and there is an expectation of a period of
relative political stability.
The presidential term is five years. Parliamentary
elections are to be conducted in May
2019.
Government support
The President has expressed support for development of the
Toliara Project both during the election campaign and
subsequently. This, combined with statements from key
advisers, is considered to represent a genuine commitment by the
Government to support the Project’s development.
A structured and intensive stakeholder engagement strategy is
focused on rapidly establishing and building relationships with the
relevant national and local government authorities.
Sovereign risk
There are several mechanisms that mitigate sovereign risk in
Madagascar, the most significant
of which is through the contractual arrangements set out in the
Large Mining Investment Law (LGIM), described further
below. However, there are a number of other available
protections against expropriation or nationalisation. The
following key protections to expropriation exist in Madagascar, pursuant to applicable local and
international laws and treaties.
- The investment law (Loi N° 2007 036 du 14 Janvier 2008 sur
les Investissements à Madagascar) protects investors from any
expropriation or nationalisation, except in case of public
utility. In this regard, the Malagasy State is required to
pay compensation to the investor although the precise method for
calculation is not specified.
- The Malagasy Constitution guarantees the right to individual
property. It provides that nobody can be deprived of their
right to individual property except by expropriation for public
utility and with the payment of compensation.
- Madagascar has concluded and
ratified eight bilateral investment promotion and protection
agreements (Accord de promotion et de Protection Réciproque des
Investissements). These bilateral investment agreements require
that expropriation can only be carried out with payment of
compensation. Madagascar is
party to a bilateral investment agreement with Mauritius, with Base Resources holding its
interest in the Toliara Project through its Mauritius subsidiaries.
Applicable Legal Regime
General
The legal system in Madagascar
is based upon the French civil law system. This is a codified
legal system based on the Napoleonic model. As in all civil
law systems, statute law (which is contained in a series of codes)
has the greatest importance. In contrast with common law
systems, the doctrine of precedent (jurisprudence) has little
weight.
Mining law
The Code Minier or Mining Code and the LGIM (and their
implementing decrees) are the main pieces of legislation that
govern the mining sector in Madagascar.
Under the Mining Code, Madagascar is divided into squares of
625m. Only one permit exists per
square.
Mining permits are administered by the Bureau de Cadastre
Minier de Madagascar
(BCMM), the Madagascar Mining Registry. It operates on
a first-come, first-served basis. The system operates in a
reliable, stable fashion and the risk of expropriation is
considered low.
A royalty is payable to the Government based on the value of the
product extracted. The Mining Code prescribes the rate as 2%
of the value of the first sale.
Environmental laws
Any entity wishing to perform exploration activities is required
to obtain an environmental authorisation, and any entity wishing to
perform exploitation activities is required to obtain an
environmental permit.
Land laws
There is a system of land registration in Madagascar. Land
that is registered is recorded in the books at the land
registry. The Topographic Service holds an official plan
drawn up by a surveyor, showing the boundaries of the land.
Foreign controlled entities are not entitled to own land in
Madagascar. Instead, occupation of land by foreign entities
is typically through a long term lease.
LGIM Explained
Overview
The Large Mining Investment Law, or LGIM, is intended to
create a beneficial legal and financial platform to attract
investment in the mining sector.
To date, only the Ambatovy project has been certified under the
LGIM.
Certification requires completion of environmental studies,
obtaining of exploration or exploitation permits, and certification
of the investment plan, including evidence that the proposed
investment will exceed MGA50 billion (approximately $15 million).
Key benefits of LGIM
- Guaranteed stability of taxes and customs and no restrictions
on the sale of mining products.
- Entitlement to use foreign currencies and hold foreign bank
accounts.
- Beneficial tax regime, including reduced income tax rates and
VAT exemptions.
- Beneficial customs regime.
- Protections from expropriation.
- International arbitration for the resolution of disputes with
the Government.
LGIM application process
Base Toliara is preparing its application for certification
under the LGIM, with this application planned to be finalised and
submitted in the coming quarter. Base Resources is confident
that the Toliara Project will satisfy the criteria for
certification under the LGIM.
The process after submission of a complete application may take
up to five months from the date of application (potentially
more) depending on the number of documents or clarifications
required by the Government.
Generally, the LGIM eligibility period runs from the date of
LGIM certification until the expiry of the mining permit granted to
the permit holder. For the Toliara Project, the eligibility
period would be expected to end on 20 March 2052, to coincide
with the end of the initial term of PE 37242.
Key Project Development Approvals
Required
Key project development approvals to
be obtained as the Toliara Project progresses to FID
Key
approval |
Notes |
EXPORT
FACILITY: |
MOU |
Provides the mechanism
for land to be incorporated into the export facility site |
Permission |
Agreement to allow
construction and operation of the export facility site |
Design and construction
approvals, and issue of construction permit |
|
LAND
ACQUISITION (EXPORT FACILITY, ROAD AND MINE SITE): |
Private contracts and
agreement |
Used to acquire private
rights (either legal or customary title), where possible |
Land decree classifying
lands as State public domain |
Compulsory land
acquisition process for public utility |
Government lease |
Long term lease over
government land (Domaine privé de l’Etat) in favour of Base
Toliara. Applies to haulage road and mine site |
HAULAGE
ROAD: |
MOU |
Establishes the basis
for the construction and use of the haulage route |
Design and construction
approvals |
|
CAMP: |
Design and construction
approvals, and issue of construction permit |
|
Borehole construction
and water extraction |
|
MINE
CONSTRUCTION: |
|
Design and construction
approvals, and issue of construction permit |
|
Borehole construction
and water extraction |
|
Authorisation to
construct power facility (Autoproduction) |
|
Electricity - supplier
licence (Licence de fourniture) |
|
LARGE MINING
LAW: |
|
Large Mining Investment
Law (LGIM) certification |
Provides, financial and
legal stability regime for large scale mining investments,
favourable customs regime, guaranteed foreign exchange rights and
certain tax benefits |
Capital Cost
Capital cost is estimated at
$439m (+20%/-10%) based on
preliminary engineering and budget quotes from vendors.
Basis of Estimate
- The estimates for quantities are based on preliminary
engineering drawings for earthworks, concrete, steelwork,
mechanical and electrical for the WCP, MSP, product storage shed,
export facility, haul roads and general infrastructure.
- An extensive Budget Quotation Request process was conducted for
major contract packages to establish unit rates that reflect the
market conditions in Madagascar
for all earthworks, concrete, SMP and buildings
contractors.
- Export facility rates used market rates determined by
engineering consultants verified by a construction contractor
(Stefanutti Stocks) in Q4 2018.
- Budget quotes were received (Q4 2018) for all major mechanical
and electrical equipment vendor packages.
- The estimate base date is Q4 2018 and includes 15%
contingencies but excludes VAT (which, being refundable, is
included in working capital), escalation, currency fluctuations and
Pre-FID costs.
- Exchange rate exposure – 89% is USD based cost and 10% AUD
based.
- Contingency is based on a deterministic assessment approach
which reviews the level of confidence in each of the inputs and
applies the relevant contingency to that input.
Capital Cost Estimate (USD)
Main Area |
Stage 1 |
Stage 2 |
Mineral Process
Plants |
93 |
30 |
Plant
Infrastructure |
41 |
3 |
Plant Services &
Utilities |
4 |
1 |
Haul Road and
Bridge |
34 |
0 |
Permanent
Accommodation |
12 |
0 |
Product Storage &
Export Facility |
90 |
0 |
Mining Equipment |
23 |
13 |
Management Costs
(EPCM) |
23 |
6 |
Owner’s Costs (see
table on the right) |
64 |
6 |
Contingency (15%) |
55 |
8 |
PROJECT
TOTAL |
439 |
67 |
Stage 1 Owners Cost Estimate (USD)
Owners
costs |
Stage 1 |
Integrated Management
Team - Labour |
11 |
Integrated Management
Team - Expenses |
2 |
Initial Clearing for
mining, TSF & Starter Pit |
3 |
Camp operating (based
on Kwale + $2m fuel) |
6 |
Spares, tools and 1st
fills |
7 |
Owner’s local
operational activities |
19 |
Owner’s External
Affairs, Enviro, Community |
11 |
Light Vehicles |
2 |
1% customs stamp duty
on value of imports |
1 |
Owner’s Project Costs -
Plant Mobile Equipment |
2 |
STAGE 1 OWNERS COST
TOTAL |
64 |
Operating Costs
Estimated operating costs have been
derived from experience gained at Kwale Operations, incorporating
local Malagasy cost inputs where appropriate.
Operating cost
category |
LOM Total
US$M |
US$M per
annum |
US$/t mined |
US$/t
produced |
Comments and
assumptions |
Power |
671 |
20 |
1.14 |
24 |
Power sourced from IPP
and based on a solar hybrid solution using HFO as a fuel
source. Assumes a HFO price of $0.73/L, which results
in an average power price of $0.20/kWhr. |
Maintenance |
577 |
18 |
0.98 |
21 |
Maintenance is based on
Kwale Operations experience and scaled where appropriate. |
Labour –
Expatriates |
122 |
4 |
0.21 |
4 |
Operations commence
with 71 expats, dropping to 27 after four years before reaching a
steady state of 6 senior managers from FY31 onwards. |
Labour – Nationals |
186 |
6 |
0.32 |
7 |
Operations commence
with 707 national employees, before peaking at 861 in FY25
following completion of the Stage 2 expansion. |
Fuel – Drying |
187 |
6 |
0.32 |
7 |
Diesel for the MSP
drying process. Cost based on Kwale Operations usage and a
delivered diesel fuel price is $0.88/L. |
Fuel – Mobile
Equipment |
167 |
5 |
0.28 |
6 |
Mobile equipment fuel
burn rates are based on Kwale Operations and a delivered diesel
fuel price is $0.88/L. |
Product Transport &
Port Rates |
200 |
6 |
0.34 |
7 |
All products
transported in bulk to the export facility at an estimated cost of
$3.99/t. |
Flocculant |
11 |
1 |
0.02 |
1 |
Flocculant usage
between 0.08 and 0.12kg/t slime at cost of $3.67/kg. |
Other Operating
Costs |
358 |
11 |
0.61 |
12 |
Other fixed operating
costs, including insurance, camp management and laboratory. |
Total Operating
Costs |
2,479 |
77 |
4.22 |
89 |
|
Royalties |
162 |
5 |
0.27 |
6 |
Government royalty rate
of 2%. |
Total Operating
Costs (incl. Royalties) |
2,641 |
82 |
4.49 |
95 |
|
Investment Evaluation
The Toliara Project has an assessed
NPV of US$671 million (10% discount
rate, pre-debt, post tax real) and an IRR of 22.4%
A discounted cash flow analysis has been undertaken on the
Toliara Project, incorporating the estimated capital costs,
operating costs and revenue assumptions based on Base Resources’
internal product price forecast.
Key assumptions:
- Net present value (NPV) is measured from FID, currently
assumed to be 1 April 2020.
- Stage 1 capex cost of $439m.
- Stage 2 capex cost of $67m -
incurred in operating year three and self-funded from operating
cash flows.
- Mining inventory of 588Mt @ 6.6% HM for a 33 year LOM.
- Product shipments commence in early CY2022, with total annual
shipments fluctuating in a tight band between 830kt and 920kt.
- Base Resources internal price forecasts – moving to TZMI long
term inducement prices from 2035.
- Average annual operating costs of $77m, or $82m
including royalties.
- Average annual non-operating costs of $7m.
- Tax depreciation = accounting depreciation = majority spread
over LOM.
- Corporate income tax rate of 20%.
- Government mineral royalties of 2%.
|
|
Unit |
Total |
NPV10 (at a discount rate of 10%) post tax,
real |
US$
millions |
671 |
*NPV8 (at a discount rate of 8%) post tax,
real |
US$
millions |
926 |
*NPV12 (at a discount rate of 12%) post tax,
real |
US$
millions |
483 |
*NPV10 – TZMI Q1-2019 price forecast, post
tax, real |
US$
millions |
737 |
IRR |
|
% |
22.4 |
Initial (Stage 1)
Capex |
|
US$ millions |
439 |
Stage 2
Capex |
|
US$ millions |
67 |
Capital Payback
Period (Stage 1 and 2) |
|
Years |
4.0 |
LOM Operating Costs +
Royalties |
|
US$/t ore mined |
4.49 |
LOM Operating Costs +
Royalties |
(A) |
US$/t produced |
95 |
LOM Revenue |
(B) |
US$/t produced |
292 |
LOM Cash Margin |
(B-A) |
US$/t produced |
197 |
LOM Revenue : Cost
of Sales Ratio |
(B/A) |
Ratio : 1 |
3.06 |
LOM Free Cash
Flow |
|
US$
millions |
3,696 |
* Alternative NPV calculations are
provided for illustrative and comparative purposes only. Base
Resources considers a 10% discount rate to be the most appropriate
for evaluation purposes.
Investment Evaluation – Free Cash
Flows (FCF)
Strong forecast project free cash flows* result in capital
payback (for both stage 1 and 2 capex) occurring after four years
of operation.
Free cash flows is all project cash flows (including all
revenues, operating and non-operating costs, income, tax, capex and
working capital) except cash flows from financing activities.
Investment Evaluation – Mining and
Production Profile
Mining starts in October 2021, MSP production commencing in
January 2022 and a current LOM of 33
years. Production remains steady over LOM.
Production
Profile |
Life of Mine (LOM) |
FY2022 |
FY2023 |
FY2024 |
FY2025
onward |
|
Total |
annual
ave* |
Operating Yr1 |
Operating Yr2 |
Operating Yr3 |
annual
ave† |
Ore mined
(Mt) |
588 |
18.3 |
8.7 |
12.9 |
12.9 |
18.7 |
HM% |
6.6% |
6.6% |
8.1% |
9.1% |
9.7% |
6.4% |
HMC produced
(kt) |
37,110 |
1,155 |
654 |
1,130 |
1,222 |
1,154 |
Period |
33
years |
31
years |
1
year |
1
year |
1
year |
29
years |
Produced
(kt): |
|
|
|
|
|
|
Sulphate
ilmenite |
9,362 |
293 |
112 |
294 |
300 |
293 |
Slag
ilmenite |
8,977 |
281 |
108 |
282 |
288 |
281 |
Chloride
ilmenite |
7,396 |
232 |
88 |
233 |
237 |
231 |
Total
ilmenite |
25,736 |
806 |
308 |
809 |
825 |
805 |
Rutile |
266 |
8 |
2 |
8 |
7 |
8 |
Zircon |
1,730 |
54 |
14 |
53 |
61 |
54 |
Investment Evaluation –
Sensitivities
NPV Sensitivities against base case -
Post tax / Pre debt (real), 10% discount rate, USD millions
DOWNSIDE SENSITIVITIES $USM |
|
|
UPSIDE
SENSITIVITIES $USM |
Base
Internal - Low Price Deck |
(281) |
233 |
Base Internal - High
Price Deck |
NPV
Discount rate +2% |
(188) |
255 |
NPV Discount rate
-2% |
Sulphate
Ilmenite Price -10% |
(73) |
72 |
Sulphate Ilmenite
Price +10% |
Zircon
Price -10% |
(66) |
65 |
Zircon Price +10% |
|
- |
67 |
TZMI Price Deck |
Chloride
Ilmenite Price -15% |
(58) |
38 |
Chloride Ilmenite
Price +10% |
Royalties @ 5% |
(54) |
- |
|
Construction/Start-up delay of 6mths |
(42) |
14 |
Construction
completed/Start-up 2 mths early |
Construction capex +10% |
(41) |
- |
|
ZIR MSP
recoveries -4% |
(34) |
50 |
ZIR MSP recoveries
+6% |
Construction VAT not refunded |
(32) |
- |
|
Operating costs +5% |
(28) |
28 |
Operating costs
-5% |
ILM MSP
recoveries -2% |
(21) |
21 |
ILM MSP recoveries
+2% |
Rutile
Price -20% |
(13) |
13 |
Rutile Price +20% |
Diesel
Price +20% |
(17) |
8 |
Diesel Price -10% |
HFO
Price +10% |
(8) |
8 |
HFO Price -10% |
RUT MSP
recoveries -5% |
(5) |
9 |
RUT MSP recoveries
+10% |
Pre-FID Expenditure
Pre-FID expenditure of $34.3m (from April
2019) is required to fund progression of the Project
including early work activities required to meet overall project
schedule timelines. The early works include FEED (haul road,
bridge, export facility shed piling, accommodation camp) and
commencement of the camp construction.
Pre-FID Budget
- The project implementation strategy has been further developed
during the PFS and the total planned pre-FID spend is forecast as
US$43.4 million, of which
US$9.1 million has been incurred to
the end of March 2019.
- This includes certain early works.
Early Works
- To meet the project schedule and to de-risk key elements of the
Project, the period between completion of the DFS and FID is
planned to continue to progress engineering design work
(FEED).
- Accommodation camp detailed design, contractor
procurement and construction of bulk earthworks and construction of
two 16 bed blockwork dormitories.
- The road, bridge, export facility shed piling, jetty and
power plant construction are scheduled to commence immediately
after FID. Detailed design and related contractor procurement
activities will take place during pre-FID.
- Continuity of personnel and progressing FEED work on the
processing plant and infrastructure designs during the four month
period between DFS completion and FID is planned.
Pre-FID Budget (USD
M) |
Budget |
Expenditure |
Forecast |
Description |
Jan'18-Mar'20 |
Jan'18-Mar'19 |
Apr'19-Mar'20 |
Integrated Management
Team (PD) |
5.5 |
2.6 |
2.9 |
Exploration &
Resource Definition |
2.3 |
0.8 |
1.5 |
Mining |
0.3 |
0.2 |
0.1 |
Metallurgical
Testwork |
1.1 |
0.9 |
0.2 |
Infrastructure |
11.6 |
1.1 |
10.5 |
Engineering
Consultants |
7.3 |
2.2 |
5.1 |
Community |
1.7 |
0.4 |
1.3 |
Environment |
1.6 |
0.3 |
1.3 |
Government &
Legal |
1.0 |
0.6 |
0.4 |
Land Acquisition |
10.0 |
0.0 |
10.0 |
Training |
1.0 |
0.0 |
1.0 |
TOTAL PROJECT
VALUE |
43.4 |
9.1 |
34.3 |
Funding
Base Resources does not have the
financial capacity to internally fund the Toliara Project
development. External funding in the form of some mix of debt, JV
interest and/or equity will be required.
The required funding for the Toliara Project can be broken down
into three elements:
- Deferred acquisition consideration of $17m payable on receiving LGIM certification
($7m) and on FID ($10m).
- Pre-FID funding of $34m to
advance the project, including land acquisition ($10m), DFS completion ($15m) and early construction works and FEED
($9m).
- Construction and operational start-up funding of $590m, consisting of:
- Capex of $439m.
- Working capital of $110m,
including an estimated $58m for VAT
(legally refundable but assumed for the purposes of funding
analysis to not be recovered until operating year five).
- Debt establishment and servicing during construction of
$41m (based on the funding mix
assumed below).
It expected that deferred acquisition consideration and pre-FID
costs will be funded internally from cash generated by Kwale
Operations or utilisation of the existing $75m Revolving Credit Facility (RCF) depending on
timing.
The ultimate funding mix for construction and start-up will be
determined prior to FID and will be dependent on Base Resources
internally generated cashflow position and forecasts for the
construction and ramp-up period, market outlook, debt availability
and cost, and scope of any strategic offtake joint venture at the
time. For the purposes of the funding analysis, the following
assumptions have been made in arriving at the $590m of construction and start-up funding:
- 40% Equity - $236m sourced from
cash generated from Kwale Operations (including the current
$75m RCF) and a capital raising of
approximately $100m.
- 60% Debt - $354m sourced from
traditional banks, DFIs and export credit agencies.
Financial modelling confirms the project’s ability to
comfortably support this debt load. The Company has appointed
advisors to lead the debt funding and, to date, have held
preliminary discussions with a select group of lenders and
political risk insurance providers.
Opportunities for JV participation in conjunction with
substantial offtake arrangements have been identified and will be
explored further following release of the PFS.
On the basis of the project economics established by the PFS (in
particular free cash flow generation), the robust market outlook
for mineral sands products (refer Marketing analysis), the
Company’s sound financial position (net cash and cash generation
from Kwale Operations), track record of successfully developing and
implementing and repaying financing on a similar project
(Kwale Operations), prior success in capital raising as and when
required (including for the acquisition of the Toliara Project in
early 2018) and preliminary work already undertaken in relation to
debt and JV participation, Base Resources’ considers that there is
a reasonable basis that development of the Toliara Project can be
successfully funded.
Risks
The risk assessment process captured
108 risks of which 37 had an initial risk rating of “high” or
“extreme” but, after factoring in identified mitigations, this
reduces to 14 risks.
Risk assessment process
- A subjective rating is applied to each risk or opportunity
based on Base Resources’ likelihood and consequence
matrix.
- Each risk is given an initial risk rating and, where
risk mitigations are identified, a residual risk
rating.
- All risks with ratings of "high" or "extreme" underwent a
high-level review by management to ensure the rating was
appropriate, followed by a moderation exercise.
- Risks are generally classified as "high" or "extreme" if there
is both a reasonable (or higher) likelihood of occurrence and the
consequence of such an occurrence is serious (or
worse).
- A number of factors are considered when assessing likely
consequence, including impact on finances, environment, personal
safety, company reputation, legal or regulatory implications,
operating continuity and strategic implications.
- Risks have been classified as pre or post FID, to identify
those that will be resolved prior to FID and those that will need
to be addressed in the DFS phase for management post-FID. Of
the 108 risks identified, there are 48 pre-FID risks and
60 post-FID risks.
- No risks were identified that would prevent the Project moving
to the DFS phase.
Pre-FID Risks
Of the 48 pre-FID risks identified,
19 have an initial risk rating of “high” or “extreme”, but this
reduces to seven risks after factoring in identified
mitigations.
Community risks
- Project delay cause by local political interference
and/or civil unrest (Initial rating: extreme -> Residual rating:
high).
- Land acquisition not finalised in time for construction
activities to commence as planned (Initial rating: high ->
Residual rating: high).
Government & Legal Risks
- Increased Government of Madagascar economic participation and
other changes in mining regulation. Any change to the mining
regime is expected to be negative, therefore these changes have the
potential to impact economics and fundability of the project.
Depending on the magnitude of any change, this may cause project
delay, possibly for an extended period. (Initial rating: extreme
-> Residual rating: extreme).
- Project delay associated with obtaining remaining required
approvals from the various regulatory bodies. (Initial rating:
extreme -> Residual rating: high).
- The Project may not receive certification under the LGIM
regime, or there may be a significant delay in obtaining
certification. There is also the risk that the newly elected
Government seeks to alter key aspects of the LGIM, which could
impact the economics and/or fundability of the project and brings a
heightened risk of delay in assessment and certification of the
project under the LGIM. (Initial rating: high -> Residual
rating: high).
Funding Risks
- Inability to secure sufficient long term take-or-pay offtake
agreements with customers of sufficiently good standing to
satisfy lender requirements for funding (Initial rating: extreme
-> Residual rating: high).
- Insufficient debt and political risk insurance capacity
for the Project’s size and Madagascan risk at a sensible cost
(Initial rating: high -> Residual rating: high).
Post-FID Risks
Of the 60 post-FID risks currently
identified, 18 have an initial risk rating of “high” or “extreme”,
but this reduces to seven risks after factoring in identified
mitigations.
Marketing risks
- A material portion of Toliara Project’s revenue comes from
sulphate and slag ilmenite, for which the targeted customers are
large slag/pigment producers. These volumes represent a
material proportion of the contestable market, notwithstanding the
anticipated supply shortfall. There is a risk of not being
able to secure an underpinning strategic offtake relationship
with target slag/pigment producers on terms acceptable to Base
Resources and thereby raising offtake volume/penetration pricing
risk (Initial rating: high -> Residual rating: high).
- Lower sulphate and/or slag ilmenite prices driven by short
term market over-supply as the Toliara Project commences
production and, in conjunction with Kwale Operations, Base
Resources will then be producing ~ 800kt-1Mtpa of these products
during the overlap years, expected from 2022 until at least
2024. Alternatively, short term over-supply resulting from
higher than expected ilmenite coming into the market from
unforeseen sources may occur. (Initial rating: high ->
Residual rating: high).
Health & safety risks
- Potential for fatal (or resulting in multiple severe
injuries) traffic accidents with pedestrians and other vehicles
when transporting product by road train from the mine site to the
export facility (Initial rating: extreme -> Residual rating:
high).
- Fatalities or serious injuries during construction
(Initial rating: extreme -> Residual rating: high).
Environment risks
- Obtaining the necessary approvals to increase the mining
rate from the currently approved 12Mtpa to 19Mtpa (2475 tph)
from operating year 4 (Initial rating: high -> Residual rating:
high).
Government & Legal Risks
- VAT incurred during the project construction phase
(US$58m) is not refunded by
the Government despite legal entitlement (Initial rating: extreme
-> Residual rating: high).
Project Execution Risks
- There are a number of factors associated with project
execution in Madagascar that
could contribute to delay or extension. Including community
unrest, extreme weather events, logistics, port clearances and
industrial action. These will be addressed in the DFS and
further mitigations will be developed.
Opportunities
18 opportunities are currently
identified that could add value to the project. Six of these
are considered to offer a high potential to add value.
- Increasing the Mineral Resource estimate through
additional drilling. The present Mineral Resources estimate
remains open to the west and only a small amount of material from
the ICSU and nothing from the LSU
mineralised zones.
- Improved regional conservation. Through the
implementation of effective conservation programs, knowledge and
practices may improve species propagation, and may eventually lead
to species being removed from the critically endangered list.
While not impacting on project NPV, this would enhance the projects
contribution to regional and national betterment and Base
Resources’ reputation and strength of licence to operate.
- Reduction in operating costs by adopting co-disposal of
coarse and fine tailings. If applicable to the Toliara
Project, this will result in significant cost savings as well as a
more flexible end land-use applications.
- Engagement and positive interaction with the local community
facilitated by the early skills training program, placement
of block manufacture and early works contracts may
provide a good foundation to build relationships prior to
commencement of the mine, export facility and process plants.
- Consolidation of HMC pipelines once WCP2 commences, as
opposed to the current design of separate standalone HMC pipelines
for each concentrator. This will reduce capital costs
slightly and operating costs through pumping efficiencies.
- Optimise the design of the product storage sheds at the
mine site and export facility to reduce dead space and ultimately
the shrink the shed footprints, resulting in capital cost savings
and reduction in visual impact.
Indicative Timeline
Base Resources is working towards being in a position to make
a FID in early 2020. On this basis, the Toliara Project could be in
operation at the end of 2021. This timeline is
indicative only and remains subject to the impact of many variables
outside the control of Base Resources, including those factors
highlighted in the Risks analysis
Glossary
Term |
Meaning |
$ or US$
or USD |
United States
Dollars |
Al2O3 |
Aluminum oxide |
Base
Toliara |
Base Toliara SARL |
Base Resources
or the Company |
Base Resources Limited
(ABN 88 125 546 910) |
CAE |
Evaluation and
compensation committee |
CaO |
Calcium |
Capex |
Capital
expenditure |
Competent
person |
The JORC Code requires
that a Competent Person must be a Member or Fellow of The
Australasian Institute of Mining and Metallurgy, or of the
Australian Institute of Geoscientists, or of a “Recognised
Professional Organisation”. A Competent Person must have a
minimum of five years’ experience working with the style of
mineralisation or type of deposit under consideration and relevant
to the activity which that person is undertaking |
Cr2O3 |
Chromium |
CSEP |
Community stakeholder
engagement plan |
CTR |
Committee for
transparency in recruitment |
CY |
Calendar year |
DFI |
Development finance
institution |
DFS |
Definitive feasibility
study |
DMU |
Dozer mining unit |
DUP |
Compulsory acquisition
of land through the process called Declaration of Public
Utility |
EI |
Electrical and
instrumentation |
EMP |
Environmental
management plan |
EPC |
Engineer-procure-construct |
EPCM |
Engineer-procure-construct-manage |
ESIA |
Environmental and
social impact assessment |
ESMS |
Environmental and
social management system |
FEED |
Front end engineering
development |
FEL |
Front end loader |
FeO |
Iron oxide |
Fe2O3 |
Iron (III) oxide |
FID |
Financial investment
decision by the Board of Base Resources to commence construction of
the Toliara Project |
FOB |
Free on
board |
FY |
Financial year. 1 July
to 30 June. |
Government |
Government of
Madagascar |
HDPE |
High density
polyethylene pipe |
HFO |
Heavy fuel oil |
HiTi |
High grade
leucoxene |
HM |
Heavy mineral |
HMC |
Heavy mineral
concentrate |
ICSU |
Intermediate clay sand
unit |
IFC |
International finance
corporation |
Indicated
Resource |
An Indicated Mineral
Resource is that part of a Mineral Resource for which quantity,
grade (or quality), densities, shape and physical characteristics
are estimated with sufficient confidence to allow the application
of Modifying Factors in sufficient detail to support mine planning
and evaluation of the economic viability of the deposit |
Inferred
Resource |
An Inferred Mineral
Resource is that part of a Mineral Resource for which quantity and
grade (or quality) are estimated on the basis of limited geological
evidence and sampling. Geological evidence is sufficient to imply
but not verify geological and grade (or quality) continuity. It is
based on exploration, sampling and testing information gathered
through appropriate techniques from locations such as outcrops,
trenches, pits, workings and drill holes |
IPP |
Independent power
producer |
IRR |
Internal rate of
return |
JORC |
The Joint Ore Reserves
Committee: The Australasian Code for Reporting of Exploration
Results, Mineral Resources and Ore Reserves (“the JORC Code”), as
published by the Joint Ore Reserves Committee of The Australasian
Institute of Mining and Metallurgy, Australian Institute of
Geoscientists and Minerals Council of Australia |
JV |
Joint
venture |
kt |
Thousand tonnes |
kV |
Kilovolts |
Kwale
Operations |
Base Resources’ mineral
sands operations in Kwale county, Kenya |
kWhr |
Kilo watt hour |
LGIM |
Large Mining Investment
Law |
LOM |
Life of mine |
LRIMP |
Labour, recruitment and
influx management plan |
LSU |
Lower sand unit |
M&I |
Measured and Indicated
Resource |
Measured
Resource |
A Measured Mineral
Resource is that part of a Mineral Resource for which quantity,
grade (or quality), densities, shape, and physical characteristics
are estimated with confidence sufficient to allow the application
of Modifying Factors to support detailed mine planning and final
evaluation of the economic viability of the deposit |
MG12
spirals |
A new high-performance
spiral separator from Mineral Technologies |
MgO |
Magnesium oxide |
Mineral
Resource |
Mineral Resources are a
concentration or occurrence of solid material of economic interest
in or on the Earth’s crust in such form, grade (or quality), and
quantity that there are reasonable prospects for eventual economic
extraction. The location, quantity, grade (or quality), continuity
and other geological characteristics of a Mineral Resource are
known, estimated or interpreted from specific geological evidence
and knowledge, including sampling. Mineral Resources are
sub-divided, in order of increasing geological confidence, into
Inferred, Indicated and Measured categories |
MnO |
Manganese oxide |
MRNL |
Madagascar Resources
NL |
MSP |
Mineral separation
plant |
Mt |
Million tonnes |
Mtpa |
Million tonnes per
annum |
MW |
Megawatt |
NGO |
Non-governmental
organisation |
NPV |
Net present value |
ONE |
Office National Pour
l'Environement |
Opex |
Operating
expenditure |
OS |
Oversize |
PFS |
Pre-feasibility
study |
RCF |
Revolving credit
facility |
ROM |
Run of mine |
RWG |
Resettlement working
groups |
SCRC |
Regional coordination
committee in Toliara |
SL |
Slime or clay |
SMP |
Structural mechanical
and pipework |
Solar PV |
Solar photovoltaic
system |
t |
Metric tonne |
TiO2 |
Titanium dioxide |
Toliara
Project |
The mineral sands
development project, based on the Ranobe deposit, located in south
west Madagascar, 45km north of the regional port town of
Toliara |
TSF |
Tailings storage
facility |
tph |
Tonnes per hour |
TZMI |
TZ Minerals
International. An independent consulting group. |
WCP |
Wet concentration
plant |
WTR |
World Titanium
Resources Limited |
USU |
Upper sand unit |
U + Th |
Uranium and
thorium |
VAT |
Value added tax |
ZrO2+HfO2 |
Zirconium and
hafnium |
ENDS.
For further information contact:
James Fuller, Manager -
Communications and Investor Relations |
UK Media Relations |
Base Resources |
Tavistock Communications |
Tel: +61 (8) 9413 7426 |
Jos Simson and Barnaby Hayward |
Mobile: +61 (0) 488 093 763 |
Tel: +44 (0) 207 920 3150 |
Email:
jfuller@baseresources.com.au |
|
About Base Resources
Base Resources is an Australian based, African focused, mineral
sands producer and developer with a track record of project
delivery and operational performance. The Company operates
the established Kwale Operations in Kenya and is developing the Toliara Project in
Madagascar. Base Resources is an ASX and AIM listed
company. Further details about Base Resources are available
at www.baseresources.com.au
PRINCIPAL & REGISTERED OFFICE
Level 1, 50 Kings Park Road
West Perth, Western Australia, 6005
Email: info@baseresources.com.au
Phone: +61 (0)8 9413 7400
Fax: +61 (0)8 9322 8912
NOMINATED ADVISOR
RFC Ambrian Limited
Andrew Thomson / Stephen Allen
Phone: +61 (0)8 9480 2500