AIM and Media Release
23 May 2017
BASE RESOURCES LIMITED
Board approves Kwale Phase 2 mine optimisation project to deliver
enhanced economics
KEY BENEFITS
- Brings forward revenue by maintaining current production levels
for the remainder of the mine life, overcoming the declining ore
grades in the current Ore Reserve through the de?constraining of
the mine and concentrator plant.
- Faster mining and processing of Ore Reserves over a 24-month
shorter period eliminates approximately US$60 million in fixed costs, with a commensurate
reduction in average operating cost per tonne produced,
significantly enhancing project economics compared with the current
mine plan.
- Increases the importance of, and value leverage from, potential
mine life extensions emerging from the exploration program that is
underway.
FEATURES
- Mining rates increased to 2,400tph as ore grade declines,
achieved through increasing the hydraulic mining capacity to three
800tph hydraulic mining units, with the existing dozer-trap mining
unit gradually phased out, realising estimated mining operating
cost savings of up to 20% per tonne mined.
- Wet concentrator plant and tails management upgraded to
accommodate the increased mining rate.
- Incremental capital requirement to implement Kwale Phase 2 is a
modest US$13.1 million, which will be
fully funded from operating cashflows.
IMPLEMENTATION MILESTONES
- Following finalisation of the front-end engineering design, a
nine-month implementation period will see construction completed in
the June quarter of 2018.
- Upgrading of the existing HMU from 400tph to 800tph and
commissioning of two additional 800tph HMUs in FY 2018, gradually
ramping up to the target 2,400tph mining rate through the course of
the 2018 year.
- The transition of mining from the Central Dune to the South
Dune is scheduled for the second half of 2019.
[Graphical representations referenced
in this release have been omitted. A full PDF version of this
release, including all graphs, is available from the Company’s
website: www.baseresources.com.au.]
African mineral sands producer, Base Resources Limited
(ASX & AIM: BSE) (“Base Resources” or the
“Company”) is pleased to announce that, following completion
of the Definitive Feasibility Study (“DFS”), the Board has
approved implementation of the Kwale Phase 2 project (“KP2”)
at its Kwale Mineral Sands Operations (“Kwale Operations”)
in Kenya, East Africa. The
DFS confirmed the opportunity for significant improvement in the
financial returns for Kwale Operations through further optimisation
of the remaining mine life. The DFS was completed internally
by Base Resources’ project development team, supported by several
specialist consulting firms, and included an independent peer
review process.
The objective of the KP2 project is to maximise the overall
Kwale Operations economic returns by implementing a solution to
maintain maximum concentrate feed to the Mineral Separation Plant
(“MSP”), and therefore final production volumes, in the face
of declining ore grades expected from mid-2018 onwards. The
KP2 DFS has established that this objective can be effectively and
efficiently achieved.
The key results and underlying assumptions for both the current
mine plan (referred to as Kwale Phase 1 or “KP1” mine plan)
and the outcomes of the KP2 DFS are outlined in the table
below:
Description |
KP2
DFS Mine Plan |
KP1
Mine Plan |
Mining method |
Three
HMUs |
DMU +
one HMU |
Maximum mining
rate |
2,400tph |
1,800tph |
Total tonnes mined
(from April 2018) |
85.4
million tonnes |
85.4
million tonnes |
End of mine life
(based on current Ore Reserves) |
November
2022 |
November
2024 |
WCP maximum spiral
starts (currently 1,180) |
1,992
spiral starts |
1,360
spiral starts |
Capital
cost estimate to increase to maximum mining rate
(includes mining equip, WCP and tails upgrade and additional
infrastructure) |
US$25.3
million |
US$13.3
million |
Capital cost estimate
to transition mining from Central Dune to South Dune |
US$8.4
million |
US$7.3
million |
Average full year
production from July 2018 – Rutile |
93,000
tonnes |
68,000
tonnes |
Average full year
production from July 2018 – Ilmenite |
414,000
tonnes |
307,000
tonnes |
Average full year
production from July 2018 – Zircon |
34,000
tonnes |
25,000
tonnes |
The above average full year production forecasts are based on
the following assumptions:
- Mining of 85.4Mt at an average HM grade of 4.18%, all from Ore
Reserves1.
- MSP feed rate at an average of 85 tonnes per hour
(“tph”), up to a maximum of 91tph where heavy mineral
concentrate stocks permit, consistent with recent performance.
- MSP product recoveries of 102% for ilmenite and 100% for
rutile, and 78% for zircon, consistent with past performance and
planned recovery improvements from MSP optimisation.
1. The Ore Reserves
estimates underpinning the above production forecasts were prepared
by Competent Persons in accordance with the JORC Code (2012
edition). The above production targets are the result of
detailed studies based on the actual performance of the Kwale mine
and processing plant. These studies include the assessment of
mining, metallurgical, ore processing, environmental and economic
factors.
A comparison of the forecast production profile of the KP1 and
KP2 mine plans is shown in the graph below [omitted – refer to
the full PDF version of this release available from the Company’s
website].
Mining optimization
Mining at the Kwale Operations was originally based on a
conventional dozer trap mining unit (“DMU”), using
Caterpillar D11T dozers to feed the DMU. Historically, when
mining the high-grade areas of the Kwale Central Dune, DMU mining
rates of up to 1,400tph have been required to ensure the wet
concentrator plant (“WCP”) is fully utilised. To
offset the declining ore grades expected from mid-2018, the KP1
mine plan assumed an increase in the mining rate to 1,800tph.
To achieve this higher mining rate, with the DMU alone, requires
the addition of a third D11T dozer.
The KP2 pre-feasibility study determined that the optimal mining
rate to maximise the economic returns of Kwale Operations was
2,400tph. The KP2 pre-feasibility study identified hydraulic
mining as the preferred method to compliment the DMU to achieve the
targeted 2,400tph mining rate. Operating dual mining units
has the additional benefit of being able to concurrently mine both
the high and low grade ore, which assists in smoothing the grade
profile to create a more consistent feed to the WCP.
In August 2016, as part of the
DFS, a 400tph hydraulic mining unit (“HMU”) was commissioned
to trial the concept. The HMU has proven to be extremely well
suited to mining Kwale ore, achieving higher availabilities and at
lower unit operating costs than the DMU. Following the
success of the HMU trial, the DFS concluded that the optimal mining
setup for Kwale Operations was three HMUs mining at an average rate
of 800tph each to give a combined total of 2,400tph.
A comparison of the mining profile of the KP1 and KP2 mine plans
is shown in the graph below [omitted – refer to the full PDF
version of this release available from the Company’s
website].
Wet concentrator plant upgrade
At the lower ore feed grades and higher mining rates anticipated
from mid-2018, the WCP must be upgraded to maintain optimal heavy
mineral recoveries. A comprehensive pilot plant program and
spiral modelling work undertaken by mineral sands industry
specialist consultants, Mineral Technologies, was employed to
determine the optimal equipment configuration for different mining
rates and ore grades. The modelling established that an
increase in the number of spirals is required to accommodate the
mining rates contemplated under the KP1 (15% increase) and KP2 (69%
increase) mining plans. In addition, modifications and
equipment upgrades are required to the primary screens, feed
de-sliming circuit, tailings cyclones, various pumps and
piping. Other than increasing the capacity of the overflow
pipework, tests confirm the capability of the two existing
thickeners to manage the increased solids loading at the higher KP2
mining rate.
Changes to the WCP process flow sheet are minimal. No
changes are required to the MSP.
Infrastructure requirements
Existing off-site and on-site infrastructure is sufficient to
support operations under the KP2 mine plan, with the exception of
the water supply infrastructure. The water supply constraints
of the KP2 mine plan are largely the product of the daily
extraction limits from the Mukurumudzi Dam imposed by licence
conditions. To overcome this constraint, the existing Gongoni
borefield will be expanded and a further borefield constructed near
the tailings storage facility (“TSF”), both of which are
fully permitted.
The cost to develop the TSF borefield is included in the KP2
capital estimate. However, the decision to develop this
infrastructure will be subject to further assessment following
recently implemented water saving initiatives.
Project execution and timeline
The KP2 project will be executed on an owner-implementation
basis, as the Company has the requisite internal capability to do
so, realising significant cost savings on EPCM indirect costs and
contractor installation costs.
Front end engineering and design (“FEED”) is currently
underway and scheduled for completion by the end of June
2017. Whilst the FEED is in progress, the main mechanical,
structural and piping contract will be awarded, based on the
comprehensive tenders received during the DFS, and long lead items
ordered.
Construction is scheduled for completion in the June quarter of
2018 after a one month shut of the WCP to tie in the plant
modifications and equipment upgrades. Ahead of the WCP shut,
heavy mineral concentrate stock levels will be managed to ensure
that MSP production continues without interruption.
The implementation schedule will see the second of the 800tph
HMU units commissioned in the June quarter of 2018, with the third
commissioned in mid-2018. The three HMUs will ramp up to full
capacity (2,400tph) through the course of 2018, with the DMU
gradually being phased out over the same period.
Engineering and design work for the transition of mining from
the Central Dune to the South Dune will commence in mid-2018, with
construction completion scheduled for the second half of 2019.
Capital cost estimate
The estimated capital cost to complete the transition from the
Central Dune to the South Dune and implement KP2 is US$33.7 million, US$13.1 million more than the estimated capital
required for KP1. A breakdown of capital cost estimate by
area of expenditure for both KP1 and KP2 is shown below (in US
Dollars):
Area |
KP2 |
KP1 |
Variance |
Mining
operations
(KP2: 3 x HMUs less sale of D11Ts and DMU; KP1: mobile
equipment) |
$0.9m |
$2.7m |
-$1.8m |
Wet
concentrator plant
(plant modifications and equipment upgrades, incl. additional
spirals) |
$10.5m |
$3.0m |
$7.5m |
Field
services
(additional water and tailings pumping systems and piping) |
$7.4m |
$4.5m |
$2.9m |
Indirect
costs
(EPCM labour and expenses) |
$3.3m |
$1.0m |
$2.3m |
Contingency |
$3.2m |
$2.1m |
$1.1m |
Total capital cost
estimate to implement KP2 |
$25.3m |
$13.3m |
$12.0m |
Mining
transition from Central Dune to the South Dune
(including contingency) |
$8.4m |
$7.3m |
$1.1m |
Total capital cost
estimate |
$33.7m |
$20.6m |
$13.1m |
Anticipated timing of KP2 capital expenditure is shown below (in
US Dollars):
FY17 |
FY18 |
FY19 |
FY20 |
Total |
$1.1m |
$24.0m |
$4.1m |
$4.5m |
$33.7m |
The capital cost will be fully funded from operating
cashflows.
Community and environment
Implementation of KP2 is not expected to impact the community to
a greater extent than the current operations. The impact of
current mining operations on the community primarily relate to
household resettlement required at the southern end of the South
Dune and temporary relocation for households close to the mining
lease boundary north of the Central Dune.
The main environmental impact from implementation of the KP2
mine plan is increased water demand, which will require enhanced
groundwater monitoring. The Mine Site Environmental and
Social Management Plan and Water Resources Environmental and Social
Management Plan will be reviewed and revised as required, with
mitigation controls implemented and monitored. Aside from the
increased water demand, no other significant environmental impact
is expected from implementation of KP2.
Forward Looking Statements
Information in this report should be read in conjunction with
other announcements made by Base Resources. No representation
or warranty, express or implied, is made as to the fairness,
accuracy or completeness of the information contained in this
report (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 report or its contents, including
any error or omission from, or otherwise in connection with,
it.
Certain statements in or in connection with this report contain
or comprise forward looking statements. 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.
Nothing in this report constitutes investment, legal or other
advice. You must not act on the basis of any matter contained
in this report, 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.
ENDS.
CORPORATE PROFILE
Directors
Keith Spence (Non-Executive
Chairman)
Tim Carstens (Managing Director)
Colin Bwye (Executive Director)
Sam Willis (Non-Executive
Director)
Michael Anderson (Non-Executive
Director)
Michael Stirzaker (Non-Executive
Director)
Malcolm Macpherson (Non-Executive
Director)
Company Secretary
Chadwick Poletti
NOMINATED ADVISOR & BROKERS
RFC Ambrian Limited
As Nominated Adviser:
Andrew Thomson / Stephen Allen
Phone: +61 (0)8 9480 2500
As Joint Broker:
Jonathan Williams
Phone: +44 20 3440 6800
Numis Securities Limited
As Joint Broker:
John Prior / James Black / Paul
Gillam
Phone: +44 20 7260 1000
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AUSTRALIAN MEDIA RELATIONS
Cannings Purple
Annette Ellis / Andrew Rowell
Email: aellis@canningspurple.com.au /
arowell@canningspurple.com.au
Phone: +61 (0)8 6314 6300
UK MEDIA RELATIONS
Tavistock Communications
Jos Simson / Emily Fenton
Phone: +44 (0) 207 920 3150
KENYA MEDIA RELATIONS
Africapractice (East
Africa)
Evelyn Njoroge / James Njuguna/Joan
Kimani
Phone: +254 (0)20 239 6899
Email: jkimani@africapractice.com
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