Base Resources confident despite lower product prices

26th Feb 2024 13:02

(Sharecast News) - Base Resources reported a decrease in average achieved product prices in its half-year results on Monday, as rutile prices declined by 4%, ilmenite by 9%, and zircon by 18%.

The AIM-traded firm said that despite those market headwinds, first-half revenue stood at $73.1m, with a group EBITDA at $14.7m.

However, the company reported a net loss after tax of $1.5m.

Base said it maintained a healthy free cash flow of $14.8m, and ended the reporting period with a net cash position of $78.9m as of 31 December.

Operationally, the Kwale operations experienced a decline in ore grade to 2.39%, a planned transition as mining operations shifted towards lower-grade ore bodies.

Production figures for the first half included 18,909 tonnes of rutile, 77,663 tonnes of ilmenite, and 7,657 tonnes of zircon, alongside 4,140 tonnes of low-grade rutile and zircon products.

Additionally, the completion of the Toliara project monazite pre-feasibility study brought positive news, doubling the project's post-tax 10%-discounted net present value (NPV10) to $2bn.

The board said strategic engagement with the government of Madagascar gained momentum following the 2023 presidential elections.

Discussions were centred on fiscal terms and the lifting of the Toliara project's suspension.

It said that encouragingly, the government had expressed support for the project's advancement, particularly in the production of a monazite product.

The company's board said it had decided not to pay an interim dividend, in line with its capital management policy.

"Kwale Operations once again performed consistently to plan, but with only lower grade ore bodies remaining, production and sales volumes were lower as expected," said managing director Tim Carstens.

"Despite this, and softening market conditions for our products, Kwale operations continued to operate profitably and generate positive free-cash flow, with preparations for post-mining after December 2024 occurring in parallel."

"We were excited to deliver the results from the monazite pre-feasibility study in December, enhancing the already exceptional potential of the Toliara Project."

Carstens said realisation of that potential was now more important than ever.

"With the president of Madagascar's government now formed and a new Mining Code in place, a positive shift in dynamics and significant focus and attention from the government on the project's progression is evident.

"We are optimistic that mutually attractive fiscal terms can be secured that will support development of the Toliara Project for the benefit of our host communities, the nation of Madagascar and our shareholders.

"In this context and in light of the approaching conclusion of mining at Kwale operations, we believe it is appropriate that cash now be retained for the anticipated progression of the Toliara Project."

At 1218 GMT, shares in Base Resources were down 21.79% at 5.67p.

Reporting by Josh White for Sharecast.com.