Base Resources says Covid-19 outbreak unlikely to disturb Kwale 2021 production target

Ilmenite is used in paint pigments

BASE Resources CEO, Tim Carstens, downplayed an outbreak of Covid-19 at the firm’s Kwale mineral sands mine in Kenya, saying a warning in its third quarter production results of possible mine curtailment was “only a caveat”.

“I’m not concerned while things are trending the right way,” he said in an interview today. “We have strong protocols in place.” There was “a very low” likelihood of downtime.

Base Resources said in its third quarter report that ilmenite production could be as much as 50,000 tons greater than the low-end of previous guidance of 270,000 tons whilst zircon output could also be higher. This was a result of an increase in availability of heavy mineral concentrate at its processing facility. Rutile production guidance remained unchanged.

It had warned of curtailment at Kwale or even a halt of mining “at some point in the future due to a severe Covid-19 outbreak on site”. A change in Kenyan government regulations in respect of Covid-19 controls could also threaten guidance, it said. For now, the company had re-introduced work-from-home protocols for non-operational staff.

March quarter production of ilmenite totalled 84,178 tons compared to 78,500 t in the December quarter and 105,035 t in the March quarter of Base’s 2020 financial year. Output of rutile was also higher quarter-on-quarter.

The company sold more ilmenite and rutile in the March quarter capitalising on an improving market for mineral sands. At 97,179 tons, ilmenite sales outstripped the 53,798 tons sold in the December quarter; rutile sales were more than double December’s. Mineral sands are used primarily in the production of paint pigments.

Base said global pigment producers recorded a strong recovery over the last two quarters, offsetting the normally weak demand in the first three months of the calendar year.

Commenting on the firm’s prospects, Carstens said that investors were waiting on two developments. The first was the result of a new feasibility study into the expansion of the Kwale life of mine via its North Dune prospects.

A study that covered a large footprint of the area found the project expansion was not feasible as grades were too low and too much money would be spent on building tailings dams and other infrastructure.

The results of the new study, covering a smaller mineral resources, would be made public in the current quarter. Carstens said he anticipated the Kwale life of mine being extended to about 2025.

The second development was agreement with the government of Madagascar regarding fiscal regulations for the Toliara mineral sands project. The project was been in mothballs since late 2019 after the government called for an overhaul of taxes and royalties.

Carstens anticipated progress in short-order, but added that the bigger headache was barriers to international travel owing to Covid-19 restrictions.

Once the Toliara project was reinstated, the company would re-think its current capital management programme. It paid a three Australian cents per share interim dividend, but Carstens said it didn’t make sense “to squirrel away cash” when the $439m project was back on the agenda.

He didn’t fear ‘missing the market’ as a result of Toliara’s project delays. “There’s been a structural improvement in the mineral sands market,” he said.