Base draws on $75m RCF in prudent step as Kwale interruption “cannot be ruled out”

Kwale, Kenya

BASE Resources became the latest mining company to draw down on debt in an effort to secure its balance sheet amid COVID-19 uncertainty.

The Australian-listed miner, which mines mineral sands in Kenya, said it had drawn down its full $75m available under a revolving credit facility (RCF). The drawdown was “prudent … in navigating the evolving uncertainty associated with the COVID-19 pandemic, it said.

The company had cash reserves of $37.7m and no debt as of February 29. The final maturity date for the RCF is December 2021.

“Base Resources’ significant combined cash reserves make it well placed to emerge from the current crisis in sound financial shape and to capitalise on appropriate emergent opportunities,” it said.

Shares in the company fell under renewed pressure, however. They were trading 10% weaker on the Australian Stock Exchange today equalling its last four-year low of 13 cents per share, equivalent to a market value of A$152m, recorded on March 25.

It said today interruption to production at its Kwale mine “cannot be ruled out” given the dynamic nature of the COVID-19 crisis. For now, however, Base said that it was continuing to mine and that its product was supported by “sound customer demand. The company is working with Government of Kenya authorities to adjust work arrangements as necessary to keep operations within government restrictions”.

The 2020 financial year started on a good footing for Base Resources.

It announced on January 13 that higher yields from a new section it had started mining at Kwale would result in an improvement to production guidance for its 2020 financial year. Ilmenite production was put at 335,000 to 355,000 tons which compares to a previous 2020 guidance of 315,000 to 350,000 tons.

Rutile production has been adjusted to a range of 75,000 to 81,000 tons whilst zircon would expected to come in at between 29,000 to 32,000 tons compared to previous expectations of 25,000 to 28,000 tons, the company said.

It said in December it was confident it could reach agreement with Malagasy government over new fiscal arrangements for its proposed $500m mineral sands project, Toliara. Development of the project had been earlier put on hold.

The government tabled a new royalty regime for nickel, cobalt as well as precious stones – the country has a vibrant emerald industry – and industrial stones. The bill also proposes government “… to take at least a 20% stake in any marketable mining production”.