Base Resources leaves production guidance unchanged

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Base Resources Limited (LON:BASE) left its production guidance for the current fiscal year unchanged as it updated on activities in the final quarter of calendar year 2020.

The African mineral sands producer may have left production guidance for its year to the end of June 2021 unchanged but it did reveal that ilmenite output is currently forecast to be towards the upper end of the guidance range.

Base offered the caveat that the inherent uncertainties associated with the coronavirus (COVID-19) pandemic could yet prevent the company from hitting its production targets.

The company’s Kwale business in Kenya continues to operate under a suite of mitigations aimed at protecting the health and safety of its employees and neighbouring communities, including modified workplace practices and a focus on hygiene and social distancing.

Kwale produced 78,500 tonnes of ilmenite in the final quarter of 2020, down from 91,406 tonnes in the same quarter of 2019. Rutile output ebbed to 18,171 tonnes from 19,812, while zircon production slipped to 6,677 tonnes from 7,923 tonnes the year before.

Sales of ilmenite totalled 53,798 tonnes (2019: 106,544 tonnes); rutile sales totalled 12,017 tonnes (2019: 13,078 tonnes) and zircon sales clocked in at 6,399 tonnes (2019: 7,090 tonnes).

Bulk loading operations at the company’s Likoni Port facility continued to run smoothly, dispatching a combined 64,000 tonnes of bulk ilmenite and rutile during the quarter (previous quarter: 85,000 tonnes). Containerised shipments of rutile and zircon through the Mombasa Port proceeded according to plan, it added.

Total operating costs of US$16.8mln were marginally higher (previous quarter: US$16.6mln) due to higher volumes mined and processed. Increased production levels resulted in lower unit operating costs of US$161 per tonne produced down from US$189 per tonne in the prior quarter.

Cost of goods sold of US$207 per tonne sold (operating costs, adjusted for stockpile movements, and royalties) increased due to the higher proportion of rutile and zircon in the sales mix in the quarter (previous quarter: US$192 per tonne).

Average unit revenue increased to US$464 per tonne (previous quarter: US$413 per tonne) due to sales mix and increased ilmenite prices. From the combination of these factors, the revenue to cost of goods sold ratio for the quarter increased to 2.2 from 2.1, Base Resources said.

Demand for ilmenite as a feedstock for Chinese pigment producers exceeded supply through the quarter resulting in further price gains for ilmenite. Ongoing strong demand and constrained supply will maintain a tight ilmenite market through the March quarter and is likely to result in further price increases, Base Resources predicted.

Rutile prices softened in the quarter due to a build-up of high-grade feedstock inventory during the early part of 2020 when western pigment producers were operating at low rates. Pigment customers are indicating that pigment demand has recovered faster than expected. This is expected to increase rutile demand and, as a minimum, stabilise rutile prices in the coming quarter and improves the outlook past this.

Demand for zircon improved through the quarter mainly due to an increase in zircon consumption in the European ceramics sector as economies emerged from lockdowns.

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