Base has posted its maiden profit and established a robust, cash-generating base at Kwale which will enable it to seize opportunities, from mine life extensions to regional expansion and the acquisition of new development-ready assets - all in an improving market.

"FY17 (the year to June 30, 2017) was really one of delivering a platform to capitalise on the opportunities ahead of us," Carstens explains, saying the challenge lay in getting investors to recognise just how strong a cash generation vehicle the business was, with enormous upside.

The company announced its maiden profit after tax in August of A$21 million (US$16.4 million) thanks to streamlined operations and improving prices for its ilmenite, rutile and zircon products.

The strong cash flow has also enabled the company to carve more than a third off its debt, with net debt down to US$98 million, which it expects to finish paying off in 2019.

Base started production at Kwale in late 2013 and is now implementing the low-cost Kwale Phase 2 (KP2) mine optimisation plan to speed up processing and further improve the project's economics.

"We certainly feel that we are in an exciting sector with a very strong outlook again," Carstens said.

"Even without the future opportunities, we're still significantly undervalued relative to our cash generation over our current mine life but when you apply that quality of the asset and operations to those future opportunities, the upside's enormous.

"We've just got to get investors feeling that, therein lies the challenge."

 

The titanium dioxide market is improving with Base recently securing vastly improved prices for its ilmenite, zircon rising more than 30% in recent months and spot prices of rutile also now heading in the right direction.

The products' applications are ubiquitous, with rutile and ilmenite primarily feedstock for the production of titanium dioxide pigment which is used in products from paint to cosmetics, while zircon is predominantly used in ceramics.

"The improving prices are really exciting," Carstens said.

"That opens up even wider opportunities, both in terms of cash generation and what that means for strategic execution - but also our value leverage to mine life extension."

The implementation of KP2 effectively allows the company to process its orebody faster, which takes the minelife based on the current reserve to just over five years.

"It does mean with the strong cash generation we have and that improving market outlook, our value leverage to adding on additional years is very significant," he said.

The company has a suite of targets in its expanded Kenyan exploration tenure and it has just released an updated and increased resource at its South Dune deposit, the mining of which will start in late 2019.

But Carstens is already looking ahead to the next phase of drilling that will start in early 2018.

"That will target an area to the northeast of our high-grade Central Dune and that's one we're particularly encouraged about," he said.

"Mine life extension is a real value lever for us and, stepping beyond the immediate area, we also see regional opportunities at our 450km² tenure in Tanzania, which is within 100km of Kwale and its economic footprint."

The company has also been thoroughly investigating the third area of opportunity, to acquire an undeveloped mineral sands asset.

"There are forecast future supply shortfalls in mineral sands that are going to necessitate the development of new projects," Carstens said.

"Having completed the successful development and operationalisation of Kwale, we've got the demonstrated capability and capacity to execute these sorts of projects well.

"Our objective is to have our foot on an asset at the front of the queue, development ready for when the market calls it forward."

He said the company's hunt for its next development was project rather than jurisdiction-led, however the majority of interesting, next generation mineral sands assets were in Australia or Africa.

"So we're fairly well set up to work our magic on the better projects in our sector," he said.

Carstens is particularly proud of the company's safety record and the community programmes it has designed to generate a permanent uplift to the local economy.

The company was on the cusp of 10 million man-hours free of lost time injuries at the time of going to press.

"I've never worked at a mining company before that's been able to cross 10 million man-hours without a lost time injury," Carstens said.

"Our safety performance has been outstanding and it's testament to two things: first, the quality of the management team onsite and their uncompromising implementation of Australian-style safety systems, contextualised for Kenya.

"Second is our Kenyan workforce that has demonstrated a fantastic ability to incorporate all aspects of that safety system into the way they work."

Carstens believes part of the business' stability comes from the strength of its relationship with the community and government in Kenya.

It has established agricultural extension programmes to provide an economic boost to the region beyond the mine's immediate employment and procurement impacts.

"We're very aware that at some point in the future the mine won't be there and the last thing we want to do is leave a vacuum or just a memory of how good things used to be," Carstens said.

The company's biggest agricultural programme is the Kwale Cotton project, in partnership with Business for Development and Australian clothing manufacturer Cotton On.

Of the 30 tonnes of Kenyan cotton lint exported to Bangladesh for processing into clothing for Cotton On last year, six tonnes came from Kwale Cotton, with proceeds being returned to the farmers' cooperative.

In a sign of Kwale's significance to its host country, the mine was granted "flagship" status in July as part of Kenya's Vision 2030, a framework mapping out a pathway to achieve middle income status.

"We're the only flagship project in the mining sector," Carstens said.

"It's a fantastic focal point for government support."

Returning to the company's quest for further investor support, Carstens said the market was yet to fully appreciate the quality and potential to unlock future value that Kwale represented.

"We have a strong and robust, growing cashflow, increased financial flexibility with our rapidly reducing debt and an optimised mine plan with our Kwale Phase 2 project now in implementation," he said.

"We've got a robust base and we now are well positioned to capture those future opportunities to significantly drive shareholder value."

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