NAIROBI, KENYA, JAN 18 — Base Titanium, the Australian company that is mining titanium ores at the Kenyan Coast, has projected a low mineral production this year characterized by low deposits at the Kwale site.
This comes amid a drop in both production and sales registered last year as the company moved faster than anticipated at the current ‘Central Dune’ of the Kwale Mineral Sands Project in the December quarter.
The company which produces Rutile , Ilmenite, Zircon at the Maumba project is keen to transit to the ‘South Dune’ by June this year.
The firm’s latest data, Quarterly Activities Report – December 2018, shows total mineral produced last year amounted to 585,235 tonnes, a drop from 597,065 tonnes produced in 2017.
This was majorly on Ilmenite production which dropped from 470,317 tonnes in 2017 to 453,133 tonnes last year. The fall weighed down increases in Rutile and Zircon whose production went up to 95,715 tonnes and 36,387 tonnes respectively, from 91,456 tonnes and 35,292 tonnes a year earlier.
Major drops were recorded in the December quarter across the three minerals.
“The main focus for the quarter was on maximising mineral recoveries under a high tonnage, low grade regime, together with preparations for relocating mining operations to the South Dune orebody in June 2019. The Company also continued to advance its exploration programs in pursuit of mine life extensions,” said Simon Wall, acting General Manager External Affairs.
Last year, total sales volume closed at 596,465 tonnes, a drop from 2017 when the company sold 612,204 tonnes in the export markets. Titanium ores are mainly sold in China, Asian markets, Europe and the US.
The amount of Ilmenite exported for sale dropped from 491,002 tonnes to 462,255 tonnes. That of Rutile and Zircon however increased to 98,749 tonnes and 35,461 from 87,166 and 34,036 tonnes respectively.
The company has since revised downwards the expected production for 2019, meaning a drop on sales and earnings for the company and government royalties.
According to Base, it expects to produce a total of 543,000 tonnes for the three titanium components, a revised production from 580,000 tonnes it had predicted earlier.
Rutile production is expected to range between 88,000 tonnes and 94,000 tonnes. Ilmenite production is hinted to go down to between 385,000 tonnes and 415,000 tonnes from a previous projection of between 420,000 to 450,000 tonnes.
That of Zircon has been revised downwards to between 31,000 tonnes and 34,000 tonnes from 32,000 and 37,000 tonnes.
“The revised financial year 2019 production guidance is driven by a combination of an anticipated continuation of the lower ore densities, than previously forecast, seen while mining the remaining fringes of the Central Dune orebody and bringing forward the move to the South Dune to June 2019 from July 2019 and the associated two week shut,” Wall explained during the firms’ quarterly performance update.
Mineral assemblage variations are also expected, resulting in lower ilmenite content relative to rutile and zircon than previously forecast in the fringe ore zones.
Global pigment producers have reported a moderation in demand through the traditionally slower December quarter, with some pigment end users and traders understood to have reduced their inventories.
The Chinese domestic pigment market softened due to ongoing economic uncertainties, as did some of China’s export markets, Base noted on Thursday.
However, as pigment producers in most major producing regions have continued to target maximum output, demand for feedstock remains high.
Ongoing supply constraints in the high-grade feedstock sector (including rutile) have maintained upward pressure on rutile prices.
“This will continue into the March 2019 quarter with solid price increases being contracted for upcoming rutile shipments. Demand for ilmenite from the Chinese pigment industry was firm through the quarter with pigment producers increasing their output as the impact of environmental inspections diminished,” Wall noted.
Prices for both domestic and foreign ilmenite in China remained reasonably stable throughout the quarter, which is expected to continue through to the March 2019 quarter.
Major global pigment producers indicate they expect demand to increase again through the seasonally strong June 2019 quarter. Zircon demand weakened through the quarter as a result of global trade tensions and softer economic conditions across most markets.
However, ongoing supply constraints have supported stable zircon prices which are expected to remain at the current high levels through early 2019.
Mining tenure arrangements continue to progress with the Ministry of Petroleum and Mining for the recently delineated resource to the south of the South Dune. Completion of an updated Ore Reserve is subject to finalisation of mining tenure arrangements.
Base Titanium’s Special Prospecting License 173 expired in May 2018 and was re-granted as a new Prospecting Licence (PL/2018/0119) under the Mining Act 2016, with the area reduced by 50 per cent, as required.
The new prospecting licence is valid for three years with the option to extend. Motivated by the improved economic environment, refined resource definition methodology and insights from five years of operations on the Central Dune, the re-evaluation of the North Dune continued in the quarter with drill assay work, the management confirmed.
Extensional exploration drilling in the North-East Sector (Kwale East) of PL/2018/0119 commenced in the June 2018 quarter with 274 holes for 3,835 metres of drilling completed.
Completion of the remaining drilling program (4,200 metres) in this area remains suspended pending resolution of community access issues. Drill assay results to date have shown potential for some limited extensional economic resource close to the Central Dune (Bumamani), but this remains subject to more detailed evaluation.
The Company’s 136 square kilometers Vanga Prospecting Licence application was recommended for approval by the Mineral Rights Board, with the licence issued in December 2018 (PL/2015/0042).
Community engagement in the area has commenced, with a drill programme planned to commence in the March 2019 quarter, access and drill rig availability permitting.
In addition, a north eastern extension of the Vanga PL/2015/0042 has been applied for to cover further prospective ground which has since become available.
“We are fully engaging the community to ensure a smooth process on both exploration and possible future investments,” external affairs manager Melba Wasunna said.
The continued strong performance saw the company become debt free as at December 31, 2018, a reduction of US$24.8 million. The company has invested more than US$350 million in equipment at the Kwale mining site with majority of the monies being loans.
“During the quarter, the Company became net cash positive for the first time following a US$24.8 million reduction in net debt to a net cash position of US$1.0 million at 31 December 2018,” Wall confirmed.
On the other hand, the company has refund claims for VAT paid in Kenya, relating to both construction of the Kwale Project and the period since operations commenced, totaling approximately US$24.3 million at December 31, 2018.
These claims are proceeding through the Kenya Revenue Authority process, although no refunds were received during the quarter (nil last quarter).
“Base Resources is continuing to engage with the Kenyan Treasury and the Kenya Revenue Authority, seeking to expedite the remainder of the refunds,” the management said.