TRANSCRIPTION OF FINANCE NEWS NETWORK INTERVIEW WITH BASE RESOURCES LIMITED (ASX:BSE) MANAGING DIRECTOR, TIM CARSTENSClive Tompkins: Hello Clive Tompkins reporting for the Finance News Network. Joining me from mineral sands developer, Base Resources Limited
(ASX:BSE) is Managing Director, Tim Carstens. Tim welcome to FNN. Can you start by introducing the company?
Tim Carstens: Yeah thank you. Base Resources is a West Australian based but Kenyan focused mineral sands developer. We have the Kwale project in Kenya that we’ve now got through its study phases and we’ve now got the financing secured. So we’re ready to launch the company into the development phase of its project suite.
Clive Tompkins: Thanks Tim, so why mineral sands and why Africa?
Tim Carstens: We saw an opportunity in mineral sands eighteen months ago. We identified it as a sector that appealed to us when we were looking for the next, sort of objective for Base as a vehicle. And we weren’t particularly looking in Africa specifically, but when we identified the right project opportunity and it was in Africa and having been there now for eighteen months or so, I’m delighted we’re there.
You have governments that particularly want to see you come into their country, want to work with you to make the project a success and you tend to find that there are lots of other opportunities once you’re in there in those countries, because of the relatively limited exploration work that’s been done in most of those countries. And that’s particularly true of Kenya.
Clive Tompkins: And Tim, who are your major shareholders?
Tim Carstens: We’ve just completed a large placement which has seen two very large share specialist resource funds join the register, in Pacific Road and Taurus. These guys are well known in the sector. They do a lot of work before they make an investment and that’s a big vote of confidence in our project, and where we’re going and where the sector’s going. We have a number of other major Australian and particularly US institutions on the register, such that probably 70-80% or 70% of stock is owned by institutions.
Clive Tompkins: And at 50 cents per share, what’s your market cap?
Tim Carstens: Well given that we’ve just completed a capital raising today – if you’d asked me that yesterday, it would have been $100 million. But now with the placement completed today, effectively a $240 million market cap.
Clive Tompkins: Turning now to your key project Kwale in Kenya, what stage is the project?
Tim Carstens: The project’s fully permitted, it’s been studied extensively. We completed an enhanced feasibility study in May of this year, which involved us picking up a study that had been done previously, pulling it apart with a complete process design review and then setting the scope for an enhanced study. So that’s all been completed.
We’ve now as I said, wrapped up the financing with $170 million debt facility that we have committed, $140 million placement completed and we’ve just got a $30 million rights issue which we’ll be completing in the next two weeks. So we’re financed, study’s done, permitted and we’ll be commencing construction early October.
Clive Tompkins: Tim and what is it going to cost and what is the internal rate of return on the project?
Tim Carstens: The capital cost including contingencies is USD256 million with working capital and what have you, and the debt facility establishment costs. We need USD310 million to develop the project which is why we’ve done the debt facility and the raisings that we had. But that sort of investment has a pretty handy payback on this project. The net cash after tax and after capex over the life of the mine – thirteen year mine life, is around USD930 million. So looking at it, you know 42% internal rate of return, it’s a fairly healthy project.
Clive Tompkins: Thanks Tim. So what is Kwale’s mine life and what opportunities exist to extend operations in the region?
Tim Carstens: The Kwale project as we call it is only based on two dunes, the Central and South Dune. There’s a third dune called the North which has never been included before because it was too low-grade for where prices were. On the basis of Central and South, we have a thirteen year mine life. We understand the ore-body pretty well, so there’s very limited scope to extend it from Central and South.
Any extension will come from including the North Dune in the future, but it’s probably more likely to impact through maintaining higher levels of production through the life of the project rather than adding five, ten years on the tail end. So we’re looking at our extensional potential coming in developing the other projects we have further to the north of Mombasa.
Clive Tompkins: Now mineral sands prices have been rising rapidly over the last year. What is the outlook for prices longer term and where is the
demand coming from?
Tim Carstens: I might answer the last part first. We’re really seeing the impact of a bolus of demand from China – not surprising, every other metal
has experienced the China affect over the last ten years. We’ve seen it in steel, in iron, base metals and they’re more driven by industrialisation, whereas mineral sands, titanium and dioxide and zircon are more driven by urbanisation and wealth. So they tend to have a take-off later in the cycle than do the base metals and iron.
So it’s not surprising that it’s taken off now given the stage of development in China. That’s forecast to continue, we’re seeing more people wanting better quality finishes in China and the big pigment producers around the world are adding to capacity to meet that demand. So the outlook for prices for our commodities, very strong.
Clive Tompkins: Tim still on Kwale, who will you appoint to commission and construct the project?
Tim Carstens: We’re taking a best of breed approach to the construction of the project. We’re not letting the construction to one contractor. We’re breaking it up into quite discreet contract packages, the largest of which by quite some way are the production facilities, which are going to be designed and built by Auscenco under an EPCM contract.
And then the other contract packages are for a dam, a port, tailings storage facility, power line, road and ancillaries are all being done by specialists in those areas, with the whole project being brought together and knitted together in a whole by what we call an integrated management team, which is populated by our guys with support from some experts from Wave Engineering.
Clive Tompkins: And how much infrastructure needs to be built?
Tim Carstens: It’s one of the strengths of the project that we’re located only fifty kilometres south of Mombasa, second largest city in Kenya. It’s got an international airport, very large first world port – seventeen hundred ships a year go through Mombasa Port. It’s the primary entry point for all freight into East Africa. Because of that and because of the large population base in Mombasa, we have access to a lot of existing infrastructures.
Starting from the mine itself, we have the rights to build a dam on the Mukurumudzi River to provide our primary water source. We have a 132 kV substation located just sixteen kilometres away. It’s very lightly used and was actually built in anticipation of the project by the Kenyan Government, which we’ll connect into. And we only have to build an eight kilometre mine road to join into the existing Transcontinental Highway that connects Mombasa with northern Tanzania. And it’s up that highway that we haul our material by truck and we own a large block of land on the shipping channel at Mombasa Port, on the opposite side from the main part of the Port.
Clive Tompkins: Good, so when is your first shipment planned?
Tim Carstens: Based on our construction schedule of twenty-two months, we’re expecting to have our first shipment leaving in the fourth quarter of 2013.
Clive Tompkins: Last question Tim. Can you tell us what the long term strategy is for Base Resources?
Tim Carstens: The long term strategy for Base is to build a truly successful African focussed mining company. We’re investing a lot of time, not just
in building Kwale because that’s not the end game. We’re investing a lot of time in building our organisation, our business model and our strategy to carry us towards that objective. That would see us with a number of mines operating in Africa and being the sort of company that others look at when they first think of truly successful mining companies in Africa, who do it right. I want us to be the first company they think of, so we definitely have aspirations for Base and Kwale’s the key to unlock that.
Clive Tompkins: Tim Carstens thanks for introducing Base Resources.
Tim Carstens: Thank you very much.
ENDS
