Interim Financial Report - period ended 31 Dece...
AIM and Media Release
29 February 2016
BASE RESOURCES LIMITED
Interim Financial Report – period ended 31 December 2015
Base Resources Limited (ASX & AIM: BSE) (“Baseâ€) is pleased to provide the following extracts from the company’s Interim Financial Report for the six month period ended 31 December 2016.
-
Review of Operations.
-
Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income.
-
Consolidated Condensed Statement of Financial Position.
-
Consolidated Condensed Statement of Changes in Equity.
-
Consolidated Condensed Statement of Cash Flows.
These extracts should be read with reference to the notes contained in the full version of the Interim Financial Report, a copy of which is available from www.asx.com.au and on the company’s website: www.baseresources.com.au.
All references to dollars or $ in this release is to Australian currency (unless otherwise specified).
1. Review of Operations
Kwale Operations features a high grade ore body with a high value mineral assemblage, comprised of the Central Dune and South Dune deposits. In October 2013, mining commenced at the higher-grade Central Dune deposit.
In the period under review, mining volumes were marginally lower than the six months to 30 June 2015 (“prior periodâ€), due to maintenance downtime reducing the availability of the wet concentrator plant (“WCPâ€). After mining in high grade blocks for much of calendar 2015, there was a planned progression through to adjacent lower grade perimeter blocks on the eastern edge of the Central Dune in the last months of the period. This resulted in an average ore grade for the period of 7.12% heavy mineral (“HMâ€), lower than the prior period.
As a result of the lower feed grade and availability, WCP production of heavy mineral concentrate (“HMCâ€) was significantly lower than the prior period. The HMC stockpile, built up in prior periods to accommodate the planned mining sequence, was drawn down by 49kt as mineral separation plant (“MSPâ€) throughput increased to above design levels following completion of upgrade projects. Mining will move back to higher grade sections of the Central Dune during the coming period, with a resultant increase in HMC production and the rebuilding of the HMC stockpile.
The successful completion of the remaining elements of the MSP upgrade projects during the period, together with ongoing process optimisation, has yielded benefits in both throughput and downstream recoveries of rutile and zircon. Consequently, the combined rutile and zircon production increased by 18% during the period, compared to the prior period. Ilmenite recorded a modest 3% increase over the prior period.
| Summary Physical Data | Six months to Dec 2015 | Six months to Jun 2015 | Six months to Dec 2014 |
| Ore mined (tonnes) | 4,428,656 | 4,625,901 | 4,520,201 |
| Heavy mineral (HM) % | 7.12% | 9.25% | 7.96% |
| WCP Heavy mineral concentrate production (tonnes) | 298,191 | 413,225 | 338,838 |
| MSP Heavy mineral concentrate consumption (tonnes) | 346,864 | 328,987 | 329,829 |
| Production (tonnes) | |||
| Ilmenite | 225,770 | 219,229 | 208,426 |
| Rutile | 42,694 | 36,253 | 35,284 |
| Zircon | 14,053 | 11,898 | 10,518 |
| Sales (tonnes) | |||
| Ilmenite | 233,642 | 203,123 | 169,923 |
| Rutile | 38,581 | 40,550 | 36,251 |
| Zircon | 13,917 | 12,803 | 8,484 |
Bulk loading operations at the Group’s Likoni Port facility continue to run smoothly, dispatching more than 249,000 tonnes during the six month period. Sales continue to be made from the Group’s China warehouse as part of the strategy for securing market share in China by offering product for immediate delivery and in smaller volumes than could be justified for a shipment direct from Kenya.
With no serious injuries occurring during the period under review, Kwale Operations lost time injury (“LTIâ€) frequency rate remains at zero. Base employees and contractors have now worked 5.4 million man-hours LTI free, with the last LTI recorded in February 2014.
The global titanium dioxide pigment industry softened towards the end of year as the northern hemisphere entered its usual seasonal slowdown, with pigment sales volumes and prices declining, prompting reductions in pigment output from global producers and demand for feedstock. Base maintained solid sales for the period but experienced pressure on pricing for ilmenite in particular as competition for sales remained high.
A significant proportion of global ilmenite production is experiencing mounting financial pressure from unsustainably low market prices, and there is evidence this is now forcing some production to cease. During the period some major Chinese producers and a major Russian producer suspended production of ilmenite. A positive development at the end of 2015 was a series of pigment price increase announcements from most of the major global pigment producers to be made effective from 1 January 2016.
Zircon trade activity remained steady throughout the period. However, the continued stock over-hang in the market, combined with increasing competition for sales between the major zircon producers, resulted in further price erosion toward the end of the period.
Review of Financial Performance
| Six months to Dec 2015 | Six months to Dec 2014 | |||||
| Kwale Operations | Other operations | Total | Kwale Operations | Other operations | Total | |
| $000s | $000s | $000s | $000s | $000s | $000s | |
| Sales Revenue | 81,721 | - | 81,721 | 61,836 | - | 61,836 |
| Cost of goods sold excluding depreciation & amortisation: | ||||||
| Operating costs | (34,481) | - | (34,481) | (31,195) | - | (31,195) |
| Changes in inventories of concentrate and finished product | 433 | - | 433 | 2,016 | - | 2,016 |
| Royalties expense | (5,563) | - | (5,563) | (4,622) | - | (4,622) |
| Total cost of goods sold (i) | (39,611) | - | (39,611) | (33,801) | - | (33,801) |
| Corporate & external affairs | (1,485) | (3,535) | (5,020) | (1,512) | (3,190) | (4,702) |
| Community development | (2,046) | - | (2,046) | (1,950) | - | (1,950) |
| Selling & distribution costs | (2,051) | (425) | (2,476) | (15) | (406) | (421) |
| Other income / (expenses) | (6,877) | 4,774 | (2,103) | 460 | (494) | (34) |
| EBITDA (i) | 29,651 | 814 | 30,465 | 25,018 | (4,090) | 20,928 |
| Depreciation & amortisation | (21,258) | (2,365) | (23,623) | (17,087) | (2,350) | (19,437) |
| EBIT (i) | 8,393 | (1,551) | 6,842 | 7,931 | (6,440) | 1,491 |
| Net financing expenses | (14,010) | (4,051) | (18,061) | (10,146) | (1,589) | (11,735) |
| Income tax expense | (47) | - | (47) | - | - | - |
| NPAT (i) | (5,664) | (5,602) | (11,266) | (2,215) | (8,029) | (10,244) |
(i) Base Resources’ financial results are reported under International Financial Reporting Standards (IFRS). These Financial Statements include certain non-IFRS measures including EBITDA, EBIT and NPAT. These measures are presented to enable understanding of the underlying performance of the Group and have not been audited/reviewed.
Base recorded a loss after tax of $11.3 million for the six month period ended 31 December 2015, compared with $10.2 million in 2014.
Sales revenue increased to $81.7 million for the six months to December 2015, compared to $61.8 million in the December 2014 period (“last yearâ€), on the back of a 33% increase in sales volumes. The average sale price of product sold (rutile, ilmenite and zircon) was steady at A$286 per tonne (US$207 per tonne) compared with A$288 per tonne (US$256 per tonne) last year. The decline in US dollar sales prices, which reflects a softening of the titanium feedstock market in particular, has been offset in Australian dollar terms by the depreciation of the Australian dollar against the US dollar.
Total cost of goods sold was $39.6 million for the six months to December 2015, compared to $33.8 million in the same period last year. The increased sales volume over the comparable 2014 period delivered a reduction in average cost from A$157 per tonne of sold to A$138 per tonne this period. The weakening Australian dollar has contributed to the higher reported costs, despite a reduction in the underlying US dollar cost of goods sold in the current period to US$100 per tonne, compared with US$142 per tonne last year. With an achieved revenue to cost of sales ratio of 2:1, Base remains well positioned in the upper quartile of mineral sands producers.
The high value mineral assemblage and low cost of production of the Kwale Operations has delivered a Kwale Operations EBITDA of $29.7 million ($25.0 million in the six months to December 2014) and a Group EBITDA of $30.5 million ($20.9 million in the six months to December 2014). A net loss after tax of $5.7 million was recorded by Kwale Operations and a net loss of $11.3 million by the Group.
Cash flow from operations was $26.8 million for six months to 31 December 2015 was higher than the comparable prior year period ($4.2 million), due to increased sales receipts for the period. Cash flow from operations were lower than Group EBITDA due to the increase in working capital requirements of $16.7 million, predominately driven by an increase in inventories of $2.1 million and a decrease in accounts payable of $1.5 million during the period.
In December 2015, the Kwale Project Debt Facility was rescheduled in order to establish a repayment profile more appropriate to the current commodity price environment. Under the terms of the reschedule, US$14 million of the Debt Facility was paid down on execution, reducing the outstanding debt to US$190 million. In addition, Base also fully funded the debt service reserve account with $24.2 million (US$17.6 million), being the principal repayment and debt service costs for the next six months. All tranches of the Kwale Project Debt Facility have been rescheduled over a remaining tenor of 4.5 years.
Total debt at 31 December 2015 was $288.1 million (US$210 million) compared with $292.6 million (US$224 million) at 30 June 2015. Aside from the movements discussed above, the increase in the Australian dollar denominated value of debt has been driven by the fluctuations in the US dollar exchange rates.
The Group's working capital, being current assets less current liabilities, has increased from $37 million at 30 June 2015 to $48 million at 31 December 2015, primarily due to the rescheduling of the Kwale Project Debt Facility, offset by the reclassification of the Taurus debt facility from non-current to current borrowings, reflecting the final repayment date of 31 December 2016.
The Taurus debt facility is held at the parent entity, and, under the terms of the facility, repayments prior to the final maturity date are only made from the permitted distributions from the Kwale Project. Permitted distributions from the Kwale Project, to the parent, will commence every six months from June 2016, subject to available surplus cash. While some level of permitted distributions are expected to be available in the period to 31 December 2016, in the current commodity price environment, it is likely that, in isolation, the quantum will not be sufficient to fully repay the Taurus debt facility prior to final maturity without additional funding.
The Company is currently assessing its options to address any outstanding balance of the Taurus debt facility at maturity, which include seeking an extension of the facility maturity date, refinancing the facility with another party, raising equity or a combination of these options. The size and nature of the required funding solution is entirely dependent on the available permitted distributions from the Kwale Operations, which are reliant on mineral sands prices, meeting forecast production output, costs, sales volumes and the receipt of VAT refunds as expected. However, the Directors are confident a suitable funding solution can be secured in the required timeframe.
Given the parent entity’s limited ability to access surplus cash from the Kwale Project, and in order to ensure funding continuity for the parent entity, on 29 February 2016, Base launched a partially underwritten entitlement offer seeking to raise $10 million less costs. The capital raising aims to provide the necessary working capital for the parent to continue to provide corporate services to the Group and pursue its corporate and strategic objectives through to mid-2017, independent of any permitted distributions from the Kwale Project, and addressing the repayment of the Taurus facility separately through the options discussed above. Refer to Note 15 (events subsequent to reporting date) for further details. At the date of this report the capital raising is not complete and the underwriting agreement is subject to customary termination clauses, however, the directors have a reasonable expectation that it will successfully close.
2. Consolidated Condensed Statement of Profit or Loss and Other Comprehensive Income for the Six Months Ended 31 December 2015
| 6 months to 31 December 2015 |
6 months to 31 December 2014 |
||
|---|---|---|---|
| Note | $000s | $000s | |
| Sales revenue | 81,721 | 61,836 | |
| Cost of sales | 2 | (63,234) | (53,238) |
| Profit from operations | 18,487 | 8,598 | |
| Corporate and external affairs | (5,020) | (4,702) | |
| Community development costs | (2,046) | (1,950) | |
| Selling and distribution costs | (2,476) | (421) | |
| Other expenses | (2,103) | (34) | |
| Profit before financing income and income tax | 6,842 | 1,491 | |
| Financing costs | 3 | (18,061) | (11,735) |
| Loss before income tax | (11,219) | (10,244) | |
| Income tax expense | (47) | - | |
| Net loss for the period | (11,266) | (10,244) | |
| Other comprehensive income | |||
| Items that may be reclassified subsequently to profit or loss: | |||
| Foreign currency translation differences - foreign operations | 8,833 | 18,654 | |
| Total other comprehensive income for the period | 8,833 | 18,654 | |
| Total comprehensive (loss) / income for the period | (2,433) | 8,410 | |
| Net Loss per share | Cents | Cents | |
| Basic profit / (loss) per share (cents per share) | (2.00) | (1.82) | |
| Diluted profit / (loss) per share (cents per share) | (2.00) | (1.82) | |
The notes contained in the full version of the Interim Financial Report form part of these consolidated financial statements, a copy of which is available from www.asx.com.au and on the company’s website: www.baseresources.com.au.
3. Consolidated Condensed Statement of Financial Position as at 31 December 2015
| 31 December 2015 | 30 June 2015 | ||
|---|---|---|---|
| Note | $000s | $000s | |
| Current assets | |||
| Cash and cash equivalents | 12,446 | 40,906 | |
| Restricted cash | 4 | 24,239 | - |
| Trade and other receivables | 5 | 54,960 | 54,481 |
| Inventories | 6 | 33,720 | 31,584 |
| Other current assets | 5,917 | 5,853 | |
| Total current assets | 131,282 | 132,824 | |
| Non-current assets | |||
| Capitalised exploration and evaluation | 1,510 | 1,432 | |
| Property, plant and equipment | 7 | 418,556 | 420,983 |
| Restricted cash | 4 | - | 6,532 |
| Total non-current assets | 420,066 | 428,947 | |
| Total assets | 551,348 | 561,771 | |
| Current liabilities | |||
| Trade and other payables | 8 | 21,404 | 21,866 |
| Borrowings | 9 | 58,880 | 70,057 |
| Provisions | 1,210 | 1,239 | |
| Deferred revenue | 1,270 | 2,159 | |
| Other liability | 221 | 636 | |
| Total current liabilities | 82,985 | 95,957 | |
| Non-current liabilities | |||
| Borrowings | 9 | 214,671 | 211,812 |
| Provisions | 29,026 | 27,313 | |
| Deferred revenue | 4,860 | 5,171 | |
| Total non-current liabilities | 248,557 | 244,296 | |
| Total liabilities | 331,542 | 340,253 | |
| Net assets | 219,806 | 221,518 | |
| Equity | |||
| Issued capital | 10 | 214,131 | 214,131 |
| Reserves | 58,532 | 49,706 | |
| Accumulated losses | (52,857) | (42,319) | |
| Total equity | 219,806 | 221,518 |
The notes contained in the full version of the Interim Financial Report form part of these consolidated financial statements, a copy of which is available from www.asx.com.au and on the company’s website: www.baseresources.com.au.
4. Consolidated Condensed Statement of Changes in Equity for the Six Months Ended 31 December 2015
| Issued capital |
Accumulated losses | Share based payment reserve | Foreign currency translation reserve |
Total | |
|---|---|---|---|---|---|
| $000s | $000s | $000s | $000s | $000s | |
| Balance at 1 July 2014 | 213,669 | (26,742) | 2,752 | 13,333 | 203,012 |
| Loss for the period | - | (10,244) | - | - | (10,244) |
| Other comprehensive income | - | - | - | 18,654 | 18,654 |
| Total comprehensive income / (loss) for the period | - | (10,244) | - | 18,654 | 8,410 |
| Transactions with owners, recognised directly in equity | |||||
| Share based payments | 462 | 462 | 1,803 | - | 2,727 |
| Balance at 31 December 2014 | 214,131 | (36,524) | 4,555 | 31,987 | 211,999 |
| Balance at 1 July 2015 | 214,131 | (42,319) | 7,037 | 42,669 | 221,518 |
| Loss for the period | - | (11,266) | - | - | (11,266) |
| Other comprehensive income | - | - | - | 8,833 | 8,833 |
| Total comprehensive income / (loss) for the period | - | (11,266) | - | 8,833 | (2,433) |
| Transactions with owners, recognised directly in equity | |||||
| Share based payments | - | 728 | (7) | - | 721 |
| Balance at 31 December 2015 | 214,131 | (52,857) | 7,030 | 51,502 | 219,806 |
The notes contained in the full version of the Interim Financial Report form part of these consolidated financial statements, a copy of which is available from www.asx.com.au and on the company’s website: www.baseresources.com.au.
5. Consolidated Condensed Statement of Cash Flows for the Six Months Ended 31 December 2015
| 6 months to 31 December 2015 |
6 months to 31 December 2014 |
||
|---|---|---|---|
| Note | $000s | $000s | |
Cash flows from operating activities |
|||
| Receipts from customers | 76,217 | 53,560 | |
| Payments in the course of operations | (49,365) | (49,243) | |
| Other | (95) | (69) | |
| Net cash from operating activities | 14 | 26,757 | 4,248 |
| Cash flows from investing activities | |||
| Purchase of property, plant and equipment | (3,117) | (4,729) | |
| Other | (323) | (9) | |
| Net cash used in investing activities | (3,440) | (4,738) | |
| Cash flows from financing activities | |||
| Repayment of borrowings | (19,209) | - | |
| Net payments to restricted cash | (17,379) | - | |
| Payments for debt service costs and re-scheduling fees | (17,533) | (10,235) | |
| Net cash used in financing activities | (54,121) | (10,235) | |
| Net decrease in cash held | (30,804) | (10,725) | |
| Cash at beginning of period | 40,906 | 20,945 | |
| Effect of exchange fluctuations on cash held | 2,344 | 2,495 | |
| Cash at end of period | 12,446 | 12,715 |
The notes contained in the full version of the Interim Financial Report form part of these consolidated financial statements, a copy of which is available from www.asx.com.au and on the company’s website: www.baseresources.com.au.
ENDS
CORPORATE PROFILE
Directors
Keith Spence (Non-Executive Chairman)
Tim Carstens (Managing Director)
Colin Bwye (Executive Director)
Sam Willis (Non-Executive Director)
Michael Anderson (Non-Executive Director)
Michael Stirzaker (Non-Executive Director)
Malcolm Macpherson (Non-Executive Director)
Company Secretary
Chadwick Poletti
NOMINATED ADVISOR & BROKER
RFC Ambrian Limited
As Nominated Adviser:
Andrew Thomson / Stephen Allen
Phone: +61 (0)8 9480 2500
As Broker:
Jonathan Williams
Phone: +44 20 3440 6800
SHARE REGISTRY: ASX
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
PERTH WA 6000
Enquiries: 1300 850 505 / +61 (3) 9415 4000
www.computershare.com.au
SHARE REGISTRY: AIM
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
BRISTOL BS99 6ZZ
Enquiries: +44 (0) 870 702 0003
www.computershare.co.uk
AUSTRALIAN MEDIA RELATIONS
Cannings Purple
Warrick Hazeldine / Annette Ellis
Email:whazeldine@canningspurple.com.au /
aellis@canningspurple.com.au
Phone: +61 (0)8 6314 6300
UK MEDIA RELATIONS
Tavistock Communications
Jos Simson / Emily Fenton
Phone: +44 (0) 207 920 3150
KENYA MEDIA RELATIONS
Africapractice (East Africa)
Evelyn Njoroge / James Njuguna/Joan Kimani
Phone: +254 (0)20 239 6899
Email:jkimani@africapractice.com
PRINCIPAL & REGISTERED OFFICE
Level 1, 50 Kings Park Road
West Perth, Western Australia, 6005
Email: info@baseresources.com.au
Phone: +61 (0)8 9413 7400
Fax: +61 (0)8 9322 8912
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