Base Resources BSE Toliara 2

Base Resources (ASX:BSE) has been quite active in Madagascar lately, and this has now resulted in the publication of a pre-feasibility study on the Toliara mineral sands project on the island.

The economic study calls for an initial capex of just US$439M to build a 13 million tonnes per year processing operation, which could be expanded to 19M tpa for an additional capex of just US$67M. Considering the very large resources at Toliara (according to the PEA approximately 588 million tonnes will be mined but the project contains a total resource of almost 1.3 billion tonnes), the total mine life is estimated at 33 years for a cumulative production of 25.7 million tonnes of ilmenite (divided into sulphate, slag and chloride ilmenite products with slag and chloride commanding premium prices for its higher ilmenite content). On top of that, Toliara is expected to produce 1.73 million tonnes of zircon and 266,000 tonnes of rutile.

The operating cost should be low at just US$4.49 per tonne mined and a total production cost of $95/t which should result in a cash margin of almost $200t. This results in an economic study with a NPV10% of US$671M on an after-tax basis and an Internal Rate of Return of 22.4% with a 4 year payback period.

Base Resources BSE Toliara 1

Base is now planning a 20,000 meter drill program to further convert inferred resources (roughly 500 million tonnes) into the measured and indicated categories, to drill the potential western extensions to the current resources and to have a better understanding of variability within the planned Toliara pit.  Base Resources expects to complete a Definitive Feasibility Study by the end of this year and this should be followed by an investment decision early next year and production by the end of 2021. But of course, this is the mining sector, so let’s already (mentally) apply a 1.5-2 year delay to the planned schedule.

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The author has no position in Base Resources. Please read the disclaimer

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