Kwale Mineral Sands Project

Right sector. Right project. Right time.

Base Resources’ flagship project is the 100% owned Kwale Mineral Sands Project in Kenya. The Kwale Project is located 10 kilometres inland from the Kenyan cpast and 50 kilometres sould of mombasa, Kenya’s principal port facility. The project is well supported by existing physical infrastructure and enjoys a high level of support frm the Government of Kenya as well as the local community.

Base acquired Kwale in July 2010 from Vaaldiam Mining Inc, which had spent more than $US60 million to progress the project through resource definition, government approvals and Definitive Feasibility Studies (DFS). This meant the project was well advanced and has allowed Base to fast-track the project’s financing and development.

During the past financial year, Base completed a capital cost update on the original DFS as well as a Process Design Review study. This study identified and evaluated a range of design and concept changes that provided the basis and scope of the Enhanced Definitive Feasibility Study (EDFS) completed during the year.

The EDFS, which built on the word completed by Vaaldiam and incorporated a suite of improvements identified through the Process Design review, was completed in May 2011. The outcome of the EDFS was significantly improved project, both in terms of returns and risk profile, and a sound basis on which to proceed with the project development.

The foundation of the EDFS was an updated JORC-compliant resource estimate released in February, following the completion of an extensive drilling program. The updated estimate included an increase in resource tonnes, contained mineral and value of the mineral assemblage. This Resource has resulted in an Ore Reserve estimate of 140.6 million tonnes at 4.9% THM and, on the basis of this Reserve, the Kwale mine lift was increased from 11 to 13 years.

The major features of the EDFS were:

• capital cost estimate of US$256 million (including a US$20 million project contingency).
• project payback period of 23 months.
• post-tax project NPV₁₀ (real) of US$395 million and an IRR of 42%.
• life of mine free cash flow (post tax real) of US$930 million.

With development financing secured, Base has now commenced project implementation activities and is targetting first production and shipment in the second half of 2012. Indicative key milestones in the implementation schedule include:

• Commence EPCM detailed design: Oct 2011
• Site earthworks commence: April 2012
• Wet Concentrator Plant (WCP) at practical completion: Q2 2013
• Mineral Separation Plant (MSP) at practical completion: Q3 2013
• Commissioning: Q3 2013
• Port ready to receive concentrate: Q3 2013
• First shipment: Q4 2013