Base picks up mineral sands project in Madagascar, taps investors for $100M
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Dual-listed mineral sands producer Base Resources has put its foot on more mineral sands-prospective land in Africa for $75 million.
Base (ASX/AIM:BSE) plans to acquire an initial 85 per cent stake in the Toliara project in Madagascar through the wholly owned Mauritian subsidiaries of World Titane Holdings Ltd.
The project hosts a 857 million tonne resource comprising ilmenite, zircon and rutile — sufficient to support an more than 40-year mine life at a similar scale to the company’s Kwale operation in Kenya.
Kwale came into production in late 2013 and over the first six years is ramping up to an annual output of 360,000 tonnes of ilmenite, 80,000 tonnes of rutile and 30,000 tonnes of zircon.
Ilmenite is the main source of titanium dioxide, which is used in paints, fabrics, plastics, paper, sunscreen, food and cosmetics.
Zircon, meanwhile, has a high melting point, making it ideal for use in engines, electronics, spacecraft and the ceramics industry. Rutile is also used in the manufacture of ceramics, as a pigment, and for the production of titanium metal.
While mineral sands prices have fallen substantially from the historical peak they reached in 2011-2012, they are recovering from recent lows.
Demand is tightly tied to global GDP and with orebodies maturing and grade declining, supply is becoming more constrained.
Mineral sands price momentum is likely to continue, benefiting from the ongoing property fit-out demand in China, UBS said in its recent 2018 outlook.
To fund the acquisition of the Toliara project, Base plans to hit new investors and shareholders up for $100 million via a partially underwritten placement and accelerated rights issue at 25.5c per share.
The project already has a mining lease and environmental approval. Base estimates it can have the project in production in mid-2021.
“World Titane — the successor to the formerly ASX-listed World Titanium Resources Limited — has invested significantly in progression of the Toliara sands project over a number of years,” Base managing director Tim Carstens said.
“This is a transformational acquisition for Base Resources and represents a significant step in execution of the company’s strategic plan.”
Base can acquire the remaining 15 per cent interest by stumping up $17 million once certain milestones have been met during the project’s development.
The deal is conditional only on the company completing an equity raising for a minimum of $80 million to partially fund the acquisition costs.
Once the acquisition is wrapped up, Base will complete a full study phase ahead of a decision to proceed to construction in the second half of 2019.