Base Resources Limited

BSE Details

PFS Supporting Extension of Kwale Mine Life: Base Resources Limited (ASX: BSE) is primarily involved in the production of mineral sands. The company recently completed a prefeasibility study (PFS) on Bumamani and Kwale North Dune deposits. The PFS has highlighted that it is economically feasible to mine smaller, higher-grade subsets of the deposits and it could extend the mine life of Kwale Operations by 7.5 months to July 2024.

FY21 Result Highlights: During FY21, the company witnessed decent demand for all mineral sands products which supported price improvement for ilmenite. Highlights for FY21 results are as follows:

• Decline in Revenue: The revenue for FY21 stood at US$198.2 million, down by 5% on the previous year, with reduced production partially offset by price increases.
• Decline in NPAT: Net profit after tax for FY21 stood at US$11.0 million, down from US$39.6 million, impacted by Kenyan dividend withholding tax of US$9.0 million incurred on repatriation of surplus cash from operations to the company.
• Repayment of Debt: During the year, the company made full repayment and early retirement of the US$75.0 million Revolving Credit Facility.
• Cash and Debt Scenario: As at 30 June 2021, the company had cash of US$64.9 million and nil debt.

Revenue Trend (Source: Analysis by Kalkine Group)

Key Risks: The company is exposed to the risk related to the fluctuations in product prices and exchange rates. Further, it is also exposed to the risk related to the changes in the regulatory environment and other government actions.

Outlook: Looking ahead, the company is focused on finalising mining tenure arrangements for Kwale South Dune extension. For FY22, the company expects the rutile production to be in the range of 73,000 to 83,000 tonnes and Ilmenite production to be between 310,000 to 340,000 tonnes. The production for Zircon is expected to be between 24,000 to 28,000 tonnes.

Stock Recommendation: Over the last one month, the stock has provided a return of ~14.28% and is currently inclined towards its 52-week high price of $0.335. Considering the decent return in the last one-month, technical analysis as mentioned below, current trading level, decline in top and bottom line for FY21, and uncertainty surrounding the fluctuations in product prices and exchange rates, we suggest investors to book profit and give a “Sell” rating to the stock at the current market price of $0.3225, as on 6 September 2021, 11:30 PM (GMT+10), Sydney, Eastern Australia.

Technical Overview:

BSE's prices recently broke a resistance level of AUD 0.310 on an upside and now facing stiff resistance of AUD 0.335 level, indicating the possibility of a downside correction from current levels. On the daily chart, the leading indicator RSI (14-period) is trading at ~65.22 level and moving towards an overbought zone. An immediate support level for the stock appears at AUD 0.290.

BSE Daily Technical Chart, Data Source: REFINITIV

Note: The purple color line in the chart depicts RSI (14-period).

Note 1: The reference data in this report has been partly sourced from REFINITIV.

Note 2: Investment decision should be made depending on the investors’ appetite on upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting from the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above.

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