Base Resources : 01/05/2019 Mineral Resource for Kwale North Dune deposit (1.2 MiB) View Document

ASX, AIM and Media Release

1 May 2019

Mineral Resource for Kwale North Dune deposit

Highlights

•The Kwale North Dune Mineral Resources estimate is 171 million tonnes at an average HM grade of 1.5% and contains 2.6Mt HM, based on a 1% HM cut-off grade.

•The Kwale North Dune Mineral Resource is considered to have the potential to add mine life to the Company's existing Kwale Operations.

•Base Resources will shortly commence a concept study to confirm a business case, followed by a pre-feasibility study to determine the economics, and therefore viability, of any mine life extensions.

•Drilling on the North Dune will continue in 2019, aimed at increasing Mineral Resources in the Measured and Indicated categories as well as furthering our understanding of the resource.

African mineral sands producer, Base Resources Limited (ASX & AIM: BSE) (Base Resources or the Company) is pleased to release the maiden JORC 2012 North Dune Mineral Resources estimate (the 2019 Kwale North Dune Mineral Resource) at its 100% owned and operated Kwale Operations in Kenya.

The Kwale Operation is currently based on the Central Dune and South Dune deposits, with mining operations to date focused on the Central Dune. A transition to the South Dune deposit is scheduled for June 2019. On the basis of current Ore Reserves, Kwale Operations will continue until mid-2022, which will be extended to mid-2024 subject to approval of the South Dune mining lease variation currently before the Kenyan Government.

The North Dune deposit was acquired by the Company as part of the acquisition of the Kwale Project in mid-2010 but was excluded from the project's Mineral Resources on the basis of grade and then prevailing economic conditions. A decision was taken to reevaluate the potential of the North Dune in 2018 in light of improved economic conditions, refined resource definition methodology and with insights gained from five years of operations on the Central Dune. The 2019 Kwale North Dune Mineral Resources estimate incorporates the results of an extensional and infill drill program completed in 2018 (refer to the Company's announcements on 25 July 20181 and 18 October 20182) as well as earlier programs.

The 2019 Kwale North Dune Mineral Resource is estimated to be 171 million tonnes (Mt) at an average heavy mineral (HM) grade of 1.5% and 38% slimes (SL) and containing 2.6Mt HM, based on a 1% HM cut-off grade. The high slimes content is likely to make the resource amenable to hydraulic mining as is currently employed at the Kwale Operations. Mining activity on the North Dune deposit would only require minimal capital expenditure due to the close proximity of the existing Kwale Operations processing facilities.

With the expectation that the resource will support modest extensions to the Kwale Operations, a further drilling program will now be completed on the North Dune deposit to allow a better understanding of the resource and a study phase commenced to assess the economics of potential mine life extensions. This will proceed in parallel with the ongoing drilling programs in the Vanga and Kwale East zones in pursuit of further mine life extensions.

1Refer to Base Resources' ASX announcement "Quarterly Activities Report - June 2018" released on 25 July 2018, which is available at http://www.baseresources.com.au/investor-centre/asx-releases/.

2Refer to Base Resources' ASX announcement "Quarterly Activities Report - September 2018" released on 18 October 2018, which is available at http://www.baseresources.com.au/investor-centre/asx-releases/.

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Table 1: 2019 Kwale North Dune Mineral Resources estimate at a 1% HM cut-off.

			2019 Kwale North Dune Mineral Resources
				as at 1 May 2019
Category	Material	In Situ HM	HM	SL	OS		HM Assemblage
						ILM		RUT		ZIR
	(Mt)	(Mt)	(%)	(%)	(%)	(%)		(%)		(%)
Measured	-	-	-	-	-	-		-		-
Indicated	136	2.1	1.5	38	2	45		12		5
Inferred	34	0.5	1.4	36	3	46		13		6
Total	171	2.6	1.5	38	2	45		12		5

Table subject to rounding errors, resources estimated at a 1% HM cut-off grade.

Figure 1: 2019 Kwale North Dune Mineral Resource grade tonnage curve (corelates with Table 1 data)

In addition, some potentially valuable mineralisation was identified in the lower sandstone unit (which normally forms the basement to the Kwale Central Dune and South Dune deposits), see Table 2. The mineralogy of this unit is quite different to the much younger overlying units reported in Table 1. If it were to be mined, its saleable products would likely only be rutile and zircon. A titano-haematite mineral is also present, but due to its low TiO2 content it is not currently considered to be marketable.

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Table 2: 2019 Kwale North Dune lower sandstone unit (zone 10) Mineral Resources estimate at a 1% HM cut-off.

			2019 Kwale North Dune Mineral Resources
				as at 1 May 2019
Category	Material	In Situ HM	HM	SL	OS		HM Assemblage
						Ti-Haem.		RUT		ZIR
	(Mt)	(Mt)	(%)	(%)	(%)	(%)		(%)		(%)
Measured	-	-	-	-	-	-		-		-
Indicated	-	-	-	-	-	-		-		-
Inferred	61	1.5	2.5	42	2	45		7		3
Total	61	1.5	2.5	42	2	45		7		3

Table subject to rounding errors, resources estimated at a 1% HM cut-off grade.

Mineral Resources are reported in accordance with the JORC Code (2012 edition). Accordingly, the information in these sections should be read in conjunction with the respective explanatory Mineral Resources information included in Appendix 1.

Supporting information

The supporting information below is provided in accordance with Chapter 5 of the ASX Listing Rules.

Section 1, Section 2 and Section 3 of JORC Table 1 can be found in Appendix 1.

Requirements applicable to the Mineral Resources estimate

A summary of the information used to prepare the 2019 Kwale North Dune Mineral Resources estimate as presented in this report is as follows.

The Kwale Project was initially owned by Tiomin Resources Inc. (Tiomin) who conducted drilling in 1997 to establish Mineral Resources estimates for the Central Dune, South Dune and North Dune deposits. Base Resources purchased the Kwale Project in mid-2010. At the time, Base Resources excluded the North Dune deposit from the project on the basis of HM grade and then prevailing economic conditions.

The Kwale North deposit is located on prospecting licence 2018-0119 comprising an area of 88.7km2 (formerly special prospecting licence 173) which is located approximately 50 kilometres south of Mombasa and approximately 10 kilometres inland from the Kenyan coast. The deposit is immediately north of the operating Kwale Central Dune mine and the plant and infrastructure comprising the Kwale Operations. The Kwale Operations currently comprise two areas that contain economically viable concentrations of heavy minerals on Special Mining Lease 23, being the Central Dune and the South Dune (Figure 2).

The rocks of the area are of sedimentary origin and range in age from Upper Carboniferous to Recent. Three divisions are recognised: the Cainozoic rocks, the Upper Mesozoic rocks (not exposed within the area) and the Duruma Sandstone Series giving rise to the dominant topographical feature of the area: the Shimba Hills. The Shimba grits and Mazeras sandstone are of Upper Triassic age and form the Upper Duruma Sandstone.

The Magarini sands form a belt of low hills running parallel to the coast. They rest with slight unconformity on the Shimba grits and Mazeras sandstone. This formation was deposited during Pliocene times and consists mainly of unconsolidated fluviatile sediments derived from the Duruma Sandstone Series.

The Kwale deposits are an aeolian subset of the Magarini sands and are generally poorly stratified and contain a fraction of silt of around 25%. Heavy minerals, mainly ilmenite, rutile and zircon, are locally concentrated and are abundant in some places, giving rise to the deposits.

The geological interpretations for the Kwale North Dune deposit considered the data in the drill logs, HM assay results, microscopic logging of HM sinks, detailed mineralogy and knowledge gained from mining the Central Dune deposit. Five geological domains have been identified at the Kwale North Dune deposit. These were used and honoured during the geological modelling (Figure 3).

The uppermost zone at the Kwale North Dune deposit, referred to as Ore Zone 1, is a dark brown, predominantly fine grained, well sorted silty sand with very little induration and is similar to the Ore Zone 1 units in the other Kwale deposits. Mineralogically it is

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characterised by clean, glossy and rounded HM grains with an average VHM content of ~75% VHM.

Ore Zone 4 lies below Ore Zone 1 with an indurated paleo-surface separating the two zones, as observed in the field through difficult drill bit penetration; and in HM sink logs, exhibiting elevated iron oxides. The Ore Zone 4 host is higher in slimes with difficult washability and the grain sorting is generally poor. It is slightly lower in valuable heavy mineral (VHM) content, often with elevated iron oxides and alumino-silicate minerals (kyanite, andalusite and sillimanite). Ore Zone 4 is considered a fluvial deposit based on the difficulty of wash and the poor grain sorting.

Ore Zone 5 lies below Ore Zone 4 and is separated from the former by a lateritic paleo-surface and is also hosted in a fluviatile clay-rich, poorly sorted formation. It is distinguished mineralogically by an increased amount of almandine garnet that reports to the magnetic fraction, significantly increasing magnesium, manganese, aluminium and silicon in the oxide chemistry. As a result of this it has a notably lower average VHM content (44%).

Ore Zone 10 lies below Ore Zone 5 and is typically hosted in weathered variants of the Mesozoic (Permo-Triassic) Duruma Sandstones. Its mineralogy is predominantly titano-haematite (<40% TiO2) with zircon enrichment in the non-magnetic fraction.

For Ore Zones 1, 4 and 5, a strong correlation between the field logs, HM sink logs and XRF oxide chemistry and QEMSCAN mineralogy gives confidence to these interpretations.

Following acquisition of the Kwale Project, subsequent resource drilling by Base Resources was completed using the reverse circulation, air core (RCAC) method and conducted in three campaigns: November 2010, December 2012 to April 2013 and June to October 2018 (Figure 5).

The predominantly 3 m sample intervals in the 2010 and 2012/13 drilling was replaced by sampling at 1.5 m intervals for the 2018 drill program to provide greater control on geological boundaries. Sample size averages close to 3 kg at this sample interval when collecting 25% of the rotary splitter cycle. Samples are dried, weighed, and screened for material less than 45 µm (slimes) and +1 mm (oversize).

Approximately 100 grams of the screened sample is subjected to a HM float/sink technique using the heavy liquid, lithium polytungstate (LST with an SG of 2.85 gcm-3). The resulting HM concentrate is dried and weighed as are the other separated constituent size fractions (the minus 45 µm material being calculated by difference).

Mineral assemblage analyses were conducted by Base Resources to characterise the mineralogical and chemical characteristics of specific mineral species and magnetic fractions. These mineral assemblage samples were subjected to magnetic separation using a Mineral Technologies induced-roll magnetic separator which captures magnetic (mag), middling (mid) and non-magnetic(non-mag) fractions. The mid and mag fractions are combined and, with the non-mag fraction, are subjected to XRF analysis using a Bruker, S8 Tiger XRF.

Data from the mag and non-mag XRF analyses are processed through the Minmod algorithm that runs approximately 100,000 iterations in assigning key chemical species to a calculated mineralogy determination.

Drill hole collar and geology data is captured by industry-specific, field logging software with on-board validation. Field and assay data are managed in a MS Access database and subsequently migrated to a more secure SQL database.

Standard samples were generated and certified for use in the field and laboratory. Accuracy of HM and SL analysis was verified by using the standard samples and monitored using control charts. Standard errors greater than three standard deviations from the mean prompted batch re-assay. A standard precision analysis was conducted on the key assay fields: HM, SL and Oversize (OS) for both laboratory and field duplicate samples. Normal scatter and QQ plots were prepared for HM, SL and OS for laboratory and field duplicates.

A twin drilling program was introduced for the 2018 program to quantify short-range variability in geological character and grade intersections. A water injection versus dry drilling assessment was included in the twin drilling analysis. Field and laboratory duplicate, standard and twin drilling analysis show adequate level of accuracy and precision to support resource classifications as stated.

A topographic DTM was based on a LIDAR survey.

Construction of the geological grade model was based on coding model cells below open wireframe surfaces, comprising topography, geology (Ore Zones 1, 4, 5 and 10) and basement (Figure 3). Model cell dimensions of 50 m x 50 m x 1.5 m in the XYZ orientations were utilised.

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Interpolation was undertaken using various sized search ellipses to populate the model with primary grade fields (HM, SL and OS), and index fields (hardness, induration percent, composite ID). Inverse distance weighting to a power of three was used for primary assay fields whilst nearest neighbour was used to interpolate index fields.

A fixed bulk density of 1.7 (t/m3) was applied to the 2019 Kwale North Dune Mineral Resources model. This bulk density was selected based on operational experience in the Kwale Central Dune deposit and because no bulk density sampling was undertaken. This is considered to be a conservative estimate of bulk density.

The Kwale North Dune deposit, being similar in nature to the Kwale Central Dune deposit currently being mined, is considered amenable to being mined and processed in the same way. That is, by using the existing plant and equipment at the Kwale Operations: hydraulic mining, spiral concentrator and mineral separation plant with magnetic, electrostatic and further gravity separation.

The criteria used for classification was primarily the drill spacing (predominantly 100 m x 100 m) and sample interval (predominantly

1.5m), with consideration also given to the continuity of mineral assemblage information. The estimates presented herein used a

1% HM bottom cut because the economic cut-off grade at the nearby Kwale Central Dune deposit mine is near to this, and resource estimates for the Kwale Operation have historically been reported at this cut-off grade.

Competent Person's Statement

The information in this report that relates to 2019 Kwale North Dune Mineral Resources is based on, and fairly represents, information and supporting documentation prepared by Mr. Greg Jones, who acts as Consultant Geologist for Base Resources and is employed by IHC Robbins. Mr. Jones is a Member of the Australasian Institute of Mining and Metallurgy and has sufficient experience that is relevant to the style of mineralisation and type of deposits under consideration and to the activity which he is undertaking to qualify as a Competent Person as defined in the 2012 Edition of the Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) and as qualified person for the purposes of the AIM Rules for Companies. Mr. Jones has reviewed this report and consents to the inclusion in this report of the Mineral Resources estimates and supporting information in the form and context in which it appears.

Forward Looking Statements

Information in this report should be read in conjunction with other announcements made by Base Resources to the ASX. No representation or warranty, express or implied, is made as to the fairness, accuracy or completeness of the information contained in this report (or any associated presentation, information or matters). To the maximum extent permitted by law, Base Resources and its related bodies corporate and affiliates, and their respective directors, officers, employees, agents and advisers, disclaim any liability (including, without limitation, any liability arising from fault, negligence or negligent misstatement) for any direct or indirect loss or damage arising from any use or reliance on this report or its contents, including any error or omission from, or otherwise in connection with, it.

Certain statements in or in connection with this report contain or comprise forward looking statements. By their nature, forward looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future and may be outside Base Resources' control. Accordingly, results could differ materially from those set out in the forward-looking statements.

Nothing in this report constitutes investment, legal or other advice. You must not act on the basis of any matter contained in this report but must make your own independent investigation and assessment of Base Resources and obtain any professional advice you require before making any investment decision based on your investment objectives and financial circumstances. This document does not constitute an offer, invitation, solicitation, advice or recommendation with respect to the issue, purchase or sale of any security in any jurisdiction.

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