More annual reports from Base Resources:
2020 ReportBUILDING A
UNIQUE MINERAL
SANDS COMPANY
ANNUAL REPORT 2019
Contents
FY19 Highlights and achievements
Chairman’s letter
Year at a glance
Operating and Financial Review
Operations
Business development
Sustainability
Markets
Corporate
Resources and Reserves
Directors’ Report
Remuneration Report
Corporate Governance
Lead Auditor’s Independence Declaration
Financial Statements and Notes
Consolidated statement of profit or loss and other comprehensive income
Consolidated statement of financial position
Consolidated statement of changes in equity
Consolidated statement of cash flows
Notes to the consolidated financial statements
Directors’ Declaration
Independent auditor’s report
Additional shareholder information
Glossary
Corporate directory
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Forward Looking Statements
Certain statements made in or in connection with this Annual Report
contain or comprise forward-looking statements, including but not
limited to statements regarding capital cost, capacity, future production
and grades, sales projections and financial performance of Kwale
Operations and the Toliara Project, estimated mineral resources and
ore reserves, trends in commodity prices and currency exchange rates,
demand for commodities (in particular mineral sands), plans, strategies
and objectives of management, operating costs, anticipated production
life of Kwale Operations, provisions and contingent liabilities and tax
and regulatory developments.
Forward-looking statements involve known and unknown risks, uncertainties,
assumptions and other factors that are beyond Base Resources’ control.
No representation, warranty, assurance or guarantee can be given that such
forward-looking statements will in fact be achieved or prove to be correct.
Results or outcomes could differ materially from those expressed or implied
by the forward-looking statements as a result of, among other factors,
changes in economic and market conditions, success of business and
operating initiatives and strategies, changes in the regulatory environment
and other government actions, fluctuations in product prices and exchange
rates and business and operational risk management. 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 Annual
Report or its contents, including any error or omission from, or otherwise
in connection with it.
Except as required by applicable regulations or by law, Base Resources
does not undertake to publicly update, review or release any revisions
to these forward-looking statements to reflect new information or future
events or circumstances.
Base Resources (ASX and AIM: BSE) is an Australian
based, African focused mineral sands producer and
developer with a demonstrated track record of project
delivery and operational performance.
The Company’s Kwale Operation in Kenya is a consistent
and efficient high margin operation. With mine life
extension and near mine exploration options being
pursued, there is opportunity for further value creation.
The Toliara Project in Madagascar continued to progress
with the pre-feasibility study confirming its status as one
of the best mineral sands development opportunities
in the world. With the definitive feasibility study on
track for completion in late 2019, and a planned final
investment decision in 2020, the project remains on
track to commence production in 2022.
Benefiting from a continued improving price environment
and consistent production at Kwale Operations, the
Company has achieved strong results during the
reporting period. This has enabled Base Resources to
become net debt free, establishing a robust financial
platform from which to grow the business and create
a truly unique mineral sands company.
BASE RESOURCES | INTRODUCTION | 1
FY19 Highlights and achievements
113.5
EBITDA
3.8
INVESTED IN COMMUNITY
AND ENVIRONMENT PROGRAMS
NET DEBT
Free
2 | BASE RESOURCES | ANNUAL REPORT 2019
2.6:1
KWALE OPERATIONS REVENUE
TO COST OF SALES RATIO
0
TOTAL RECORDABLE INJURY
FREQUENCY RATE OF ZERO -
NO LOST TIME DUE TO INJURY
SINCE 2014
TOLIARA PROJECT PRE-FEASIBILITY STUDY COMPLETED
671 133
AVERAGE ANNUAL FREE CASH FLOW
NPV10
BASE RESOURCES | FY19 HIGHLIGHTS AND ACHIEVEMENTS | 3
Chairman’s letter
Dear Shareholders
This was another significant year for Base Resources, with our highly
productive Kwale Operation in Kenya continuing to deliver and the
world class Toliara Project in Madagascar on schedule to commence
operations in 2022. With this high-quality asset portfolio and a track
record of excellence in safety and operations, community engagement
and environmental stewardship, we are building a truly unique mineral
sands company.
Medium and long-term dynamics for our products continue
to be encouraging with strong global demand and restricted
supply. These market conditions supported steady price
improvement for rutile and ilmenite throughout the year while
zircon prices stabilised following prior increases. In the longer
term, structural supply shortfalls require new projects to be
developed in the coming years and present exciting strategic
opportunities for Base Resources as an established and
experienced mineral sands producer.
Kwale Operations continued to perform well with the Company
focusing on maximising mineral recoveries under a high
tonnage, low grade regime as the fringes of the Central Dune
were mined and the orebody fully depleted. Mining operations
were successfully transitioned to the South Dune towards the
end of the reporting period - another meticulously planned and
executed capital project, and a testament to the capability of
the Group’s operational and project teams.
Most importantly, the above outcomes were achieved with
an uncompromising focus on the safety, health and wellbeing
of our employees, contractors and communities. One of the
Company’s most significant highlights was a Total Recordable
Injury Frequency Rate of zero at the end of the financial year,
with no medical treatments. The Kwale Operation has not had
a lost time injury since February 2014 and our employees and
contractors have now worked 17.0 million man-hours lost time
injury free. This is a remarkable achievement for any mining
operation in any jurisdiction.
Kwale Operations also continued to set a high benchmark in
regard to sustainability with over 77,000 trees planted since
operations commenced and over 3,000 farmers participating
in our agricultural livelihood programs. Significantly, of
the 1,141 people employed by Base Resources at Kwale
Operations, 98% are now Kenyan nationals with 70% drawn
from Kwale County.
Our strong operational performance, combined with a
healthy pricing environment, allowed the Company to
achieve record revenue of US$209.5 million. This result,
along with our low operating costs and focus on efficiency
led to EBITDA of US$113.5 million and a net profit after tax
of US$39.2 million. Strong cashflow enabled the Company
to end the year US$19.2 million net cash positive after
repaying US$72.5 million of debt.
The Company remains focused on Kwale mine life extension
to maximise value creation for employees, the community,
the nation of Kenya and shareholders. A number of mine
life extension and near mine exploration options are being
pursued and completion of the extended South Dune mining
tenure continues to progress. A Mineral Resources estimate
for the Kwale North Dune deposit was released in the period
with a study phase now underway to assess the economics
of potential mine life extension.
In conjunction with delivering excellence at Kwale, the Company
made significant progress in development of the Toliara Project
in Madagascar, our next major growth opportunity. Following
acquisition of the project in January 2018, an accelerated study
phase saw the release of the pre-feasibility study (PFS) in March
2019. With a NPV10 of US$671 million, annual free cash flow
generation of US$133 million and a sector leading average revenue
to cost ratio of 3.06, the PFS confirmed our view that the Toliara
Project is a world class mineral sands development opportunity.
The Toliara Project is also gaining significant momentum on
the ground with 5,500 local men and women registering to
qualify for participation in a wide range of training programs
including heavy mobile equipment operation, brickmaking,
bricklaying and plastering. In addition, 25 local Malagasy
apprentices are preparing to temporarily relocate to Kenya to
train at our Kwale Operations.
4 | BASE RESOURCES | ANNUAL REPORT 2019
Work on the definitive feasibility study (DFS) commenced during
the year and is on target for completion by the end of 2019,
ahead of a planned decision to proceed to construction in 2020.
Financing arrangements for the Toliara Project development are
progressing in parallel with the DFS. If a decision to proceed is
approved on this schedule, the project timetable is expected to
have the Toliara Project in production by 2022.
In the Toliara Project, we are confident that we have one of
the best undeveloped mineral sands assets in the world but,
Base Resources remains alert to additional opportunities
to further build our portfolio of assets, capitalise on our
strengths and build an attractive investment profile.
I believe Base Resources is now very well positioned to
create further shareholder value.
Kwale Operations is a consistent and strong cash generator
with extensional potential, the Toliara Project is an exciting
development opportunity, market conditions are supportive,
and we have an outstanding team with a recognised reputation
for successful mineral development.
I’d like to thank the Board, our employees, suppliers, local
communities and host governments for their steadfast
support and commitment. Finally, thank you to you, our
shareholders, for your confidence, and patience. We
appreciate your ongoing support as we continue to build
a truly unique mineral sands company.
Keith Spence,
Chair
Dated: 24 August 2019
BASE RESOURCES | CHAIRMAN'S LETTER | 5
Year at a glance
Kwale Operations
Kenya
Operational asset producing
rutile, ilmenite and zircon.
Toliara Project
Madagascar
Mineral sands development
project with definitive feasibility
study progressing.
Base Resources
Perth
Company headquarters.
Production
402,698
TONNES OF ILMENITE
92,393
TONNES OF RUTILE
31,941
TONNES OF ZIRCON
Full year results financial summary
US$M
REVENUE
EBITDA
DEPRECIATION AND AMORTISATION
EBIT
FINANCING COSTS
INCOME TAX EXPENSE
NPAT
EARNINGS PER SHARE (US CENTS)
REVENUE/COST OF SALES RATIO
6 | BASE RESOURCES | ANNUAL REPORT 2019
FY19
FY18
209.5
113.5
(52.1)
61.4
(11.6)
(10.7)
39.2
3.39
2.6
198.8
109.3
(47.4)
61.9
(18.5)
(9.4)
34.0
3.66
2.8
Historical Ilmenite/Rutile prices
FY19
R
U
T
I
L
E
U
S
$
P
E
R
T
O
N
N
E
1,300
1,000
700
400
100
Q 1 1 5
Q 2 1 5
Q 3 1 5
Q 4 1 5
Q 1 1 6
Q 2 1 6
Q 3 1 6
Q 4 1 6
Q 1 1 7
Q 2 1 7
Q 3 1 7
Q 4 1 7
Q 1 1 8
Q 2 1 8
Q 3 1 8
Q 4 1 8
Q 1 1 9
Q 2 1 9
Q 3 1 9
Q 4 1 9
Historical Zircon prices
FY19
1,600
1,200
800
400
Z
I
R
C
O
N
U
S
$
P
E
R
T
O
N
N
E
0
Q 1 1 5
Q 2 1 5
Q 3 1 5
Q 4 1 5
Q 1 1 6
Q 2 1 6
Q 3 1 6
Q 4 1 6
Q 1 1 7
Q 2 1 7
Q 3 1 7
Q 4 1 7
Q 1 1 8
Q 2 1 8
Q 3 1 8
Q 4 1 8
Q 1 1 9
Q 2 1 9
Q 3 1 9
Q 4 1 9
RUTILE
ILMENITE
ZIRCON
200
150
100
50
0
I
L
M
E
N
I
T
E
U
S
$
P
E
R
T
O
N
N
E
1,600
1,200
800
400
0
BASE RESOURCES | YEAR AT A GLANCE | 7
W
E
I
V
E
R
L
A
I
C
N
A
N
F
I
I
D
N
A
G
N
T
A
R
E
P
O
Operations
Base Resources operates the 100% owned Kwale Operation in Kenya,
which commenced production in late 2013. The Kwale Operation is located
50 kilometres south of Mombasa, the principal port facility for East Africa.
Processing
Mineral Separation Plant (MSP)
Performance
MSP feed (tonnes of heavy
mineral concentrate)
MSP feed rate (tph)
MSP recovery %
Ilmenite
Rutile
Zircon
Production (tonnes)
Ilmenite
Rutile
Zircon
Zircon low grade
2019
2018
702,082
753,801
84
102
101
76
91
100
100
77
402,698
464,988
92,393
31,941
519
91,672
37,157
1,425
The Kwale Operation is designed to process ore to recover three
main products: rutile, ilmenite and zircon. Mining operations are
predominantly hydraulic mining, which has proved to be cost
effective and well suited to the Kwale deposit. Ore is received
at the wet concentrator plant from the mining units via a slurry
pipeline. The wet concentrator plant removes slimes, concentrates
the valuable heavy minerals with a number of gravity separation
steps and rejects most of the non-valuable, lighter gangue
minerals to produce a heavy mineral concentrate. The heavy
mineral concentrate is then processed in the mineral separation
plant which cleans and separates the rutile, ilmenite and zircon
minerals into finished products for sale.
Mining
Mining volume increased 57% to 17.8 million tonnes in the
reporting period (the year ended 30 June 2019) compared
to the comparative period (the year ended 30 June 2018)
following implementation of the Kwale Phase 2 (KP2)
mine optimisation project in 2018. KP2 aimed to maximise
heavy mineral concentrate (HMC) feed to the mineral separation
plant (MSP) by increasing mining rates to counter ore grade
declines. The average mined ore grade was 3.90%, lower than
the comparative period (7.12%) due to mining on the remnant
outer fringes of the Central Dune as the ore body was fully
depleted in the reporting period. In June 2019, mining operations
were successfully transitioned to the South Dune orebody.
Mining and Wet Concentrator
Plant (WCP) Performance
2019
2018
Ore mined (tonnes)
17,822,324
11,332,668
Heavy mineral (HM) %
WCP heavy mineral concentrate
production (tonnes)
3.90
7.12
644,180
748,081
644,180 tonnes of HMC was produced in the reporting period,
lower than the comparative period (748,081 tonnes) due to the
lower heavy mineral grade of ore mined. The HMC stockpile
decreased to 20,010 tonnes at 30 June 2019 (comparative
period: 77,912 tonnes), following the drawdown of stocks during
the transition of mining operations to the South Dune orebody.
10 | BASE RESOURCES | ANNUAL REPORT 2019
The mineral separation plant continued to maintain high
throughput rates for much of the reporting period, though
the MSP feed rate was decreased from February 2019
onwards to ensure sufficient HMC stocks were available to
allow a continuous feed to the MSP during the June transition
of mining to the South Dune orebody. Total heavy mineral
concentrate feed in the reporting period was correspondingly
lower at 702,082 tonnes (comparative period: 753,801 tonnes).
Due to the reduced MSP feed in the reporting period,
production of ilmenite and zircon was lower than the
comparative period:
• Ilmenite production was 402,698 tonnes in the reporting
period (comparative period: 464,988 tonnes) with production
also affected by lower contained ilmenite in the feed.
• Rutile production was 92,393 tonnes in the reporting period
(comparative period: 91,672 tonnes) with higher contained
rutile in the feed offsetting a reduced feed rate.
• Zircon production was 31,941 tonnes for the reporting period
(comparative period: 37,157 tonnes) with production also
affected by lower contained zircon in the feed. Production
of a low-grade zircon product re-commenced in February
2019 from a previously rejected MSP tailings stream with
a contained 519 tonnes produced during the year.
Sales
Across each of its three products, the Company maintains a
balance of multi-year, annual and quarterly offtake agreements
with long term customers as well as a small proportion of
ongoing spot sales. These agreements, in place with some of
the world’s largest consumers of titanium dioxide feedstocks
and zircon products, provide certainty for the Kwale Operations
by securing minimum offtake quantities. Sales prices in these
agreements are derived from prevailing market prices, based
on agreed price indices or periodic price negotiations.
The Company continues its strong market presence in China,
the world’s largest market for both ilmenite and zircon, with
over 390,000 tonnes of ilmenite and over 25,000 tonnes of
standard zircon products sold into the Chinese market during
the reporting period.
The strength of the mineral sands market for all products has
ensured that sales continue to closely match production, with
minimal inventories being maintained.
Product Sales
Sales (tonnes)
Ilmenite
Rutile
Zircon
Zircon low grade
2019
2018
395,378
473,549
94,070
32,992
334
89,132
36,318
3,287
BASE RESOURCES | OPERATIONS | 11
12 | BASE RESOURCES | ANNUAL REPORT 2019
Business development
Business development remained a core focus with the Toliara Project
significantly progressed and opportunities to extend Kwale Operations
mine life pursued.
Toliara Project
The Company completed the acquisition of the Toliara Project
in January 2018 and is currently progressing the project
through a full study phase. The Toliara Project is founded on
the Ranobe deposit, located approximately 50 kilometres north
of the regional town of Toliara in south west Madagascar.
An updated Ranobe Mineral Resources estimate was released
in the reporting period increasing the contained heavy mineral
by 25% to 1.3 billion tonnes at 5.1% heavy mineral.
The release of the pre-feasibility study (PFS) for the Toliara
Project confirmed the Company’s view that the project is one
of the best mineral sands development opportunities in the
world. The PFS estimated post-tax/pre-debt (real) NPV10 of
US$671 million and a sector leading average revenue to cost
of sales ratio of 3.06 over the 33-year initial mine life1. Other
key estimated annual outputs of the PFS are:
• Production of 806kt ilmenite (sulphate, slag and chloride),
54kt zircon and 8kt rutile.
• Revenue of US$254 million.
• Operating costs of US$77 million or US$82 million
incl. 2% royalties.
• EBITDA of US$165 million and NPAT of US$110 million.
• Free cash flow of US$133 million.
A definitive feasibility study (DFS) for the Toliara Project
commenced in the reporting period and is on target for
completion in late 2019, ahead of a planned decision to
proceed to construction in 2020. On this schedule, it could
be expected that the Toliara Project would be brought into
production in 2022.
Kwale Operations extensional exploration
The Company released the Kwale North Dune Mineral Resources
estimate of 171 million tonnes at an average heavy mineral grade
of 1.5% in the year. With the expectation that the resource will
support modest extensions to Kwale Operations, further drilling
has been completed and a study phase has commenced to
assess the economics of potential mine life extensions.
Base Resources was granted a prospecting licence for the
136km2 Vanga area in December 2018 and exploratory drilling
commenced in April 2019. An extension of this prospecting
licence was also applied for in the period. Completion of the
remaining drilling program in the Kwale East area and the Vanga
area remains suspended pending resolution of community access
issues. Drill assay results to date have shown potential for some
limited extensional economic resource close to the Central Dune
(Bumamani), but this remains subject to more detailed evaluation.
Drilled Holes
Planned Holes
Central Dune
South Dune
North Dune
Kwale East
Mukurumudzi Dam
SML
Prospecting Tenure
N
Vanga Prospect
PL/2015/0042
PL/2018/0119
App/No/1753
1. For further information about the Toliara Project PFS outcomes including key assumptions and risks, refer to Base Resources’ market announcement on 21 March 2019
“Toliara Project PFS confirms status as a world-class mineral sands development” available at baseresources.com.au/investor-centre/asx-releases.
BASE RESOURCES | BUSINESS DEVELOPMENT | 13
0
5
10km
Sustainability
From project development through to operating mines, Base Resources
has adopted world-class, inclusive business practices seeking to minimise
any negative impacts and maximise positive outcomes of its operations
for its employees, its host communities and, more broadly, its host nations.
Local employment
Base Resources prioritises the recruitment of local people via
a system that is specifically designed to maximise employment
opportunities and project benefits for local communities.
Through a ‘fencing system’, established in consultation with
governments and local communities, Base Resources gives
preference to those residing in the immediate environs of a
mine with progressively lower priority given to those living
further away from the mine.
Base Resources complies with national legislation and
international best practice, specifically the International
Finance Corporation’s Performance Standards, the Equator
Principles, World Bank Group’s Environmental, Health and
Safety Guidelines, International Labour Organisation’s core
labour standards and the United Nations Voluntary Principles
on Security and Human Rights.
Employees
Safety
Base Resources is committed to safety and has entrenched a
best-practice safety culture across all of its operations. This was
evidenced by a Company-wide Lost Time Injury Frequency Rate
of zero in the reporting period, and with no medical treatment
injuries, a Total Recordable Injury Frequency rate of zero. Base
Resources employees and contractors have now worked more
than 17.0 million man-hours Lost Time Injury free, with the last
Lost Time Injury recorded in February 2014.
CASE STUDY
Kwale Operations workforce
Base Resources employee fencing system has
proved highly effective at Kwale Operations
and, of the 1,141 people employed, 98% are
Kenyan with 70% drawn from Kwale County.
It is expected that the expatriates workforce will be further reduced
over the coming years, with a succession program in place to
ensure the transfer of specialist skills to Kenyan nationals. A similar
approach is being developed in Madagascar for the Toliara Project.
14 | BASE RESOURCES | ANNUAL REPORT 2019
BASE RESOURCES | SUSTAINABILITY | 15
Employee engagement
Base Resources places significant emphasis on establishing
and developing a highly engaged, satisfied and motivated
workforce, with the operational performance achieved to date,
across production, safety and cost management, reflective
of the Company’s success in developing human capital.
In addition to productivity and safety performance, staff
turnover and industrial action are key indicators of employee
satisfaction and motivation as well as sources of competitive
cost advantage. The voluntary staff turnover rate for the year
was very low at 1%, down from the prior year’s 1.9%. The
Kwale Operations have not recorded any industrial action
since commencement of operations.
Skills transfer
Base Resources has structured training and skills transfer programs
covering on-the-job training for permanent employees, as well as
tailored programs for graduates, interns, apprentices and high
school students. Implemented in both Kenya and Madagascar, the
programs focus not only on employees, but also on building skills
capacity in the broader community.
Base Resources invested US$0.6 million in training and development
across its operations during the reporting period. This reflects the
Company’s continued commitment to skills transfer to its Kenyan
and Malagasy workforce and the local community.
CASE STUDY
Building a Malagasy workforce
In the reporting period, more than 5,500 men
and women from communities surrounding
the Toliara Project expressed interest in Base
Resources training programs across a range
of skills and expertise.
Training has commenced in expertise such as brickmaking,
bricklaying and heavy mobile operation and 25 Malagasy
apprenticeship candidates commenced English language
training programs in Toliara, ahead of travelling to Kenya for
technical training in late 2019.
16 | BASE RESOURCES | ANNUAL REPORT 2019
Community
Base Resources understands that achieving its long-term
goals is reliant on building beneficial relationships with
the communities in which it operates and establishing
a balanced flow of mutual benefit.
Base Resources engages with its local communities in
a structured and inclusive manner. Across its operations,
the Company has established several committees to act
as an interface between the Company, local communities
and governments. This is an important tool for managing
expectations, addressing grievances or concerns and
establishes a mechanism for achieving more participatory
and inclusive outcomes. These committees also play a
major role in identifying community development priorities.
Through close collaboration with these committees over
150 community programs across Kenya and Madagascar
have been developed based around four key pillars:
• Livelihood Programs.
• Community Health.
• Education.
• Community Infrastructure.
More Information on Base Resources’ community programs
is available at baseresources.com.au.
BASE RESOURCES | SUSTAINABILITY | 17
CASE STUDY
Livelihood programs
CASE STUDY
Education
Base Resources livelihood programs
support around 3,000 small hold
farmers and community groups to
establish new agricultural opportunities
that will provide economic growth well
beyond the life of mining activities.
The Kwale Cotton Project supports farmers in Kwale
County to plant cotton as an economically sustainable
cash crop through a cooperative which is focussed
on securing more income for farmers through
value addition in the sector. Run in partnership with
CottonOn, Business for Development, DEG, FMO and
Australia’s Department of Foreign Affairs and Trade,
the program has proved particularly successful to
date growing from an initial 15 farmers in 2014 to
over 2,500 participating farmers in 2019.
To support continued personal and
social improvement through education,
Base Resources provides a wide
range of merit-based scholarships
to secondary and tertiary students.
These scholarships fund all academic
and school fees for the year.
Base Resources has awarded over 380 secondary
school and 170 tertiary scholarships to students
living in communities around Kwale Operations in
the reporting period.
18 | BASE RESOURCES | ANNUAL REPORT 2019
CASE STUDY
Community infrastructure
CASE STUDY
Community health
Base Resources works with
governments and communities to
identify infrastructure that will improve
living standards such as boreholes
and the construction of education and
health facilities. Since commencement
of operations in Kenya, Base Resources
has constructed 16 boreholes,
supported the construction of more
than 40 schools and supported the
construction or expansion of seven
health facilities.
In Madagascar, Base Resources has completed
three community bore holes to provide clean water
to villages surrounding the Toliara Project and
is currently working with communities and local
authorities to identify suitable land for two new
schools and two health facilities. Other projects
include rehabilitating irrigation channels and flood
protection systems through collaborative job creation
schemes with local communities.
Base Resources supports initiatives
to improve the quality of, and access
to, healthcare facilities in collaboration
with local and national government
initiatives aimed at improving key
health indicators.
Through the Community Health Units, more than
240 Community Health Volunteers were provided
with training and resources to cover 46 villages
around the Kwale Operation, Base Resources’ Likoni
port facility and the host resettlement site at Bwiti.
The volunteers offer primary health care support
to their communities by providing sanitation and
hygiene information, family planning information,
HIV and STI awareness and by promoting good
health practices.
BASE RESOURCES | SUSTAINABILITY | 19
20 | BASE RESOURCES | ANNUAL REPORT 2019
Environment
Base Resources is committed to operating in a sustainable
and environmentally responsible manner. The Company
operates a comprehensive environmental management
system and had no significant environmental incidents
during the year.
Rehabilitation of the Kwale tailings storage facility external
walls continued throughout the period with approximately
10.1 hectares now classified and signed off as fully
rehabilitated with demonstrative ecological functioning with
visible signs of secondary vegetation growth, biodiversity
and low levels of erosion.
Additional area has been re-vegetated but is not yet considered
fully rehabilitated. Seeds and topsoil erosion control materials
are sourced from local women’s groups, thereby providing
additional incomes for villages surrounding the mine site.
Across the Company’s operations, work continued on several
programs to rehabilitate impacted areas, improve local
biodiversity, and promote conservation and sustainability.
For more information on other environmental programs such
as biodiversity corridors, wetland restoration and recycling
programs visit baseresources.com.au.
CASE STUDY
Rare and endangered flora
propagation research program
Base Resources targets species
of conservation interest, particularly
local and threatened indigenous
plant species, for propagation
in its nurseries.
The Kwale Operations nursery has 278 indigenous
species represented, and over 107,000 plants have
been grown to date. The nursery represents one of
the largest of its kind in Africa, with a number of
propagated rare species considered to be of high
conservation value. 90 of these appear in the IUCN
Red List of Threatened Species, as either critically
endangered, endangered or vulnerable. The nursery,
together with the arboretum established alongside
it, function as a training and educational facility for
local community projects and visitors.
BASE RESOURCES | SUSTAINABILITY | 21
Markets
With ongoing demand and supply constraints, Base Resources secured
strong price gains for rutile and zircon in the reporting period. Ilmenite
experienced a modest start to the year before supply tightness triggered
solid price improvement.
Mineral sands end products are widely used in everyday
life and historical demand has been tightly tied to growth
in global GDP.
Ilmenite and rutile
Rutile and ilmenite are different grades of titanium dioxide
(Ti02) minerals and are used predominantly to produce
pigments for paint, paper, plastics, textiles and inks. Ti02
pigment is prized for its opacity, brightness and whiteness
and its ability to absorb and reflect ultraviolet radiation.
It is also non-toxic and inert to most chemical reagents.
22 | BASE RESOURCES | ANNUAL REPORT 2019
High grade Ti02 minerals (which include rutile) can also be used
to produce titanium metal, which is corrosion resistant and
has the highest strength to weight ratio of any metal. Titanium
metal is used across the aerospace and defence industries as
well as in medical devices, sporting equipment and jewellery.
After a solid start to the reporting period the global pigment
industry experienced a slowdown in demand in late 2018 as
major pigment producers reported that pigment consumers
had embarked on a period of de-stocking pigment inventory.
While consumption of pigment from these end users remained
at good levels, the reduction in inventories had a net negative
impact on pigment demand which ultimately led to some
pigment producers reducing their production rates. By the
end of the reporting period major pigment producers indicated
that the de-stocking process had slowed significantly or been
completed. Pigment conditions for the rest of 2019 are looking
positive with an expectation of ongoing growth.
Conditions within the titanium metal sector improved through
the course of the year. A significant and growing backlog of
orders with the major aircraft manufacturers has led to a
much-improved outlook on titanium metal demand from the
aerospace industry.
Supply constraints on high grade titanium feedstocks (which
includes rutile) persisted through the reporting period. This
is the result of some rutile deposits approaching the end of
their life and ongoing production issues at some major rutile
operations. Despite the adjustments to pigment production by
some western producers, demand for high grade feedstocks
from all three end-user segments (pigment, Ti02 metal and
welding) has continued to exceed supply which has resulted
in ongoing price gains. The average price for Base Resources
rutile in the reporting period was ~25% higher than in the
comparative period.
Supply constraints on ilmenite emerged through the course
of the year. The bans on the mining and export of mineral
sands in the two major producing states in India (Tamil
Nadu and Andhra Pradesh) continued and these have been
more recently followed up with a separate blanket ban being
imposed by the Indian national government on all private
mining of mineral sands deposits in India. Vietnamese
ilmenite supply has also trended strongly downwards since
export quotas expired at the end of calendar year 2018.
Following subdued conditions in the first months of the
reporting period, increased pigment production in China,
combined with the restrictions on ilmenite supply, resulted
in ilmenite prices trending upwards towards the end of the
year. While the average price of Base Resources ilmenite was
marginally lower than the prior year, ilmenite prices ended the
reporting period ~10% higher than the comparative period
average. Ongoing supply constraints and firm demand are
expected to support a positive market environment for rutile
and ilmenite in the coming year.
Zircon
Zircon has a range of end-uses, including in the production
of ceramic tiles, which accounts for more than 50% of
global zircon consumption. Milled zircon enables ceramic
tile manufacturers to achieve brilliant opacity, whiteness
and brightness in their products. Zircon’s unique properties
include heat and wear resistance, stability, opacity, hardness
and strength, making it sought after for other applications
such as refractories, foundries and specialty chemicals.
Demand for zircon is closely linked to growth in global
construction and increasing urbanisation in the developing
world. Under normal conditions there is a close link between
zircon demand growth and global GDP growth.
After a good start to the period, which saw further strong
gains in pricing, the zircon market began to moderate during
late 2018. Global trade tensions and economic uncertainties,
combined with increased environmental inspections in some
of the major zircon consuming regions in China, led to more
cautious buying behaviour from consumers and an overall
dampening on demand. Following a two-year period of strong
quarterly gains, market conditions and prices for zircon
stabilised from early 2019 onwards.
The management of supply to suit the conditions from at
least one of the major zircon suppliers, and a move to six
monthly fixed pricing contracts from a number of major
suppliers, provide a solid foundation for ongoing stability in
the zircon market. Any return to normal levels of demand
growth would likely result in further price improvement as
ongoing constrained supply may not be able to keep pace
with demand.
Zircon demand from Base Resources’ customers remains
firm and continues to exceed the Company’s ability to supply.
The recent trend in market preference for standard zircon
compared with premium zircon suits Base Resources’
production profile which is currently set at ~85% standard
grade and ~15% premium. The average price for Base
Resources’ standard zircon in the reporting period was
~30% higher than the comparative period.
BASE RESOURCES | MARKETS | 23
Corporate
Base Resources achieved a record profit after tax of US$39.2 million for the
reporting period compared to US$34.0 millions in the comparative period,
driven primarily by higher sales revenues and reduced debt servicing expenses.
2019
2018
Kwale
Operation
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
Kwale
Operation
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
Sales Revenue
209,456
Cost of goods sold excluding
depreciation & amortisation:
Operating costs
Inventory movement
Royalties expense
Total cost of goods sold (i)
Corporate & external affairs
Community development
Selling & distribution costs
Other income / (expenses)
(63,234)
(2,075)
(14,597)
(79,906)
(4,024)
(3,607)
(2,501)
850
-
-
-
-
-
-
-
-
-
-
209,456
198,810
(63,234)
(56,658)
(2,075)
(2,114)
(14,597)
(13,678)
(79,906)
(72,450)
-
-
-
-
-
-
-
-
-
-
(249)
(5,859)
(10,132)
-
-
-
-
-
(649)
(3,607)
(2,501)
201
(4,312)
(3,000)
(4,056)
28
(87)
(4,855)
-
-
(704)
(791)
-
-
(89)
198,810
(56,658)
(2,114)
(13,678)
(72,450)
(9,254)
(3,000)
(4,056)
(765)
EBITDA (i)
120,268
(249)
(6,508)
113,511
115,020
(4,944)
109,285
Depreciation & amortisation
EBIT (i)
Net financing expenses
Income tax expense
NPAT (i)
(51,885)
68,383
(9,729)
(10,735)
47,919
-
(183)
(52,068)
(47,349)
-
(84)
(47,433)
(249)
(6,691)
61,443
67,671
(791)
(5,028)
61,852
-
-
(1,826)
(11,555)
(15,929)
-
(10,735)
(9,389)
-
-
(2,560)
(18,489)
-
(9,389)
(249)
(8,517)
39,153
42,353
(791)
(7,588)
33,974
(i) Base Resources’ financial results are reported under International Financial Reporting Standards (IFRS). These Financial Statements include
certain non-IFRS measures including EBITDA, EBIT and NPAT. These measures are presented to enable understanding of the underlying
performance of the Group and have not been audited.
Sales revenue increased 5% to US$209.5 million for the reporting period (comparative period: US$198.8 million), achieving an average
price of product sold (rutile, ilmenite, zircon and zircon low grade) of US$401 per tonne (comparative period: US$330 per tonne), with
higher average realised prices for rutile and zircon, offset by lower prices for ilmenite. Operating cost per tonne produced was
28% higher at US$120 per tonne for the reporting period (comparative period: US$95 per tonne), due to increased volumes mined
following the implementation of the Kwale Phase 2 mine optimisation project. In addition, increased flocculant use on the lower grade
ore and increased mine clearing and preparation associated with the higher mining rate following the Kwale Phase 2 upgrade have
contributed to the increase in operating costs. Total cost of goods sold, excluding depreciation and amortisation, was US$79.9 million
for the reporting period, 10% higher than the comparative period (US$72.5 million) at an average cost of US$153 per tonne of product
sold (comparative period: US$120 per tonne), due to higher operating costs and higher royalties associated with increased sales revenue.
With a margin of US$248 per tonne sold for the reporting period, 18% higher than the comparative period (US$210 per tonne) and
an achieved revenue to cost of sales ratio of 2.6 (comparative period: 2.8), the Company remains well positioned high in the upper
quartile of mineral sands producers.
24 | BASE RESOURCES | ANNUAL REPORT 2019
Net debt reduction
In October 2018, the US$80.0 million outstanding balance of
the Kwale Project Debt Facility was repaid from a combination
of cash reserves and utilisation of the Revolving Credit
Facility (RCF) following a concurrent increase in the RCF to
US$75.0 million. The drawn balance of the RCF increased by
$US7.5 million to US$20.0 million in the reporting period. Early
retirement of the Kwale Project Debt Facility demonstrates
the continued strong performance of Kwale Operations and,
together with the increased RCF, provides the Group with
additional funding flexibility and reduced debt servicing costs.
During the reporting period, the Group became net cash positive
for the first time following a US$52.4 million reduction in net debt
from US$33.2 million at 30 June 2018, to a net cash position
of US$19.2 million at 30 June 2019. The Group’s cash positive
position is comprised of cash reserves of US$39.2 million, with the
RCF drawn to US$20.0 million. Future cash generation will now be
available to contribute to the progression of the Toliara Project.
Kenyan VAT receivable
Base Resources has refund claims for VAT paid in Kenya,
relating to both the construction of the Kwale Project and the
period since operations commenced, totalling approximately
US$24.2 million at 30 June 2019. These claims are proceeding
through the Kenya Revenue Authority process, with a number of
operational period claims, totalling approximately US$3.5 million,
settled during the reporting period. Base Resources is continuing
to engage with the Kenyan Treasury and the Kenya Revenue
Authority, seeking to expedite the remainder of the refunds.
Improved commodity prices and a continued focus on cost
management has delivered a Kwale Operations EBITDA for
the reporting period of US$120.3 million, a 5% increase over
the comparative period (US$115.0 million) and a Group EBITDA
of US$113.5 million, a 4% increase over the comparative period
(US$109.3 million).
The majority of Kwale Operation assets are depreciated on
a straight-line basis over the remaining mine life. Since the
implementation of the Kwale Phase 2 mine optimisation
project in March 2018, mining rates have significantly
increased to offset declining ore grades and thus the
remaining mine life is correspondingly shorter. As a result,
depreciation and amortisation has increased 10% in the
reporting period to US$52.1 million (comparative period:
US$47.4 million). Should the extensional exploration currently
underway at Kwale Operations be successful, there is the
potential to increase ore reserves and extend mine life, thereby
reducing future annual depreciation and amortisation charges.
A 13% increase in net profit after tax of US$47.9 million
was recorded by Kwale Operations (comparative period:
US$42.4 million) and Group net profit after tax increased by
15% to US$39.2 million (comparative period: US$34.0 million).
Basic earnings per share for the Group was 3.39 cents per
share (comparative period: 3.66 cents).
Cash flow from operations was US$96.6 million for the
reporting period (comparative period: US$117.1 million), lower
than Group EBITDA due to working capital movements. The
operating cashflows were used to fund capital expenditure at
Kwale Operations, Toliara Project progression, as well as debt
servicing and repayment.
Total capital expenditure for the Group was US$36.1 million in the
reporting period (comparative period: US$35.9 million excluding
Toliara Project acquisition costs), including US$11.7 million for
the transition of mining operations to the South Dune deposit and
US$17.3 million on the progression of the Toliara Project.
BASE RESOURCES | CORPORATE | 25
Resources and Reserves
The 2019 Mineral Resources and Ore Reserves for Base Resources are summarised in the table below together with the
2018 Ore Reserves and Mineral Resources for comparison.
2019
as at 30 June 2019
2018
as at 30 June 2018
Project
Tonnes
HM
HM
SL
OS
HM Assemblage
Tonnes
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
ILM
(%)
RUT
(%)
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
ILM
(%)
RUT
(%)
ZIR
(%)
Mineral Resources (Measured + Indicated + Inferred, inclusive of Ore Reserves)
Kwale
285
Ranobe
1,293
6.0
66
2.1
5.1
33
6
2
0
52
72
13
2
6
6
134
4.2
3.1
25
857
53
6.2
4
2
0
57
72
13
2
6
6
Kwale
62
2.3
3.8
27
3
57
13
6
80
3.1
3.9
26
2
56
13
6
Ore Reserves (Proved + Probable)
Table subject to rounding differences
Mineral Resources and Ore Reserves estimates in this statement are reported in accordance with the JORC Code (2012 edition).
Accordingly, this statement should be read in conjunction with the respective explanatory Mineral Resources and Ore Reserves
information included in the following announcements1 for the relevant deposits:
Deposit
Announcement Title
Estimate date Release date
Kwale North Dune Mineral Resources
Mineral Resource for Kwale North Dune deposit
1 May 2019
1 May 2019
Ranobe
Mineral Resources
Updated Ranobe Deposit Mineral Resources (corrected)
23 Jan 2019
23 Jan 2019
2018 Comparatives Mineral Resources
2018 Mineral Resources and Ore Reserves Statement (corrected)
30 Jun 2018
3 Dec 2018
& Ore Reserves
Kwale South Dune
Kwale Central Dune
Mineral Resources
& Ore Reserves
2017 Kwale Mineral Resources and Ore Reserves Statement
30 Jun 2017
9 Oct 2017
Kwale Deposits
The Company’s Kwale Operation holds the Kwale Central Dune, South Dune and North Dune deposits, located approximately
50 kilometres south of Mombasa and approximately 10 kilometres inland from the Kenyan coast.
Mineral Resources
The 2019 Kwale Mineral Resources, as at 30 June 2019, are estimated to be 285 million tonnes (Mt) at an average heavy mineral (HM)
grade of 2.1% for 6.0Mt of contained HM, at a 1% HM cut-off grade. The 2019 Kwale Mineral Resources estimate has increased by
112% for material tonnes and by 43% for contained HM tonnes when compared with the 2018 Kwale Mineral Resources estimate due
to the addition of the Kwale North Dune Mineral Resources, partially offset by mining depletion of the Kwale Central Dune.
The Kwale Central Dune Mineral Resources were fully depleted by mining during the year. At 30 June 2018, they were estimated
to be 20Mt at an average HM grade of 3.9% for 0.8Mt of contained HM.
The South Dune Mineral Resources at 30 June 2019 are unchanged from the 30 June 2018 estimate. Following transition of mining
operations from the Kwale Central Dune to the South Dune, mining of the deposit only commenced on 26 June 2019, resulting in
negligible material mined (0.1Mt) during the year, with this depletion having no effect on the reported Mineral Resources estimate due
to rounding to two significant figures. Also on the basis of rounding methodology, the Kwale South Dune Inferred Resources will no
longer be reported.
The North Dune Mineral Resources at 30 June 2019 are unchanged from the 1 May 2019 estimate.
1. Refer to ASX announcements available at baseresources.com.au/investor-centre/asx-releases.
26 | BASE RESOURCES | ANNUAL REPORT 2019
Table 2: 2019 Kwale Mineral Resources estimate compared with the 2018 estimate.
2019
as at 30 June 2019
2018
as at 30 June 2018
Category
Tonnes
HM
HM
SL
OS
HM Assemblage
Tonnes
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
ILM
(%)
RUT
(%)
ZIR
(%)
Kwale Central Dune
(Mt)
(Mt)
(%)
(%)
(%)
ILM
(%)
RUT
(%)
ZIR
(%)
Measured
Indicated
Total
Measured
Indicated
Inferred
Total
-
-
-
-
-
-
-
-
-
-
-
-
81
33
-
2.6
0.8
-
3.2
2.5
-
25
26
-
114
3.5
3.0
25
Indicated
136
2.1
1.5
Inferred
34
0.5
1.4
Total
171
2.6
1.5
Measured
Indicated
Inferred
Total
81
169
34
285
2.6
2.9
0.5
6.0
3.2
1.7
1.4
2.1
38
36
38
25
36
36
33
-
-
-
1
7
-
3
2
3
2
1
3
3
2
-
-
-
-
-
-
-
-
-
13
0.6
7
0.2
4.1
3.4
20
0.8
3.9
Kwale South Dune
59
52
-
14
12
-
56
13
6
6
-
6
81
33
2.6
0.8
0.2
0.003
3.2
2.5
1.5
114
3.5
3.0
Kwale North Dune
45
46
45
12
13
12
5
6
5
Total Kwale Mineral Resources
24
25
24
25
26
27
25
N/A
59
47
46
52
14
12
13
13
6
5
6
6
94
40
3.2
1.1
0.2
0.003
3.4
2.7
1.3
134
4.2
3.1
25
26
27
25
1
2
1
1
7
7
3
1
6
7
2
57
57
57
59
52
48
56
14
14
14
14
12
13
13
59
53
54
57
14
13
15
13
6
6
6
6
6
7
6
6
6
7
6
Table subject to rounding differences, Mineral Resources estimated at a 1% HM cut-off grade.
Ore Reserves
Contained within the Kwale Mineral Resources are the Kwale Ore Reserves, estimated as at 30 June 2019 to be 62Mt at an average
HM grade of 3.8% for 2.3Mt of contained HM. The 2019 Kwale Ore Reserves estimate represents a decrease of 22% in total ore
tonnes and 26% in contained HM tonnes over the previously reported 2018 Kwale Ore Reserves estimate due to mining depletion.
The Kwale Central Dune Ore Reserves were fully depleted by mining during the year. At 30 June 2018 they were estimated to be
18Mt at an average HM grade of 4.0% for 0.7Mt of contained HM.
The South Dune Ore Reserves at 30 June 2019 are unchanged from the 30 June 2018 estimate. Following the transition of mining
operations from the Kwale Central Dune to the South Dune, mining of the deposit only commenced on 26 June 2019, resulting
in negligible ore mined (0.1Mt) during the year, with this depletion having no effect on the reported Ore Reserves estimate due to
rounding to two significant figures. Mining tenure arrangements continue to progress with the Kenyan Ministry of Petroleum and
Mining as a precursor to an anticipated updated South Dune Ore Reserve based on the expanded 2017 Kwale South Dune Mineral
Resources estimate as announced on 4th October 2017.
No Ore Reserves estimate has been completed for the Kwale North Dune deposit. A study phase is currently underway to assess
the potential for this deposit to support mine life extension.
BASE RESOURCES | RESOURCES AND RESERVES | 27
Table 3: The 2019 Kwale Ore Reserves estimate compared with the 2018 estimate.
2019
as at 30 June 2019
2018
as at 30 June 2018
Project
Tonnes
HM
HM
SL
OS
HM Assemblage
Tonnes
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
ILM
(%)
RUT
(%)
ZIR
(%)
Kwale Central Dune
(Mt)
(Mt)
(%)
(%)
(%)
ILM
(%)
RUT
(%)
ZIR
(%)
Proved
Probable
Total
-
-
-
-
-
-
-
-
-
Proved
Probable
39
23
1.6
0.8
4.0
3.3
Total
62
2.3
3.8
Proved
Probable
39
23
1.6
0.8
4.0
3.3
Total
62
2.3
3.8
Table subject to rounding differences.
-
-
-
27
26
27
27
26
27
-
-
-
1
5
3
1
5
3
-
-
-
-
-
-
-
-
-
13
5
0.6
0.2
4.3
3.5
18
0.7
4.0
Kwale South Dune
59
53
57
14
13
13
6
6
6
39
23
1.6
0.8
4.0
3.3
62
2.3
3.8
Total Kwale Ore Reserves
59
53
57
14
13
13
6
6
6
52
28
2.1
0.9
4.1
3.4
80
3.1
3.9
23
25
24
27
26
27
26
26
26
0
1
1
1
5
3
1
4
2
57
57
57
59
53
57
58
54
56
14
14
14
14
13
13
14
13
13
6
6
6
6
6
6
6
6
6
Ranobe Deposit
The Company acquired the Toliara Project in January 2018 and is currently progressing the project through a definitive feasibility
study. The Toliara Project is founded on the Ranobe deposit, located approximately 40 kilometres north of the town of Toliara in
south west Madagascar and approximately 15 kilometres inland from the coast.
Mineral Resources
The 2019 Ranobe Mineral Resources are estimated to be 1,293Mt at an average HM grade of 5.1% for 66Mt of contained HM, based
on a 1.5% HM cut-off grade.
Table 4: The 2019 Ranobe Mineral Resources estimate at a 1.5% HM cut-off.
2019
as at 30 June 2019
2018
as at 30 June 2018
Category Material
In Situ
HM
HM
SL
OS
HM Assemblage
Material
In Situ
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT*
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
ZIR
(%)
2019 Ranobe Mineral Resources
Measured
Indicated
Inferred
Total
419
375
499
1,293
28
18
20
66
6.6
4.9
3.9
5.1
4
8
7
6
0
1
1
0
75
72
70
72
2
2
2
2
6
6
5
6
Table subject to rounding differences, resources estimated at a 1.5% HM cut-off grade.
*RUT reported in the table is rutile + leucoxene mineral species.
Data not previously reported @ 1.5% cut-off grade
For comparison to previously reported Mineral Resources estimates, the 2019 Ranobe Mineral Resources at a 3% HM cut-off grade are
estimated to be 1,021Mt at an average HM grade of 5.8%, containing 59Mt of in-situ heavy mineral.
28 | BASE RESOURCES | ANNUAL REPORT 2019
Table 5: The 2019 Ranobe Mineral Resources estimates at a 3% HM cut-off compared with the 2018 estimate.
2019
as at 30 June 2019
2018
as at 30 June 2018
Category Material
In Situ
HM
HM
SL
OS
HM Assemblage
Material
In Situ
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT*
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT*
2019 Ranobe Mineral Resources
Measured
Indicated
Inferred
Total
398
306
318
1,021
27
17
15
59
6.8
5.5
4.8
5.8
4
6
6
5
0
0
1
0
75
72
70
73
2
2
2
2
6
6
5
6
282
330
245
857
20
21
12
53
7.2
6.2
5.0
6.2
4
4
5
4
0
0
1
0
72
72
71
72
2
2
1
2
ZIR
(%)
6
6
5
6
Table subject to rounding differences, resources estimated at a 3% HM cut-off grade.
*RUT reported in the table is rutile + leucoxene mineral species.
Ore Reserves
No Ore Reserves estimate has yet been completed for the Ranobe deposit. An Ore Reserves estimate will be completed
and incorporated into the Toliara Project definitive feasibility study which is in progress.
Mineral Resources and Ore Reserves Governance
A summary of the governance and internal controls applicable to Base Resources’ Mineral Resources and Ore Reserves estimates
are as follows:
Mineral Resources
• Review and validation of drilling and sampling methodology and data spacing, geological logging, data collection and storage,
sampling and analytical quality control.
• Geological interpretation – review of known and interpreted structure, lithology and weathering controls.
• Estimation methodology – relevant to mineralisation style and proposed mining methodology.
• Comparison of estimation results with previous mineral resource models, and with results using alternate modelling methodologies.
• Visual validation of block model against raw composite data.
• Use of external Competent Persons to assist in preparation of JORC Mineral Resources updates.
Ore Reserves
• Review of potential mining methodology to suit deposit and mineralisation characteristics.
• Review of potential Modifying Factors, including cost assumptions and commodity prices to be utilised in mining evaluation.
• Ore Reserve updates initiated with material changes in the above assumptions.
• Optimisation using appropriate software packages for open pit evaluation.
• Design based on optimisation results.
• Use of external Competent Persons to assist in preparation of JORC Ore Reserves.
BASE RESOURCES | RESOURCES AND RESERVES | 29
Competent Person Statements
The 2019 Mineral Resources and Ore Reserves Statement has been approved by the following competent persons, as detailed below:
Mineral Resources – Kwale Central and South Dune Deposits
The information in this report that relates to Kwale Central and South Dune Deposit Mineral Resources is based on, and fairly
represents, information and supporting documentation prepared by Mr. Richard Stockwell (for the South Dune deposit) and
Mr. Scott Carruthers (for the Central Dune deposit). Mr. Stockwell is a member of the Australian Institute of Geoscientists and
Mr. Carruthers is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Stockwell acts as Consultant Geologist
for Base Resources. Mr. Carruthers is employed by Base Resources, he holds equity securities in Base Resources and is entitled
to participate in Base Resources’ equity long term incentive plan, details of which are included in the 2018 Annual Report. Both
Mr. Stockwell and Mr. Carruthers have 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 both
are considered Qualified Persons for the purposes of the AIM Rules for Companies. Mr. Stockwell has reviewed this report and
consents to the inclusion in this report of Kwale South Dune Deposit Mineral Resources estimates and supporting information
in the form and context in which it appears. Mr. Carruthers has reviewed this report and consents to the inclusion in this report
of Kwale Central Dune Deposit Mineral Resources estimates and supporting information in the form and context in which it
appears.
Mineral Resources – Kwale North Dune Deposit
The information in this report that relates to Kwale North Dune Deposit 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 Kwale North Dune Deposit Mineral Resources estimate and
supporting information in the form and context in which it appears.
Ore Reserves – Kwale Central and South Dune Deposits
The information in this report that relates to Kwale Central and South Dune Deposit Ore Reserves is based on, and fairly represents,
information and supporting documentation prepared by Mr. Per Scrimshaw (for the South Dune deposit) and Mr. Scott Carruthers (for
the Central and South Dune deposits). Mr. Scrimshaw and Mr. Carruthers are both Members of The Australasian Institute of Mining
and Metallurgy. Mr. Scrimshaw is employed by Entech, a mining consultancy engaged by Base Resources to prepare Ore Reserves
estimates for the Kwale Operations. Mr. Carruthers is employed by Base Resources, he holds equity securities in Base Resources and
is entitled to participate in Base Resources’ equity long term incentive plan, details of which are included in the 2018 Annual Report.
Mr. Scrimshaw and Mr. Carruthers have sufficient experience that is relevant to the style of mineralisation and type of deposits under
consideration and to the activity which they are undertaking to qualify as Competent Persons as defined in the 2012 Edition of the
Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves (JORC Code) and both are considered
Qualified Persons for the purposes of the AIM Rules for Companies. Mr. Scrimshaw and Mr. Carruthers each has reviewed this report
and consent to the inclusion in this report of Kwale Central and South Dune Deposit Ore Reserves estimates and supporting information
in the form and context in which it appears.
Mineral Resources – Ranobe Deposit
The information in this report that relates to the Ranobe Deposit 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 a 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 Ranobe Deposit Mineral Resources estimates and supporting
information in the form and context in which it appears.
30 | BASE RESOURCES | ANNUAL REPORT 2019
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BASE RESOURCES | DIRECTORS' REPORT | 31
Directors’ Report
Your directors present their report, together with the financial statements of the Group, being the Company, Base Resources
Limited, and its controlled entities for the financial year ended 30 June 2019 (the reporting period) compared with the year ended
30 June 2018 (the comparative period).
Directors
The names of the directors in office at any time during or since the end of the year are:
Mr Keith Spence
Mr Tim Carstens
Mr Colin Bwye
Mr Samuel Willis
Mr Malcolm Macpherson
Mr Mike Stirzaker
Ms Diane Radley
All Directors have been in office since the start of the financial year to the date of this report.
Company Secretary
Mr Chadwick Poletti held the position of company secretary during the financial year.
Principal activities and significant changes in nature of activities
The principal activity of the Group is the operation of the Kwale Mineral Sands Operation (Kwale Operation) in Kenya and
the development of the Toliara Project in Madagascar which the Group is progressing through an accelerated feasibility
study program, that aims to advance toward a decision to proceed to construction in 2020.
Operating results
The Group recorded a profit after tax of US$39,153,000 for the reporting period (2018: US$33,974,000).
Dividends paid or recommended
There were no dividends paid or declared for payment during the reporting period.
Significant changes in state of affairs
There were no other significant changes in the state of affairs of the Group during the reporting period.
After balance date events
There have been no significant events since the reporting date.
Future developments, prospects and business strategies
Base Resources strategy is to continue to pursue mine life extension at the Kwale Operation through exploration and develop
the Toliara Project ahead of a decision to proceed with construction in 2020.
32 | BASE RESOURCES | ANNUAL REPORT 2019
Information on Directors
Mr Keith Spence
Qualifications:
Appointed:
Experience:
Special responsibilities:
Other current public
company directorships:
Past public company
directorships held over
the last three years:
Non-Executive Chair
BSc (Geophysics) (Hons), FAIM
20 February 2015 (Appointed as Non-Executive Chair on 19 May 2015)
Mr Spence has over 40 years’ experience in managing and governing oil and gas operations
in Australia, Papua New Guinea, the Netherlands and Africa.
A geologist and geophysicist by training, Mr Spence commenced his career as an
exploration geologist with Woodside in 1977. He subsequently joined Shell (Development)
Australia, where he worked for 18 years. In 1998, he left Shell to join Woodside. He retired
from Woodside in 2008 after a 14-year tenure in top executive positions in the company,
including Chief Operating Officer and Acting Chief Executive Officer. Upon his retirement
he took up several board positions, including Clough Limited, where he served as Chair
from 2010 to 2013, Geodynamics Limited where he served as a non-executive Director
from 2008 to 2016 (including as Chair from 2010 to 2016) and Oil Search Limited, where
he served as a non-executive Director from 2012 to 2017.
Chair of the Board; Chair of the Remuneration & Nomination Committee; member of the
Risk Committee; member of the Audit Committee
Independence Group NL (since 2014); Murray and Roberts Holdings Ltd (since 2015);
Santos Limited (Chair, since 2018)
Geodynamics Limited (now ReNu Energy Limited) (resigned 2016); Oil Search Limited
(resigned 2017)
Mr Tim Carstens
Managing Director
Qualifications:
Appointed:
Experience:
BCom
5 May 2008
Mr Carstens is an experienced mining executive, with a career spanning more than 20 years
in senior resources-sector roles, both in Australia and overseas, with Perilya Limited, North
Limited, Robe River Iron Associates, Iron Ore Company of Canada and St Barbara Mines
Limited. He has strong experience in all aspects of business strategy development and
implementation, acquisitions and divestments, debt and equity financing, organisational
development and operational performance. He has been Managing Director of Base
Resources since the Company’s inception in May 2008. Mr Carstens is also the Chair of the
Australia-Africa Minerals and Energy Group (AAMEG), the peak body representing Australian
companies engaged in the development of Africa’s resource industry.
Special responsibilities:
Managing Director
Other current public
company directorships:
Past public company
directorships held over
the last three years:
Nil
Nil
BASE RESOURCES | DIRECTORS' REPORT | 33
Directors’ Report (cont.)
Mr Colin Bwye
Qualifications:
Appointed:
Experience:
Executive Director – Operations & Development
BEng (Hons)
12 July 2010
Mr Bwye has over 30 years’ experience in the mineral sands sector, having commenced
his professional career with RGC Mineral Sands (since consolidated into Iluka Resources)
as a plant metallurgist in 1988. He undertook a number of technical, production and
mining roles within RGC and then, after a period of time consulting to the industry, joined
Doral Mineral Industries, a subsidiary of Iwatani Corporation of Japan. Here he was a
leader in the development and operation of the Dardanup mineral sands mine in Western
Australia before taking on the role of managing director and becoming accountable for
the fused materials (zirconia and alumina) processing facilities as well as the mineral
sands operation. In 2010 Mr Bwye joined Base Resources as Executive Director –
Operations and Development. Mr Bwye has an extensive knowledge of all aspects of
the mineral sands industry, including downstream processing and marketing of mineral
sands products. He was born in Kenya and lived there prior to migrating to Australia in
1987 and so brings a deep understanding of the country and its culture.
Special responsibilities:
Executive Director
Other current public
company directorships:
Past public company
directorships held over
the last three years:
Nil
Nil
Mr Samuel Willis
Non-Executive Director
Qualifications:
Appointed:
Experience:
BCom
23 May 2007
Mr Willis is an experienced company director in the resources and energy sectors and is currently
a director of Checkside (a consulting firm that specialises in Strategic HR, Executive Recruitment
and Leadership). Mr Willis provides Base Resources with in excess of 20 years’ experience and
expertise in capital markets, corporate finance and executive board involvement with emerging
small and mid-cap companies. Mr Willis previously held roles as managing director of oil and
gas explorer and developer New Standard Energy Limited and as non-executive director of Elixir
Petroleum Limited.
Special responsibilities:
Chair of the Audit Committee; member of the Remuneration & Nomination Committee;
member of the Risk Committee.
Other current public company
directorships:
Nil
Past public company
directorships held over
the last three years:
New Standard Energy Limited (retired 2016); Elixir Petroleum Limited (resigned 2017)
34 | BASE RESOURCES | ANNUAL REPORT 2019
Mr Michael Stirzaker
Non-Executive Director
Qualifications:
Appointed:
Experience:
BCom, ACA
19 November 2014 (previously acting as an alternate since November 2011)
Mr Stirzaker has over 30 years’ commercial experience, mainly in mining finance and
mining investment. He began his career in Sydney as a Chartered Accountant with KPMG,
having obtained a Bachelor of Commerce from the University of Cape Town. He moved into
investment banking with Wardley James Capel (part of the HSBC Group) and then Kleinwort
Benson Limited in London. From 1993 to 2007 he was part of the natural resource advisory
and investment firm, RFC Group Limited, where he became Joint Managing Director. He
has also been a shareholder and Director of Tennant Metals Pty. Limited, a privately owned
physical metal trader and investor, and was the Finance Director of Finders Resources
Limited, an ASX listed company producing copper in Indonesia. In 2010, Mr Stirzaker joined
the private equity mining fund manager, Pacific Road Capital Management as a partner. The
Pacific Road Resources Fund II is a major shareholder of Base Resources, with Mr Stirzaker
appointed as its nominee on the Base Resources Board. Mr Stirzaker is also a non-executive
director on the Boards of Prodigy Gold NL and Firestone Diamonds PLC.
Special responsibilities:
Member of the Remuneration & Nomination Committee
Other current public
company directorships:
Past public company
directorships held over
the last three years:
Prodigy Gold NL (since 2018); Firestone Diamonds PLC (since 2019)
Nil
Mr Malcolm Macpherson
Non-Executive Director
Qualifications:
Appointed:
Experience:
B.Sc. FAusIMM, FTSE
25 July 2013
Mr Macpherson is an accomplished business leader, with decades of experience in the global
mining industry at executive management and board level. Mr Macpherson spent 25 years
from 1974 at Iluka Resources, the world’s largest mineral sands company, rising from mine
manager to Managing Director and Chief Executive Officer. He has previously held the position
of Chair with Azumah Resources Limited and Western Power Corporation and been a director
of Portman Mining Limited and Minara Resources Limited. Mr Macpherson has also been the
Senior Vice President of the Minerals Council of Australia, President of the Western Australian
Chamber of Minerals & Energy, and a member of the Senate at Murdoch University.
Special responsibilities:
Chair of the Risk Committee; member of the Remuneration & Nomination Committee;
member of the Audit Committee
Other current public company
directorships:
Past public company
directorships held over
the last three years:
Nil
Nil
BASE RESOURCES | DIRECTORS' REPORT | 35
Directors’ Report (cont.)
Ms Diane Radley
Qualifications:
Appointed:
Experience:
Non-Executive Director
BComm BCompt (Hons), CA(SA), MBA, AMP (Harvard)
1 February 2018
Ms Radley has over 25 years’ experience in senior leadership roles across multiple
industries, most recently in financial services and investments. She served as CFO at Allied
Electronics Corporation (JSE), Group Finance Director at Old Mutual South Africa, and CEO
of Old Mutual Investment Group. Prior to this, she advised on a variety of transactions,
listings and due diligences for large corporate acquirers and private equity funds in her role
as Partner-in-charge of Transaction Services at PricewaterhouseCoopers in South Africa.
Ms Radley is currently a non-executive director of Murray & Roberts Holdings Ltd (JSE),
Transaction Capital Ltd (JSE) and a trustee of the DG Murray Trust.
Special responsibilities:
Member of the Risk Committee; member of the Audit Committee
Other current public company
directorships:
Murray & Roberts Holdings Ltd (since 2017); Transaction Capital Ltd (since 2018)
Past public company
directorships held over
the last three years:
Nil
Mr Chadwick Poletti
Qualifications:
Appointed:
Experience:
Company Secretary
LLB (Hons), BCom
19 May 2015
Mr Poletti is a practising lawyer and holds a Bachelor of Commerce majoring in Finance and
Accounting. Mr Poletti has broad experience in advising directors of listed public companies
in relation to directors’ duties, the Corporations Act, the ASX Listing Rules, the AIM Rules for
Companies and corporate governance.
Prior to joining Base Resources, Mr Poletti was a senior associate at international law firm,
Ashurst, where he specialised in both domestic and cross-border regulated and unregulated
mergers and acquisitions, including takeovers and schemes of arrangement, capital raisings
and corporate advisory and governance.
36 | BASE RESOURCES | ANNUAL REPORT 2019
Meetings of directors
The number of meetings of Directors (including meetings of committees of Directors) held during the year and the number
of meetings attended by each Director was as shown in the table below:
Directors’
Meetings
Audit
Committee
Remuneration &
Nominations Committee
Risk
Committee
Meetings
held while
a director
Meetings
attended
Meetings
held while a
committee
member
Meetings
attended
Meetings
held while a
committee
member
Meetings
attended
Meetings
held while a
committee
member
Meetings
attended
Keith Spence
Tim Carstens
Colin Bwye
Samuel Willis
Malcolm Macpherson
Michael Stirzaker
Diane Radley
8
8
8
8
8
8
8
8
8
8
8
8
8
8
4
-
-
4
4
-
4
4
-
-
4
4
-
4
4
-
-
4
4
4
-
4
-
-
4
4
4
-
4
-
-
4
4
-
4
3
-
-
4
4
-
4
Indemnifying officers
During or since the end of the financial year, Base Resources has given an indemnity or entered into an agreement to indemnify, or
paid or agreed to pay insurance premiums to insure its directors and officers against certain liabilities incurred while acting in that
capacity. The contracts of insurance prohibit disclosure of details of the policies or the premiums paid.
The Company’s Constitution provides that, subject to and so far as permitted by applicable law, the Company must indemnify every
officer of the Company and its wholly owned subsidiaries against a liability incurred as such an officer to a person (other than the
Company or a related body corporate) including a liability incurred as a result of appointment or nomination by the Company or
subsidiary as a trustee or as an officer of another corporation, unless the liability arises out of conduct involving a lack of good faith.
Consistent with the rules of the Company’s Constitution, the Company or its subsidiary companies (as applicable) has also granted
indemnities under the terms of deeds of indemnity with current and former Directors and current officers of the Company and its
subsidiaries. Each deed provides that the relevant Director or officer is to the maximum extent permitted by law, indemnified out
of the property of the Company or the subsidiary, as applicable, against any liability (other than a liability for costs and expenses)
the Director or officer incurs to another person (other than the Company or a related body corporate of the Company) as a Director
or officer of Company or a related body corporate, unless the liability arises out of conduct involving a lack of good faith by the
Director or officer.
No indemnity has been granted to an auditor of the Group in their capacity as auditors of the Group.
Options
On 31 December 2018, 61,425,061 options lapsed unexercised following their expiry.
Shares issued since the end of the financial year
No shares in Base Resources Limited have been issued since year end and no amounts are unpaid on any of the issued shares.
Proceedings on behalf of Group
No person has applied for leave of a Court to bring proceedings on behalf of the Group or intervene in any proceedings to which
the Group is a party for the purpose of taking responsibility on behalf of the Group for all or any part of those proceedings. The
Group was not a party to any such proceedings during the year.
BASE RESOURCES | DIRECTORS' REPORT | 37
Directors’ Report (cont.)
Non-audit services
The Board of Directors is satisfied that the provision of non-audit services during the year is compatible with the general standard
of independence for auditors imposed by the Corporations Act 2001. The Directors are satisfied that the services disclosed below
did not compromise the external auditor’s independence for the following reasons:
• The nature of the services provided do not compromise the general principles relating to auditor independence in accordance
with APES 110: Code of Ethics for Professional Accountants set by the Accounting Professional and Ethical Standards Board.
The following fees were paid or payable to external auditors for non-audit services provided during the year ended 30 June 2019:
KPMG Australia
Taxation services
Other services
Overseas KPMG firms
Taxation services
2019
US$
49,769
7,330
218,183
2018
US$
59,491
8,727
68,728
Auditor’s independence declaration
The lead auditor’s independence declaration for the year ended 30 June 2019 has been received and can be found on page 66 of
the Annual Report.
Rounding
The Group is of a kind referred to in ASIC Class Instrument 2016/191 and in accordance with that Class Instrument, amounts
in the financial report and directors’ report have been rounded to the nearest thousand dollars, unless otherwise stated.
38 | BASE RESOURCES | ANNUAL REPORT 2019
Remuneration Report - audited
This Remuneration Report sets out the remuneration arrangements for Base Resources Limited for year ended 30 June 2019.
This Remuneration Report forms part of the Directors’ Report and has been audited in accordance with the Corporations Act 2001.
Details of key management personnel
The remuneration report details the remuneration arrangements for key management personnel (KMP) who are defined as those
persons having authority and responsibility for planning, directing and controlling the major activities of the Group, and comprise the
Directors (whether executive or otherwise) of the Group and other executive management, as detailed in the table below. The Senior
Executives considered to be KMP’s are those who are members of the Group’s strategic planning team. The Executive Directors and
executive management listed in the table below are collectively defined as the Senior Executives for the purposes of this report.
Name
Senior Executives
T Carstens
C Bwye
K Balloch
A Greyling
S Hay
C Poletti
Non-Executive Directors
K Spence
S Willis
M Macpherson
M Stirzaker
D Radley
Position
Managing Director
Executive Director - Operations & Development
Chief Financial Officer
General Manager - Project Development
General Manager - Marketing
General Counsel and Company Secretary
Chair
Director
Director
Director
Director
Role of the Remuneration & Nomination Committee
The Remuneration & Nomination Committee is responsible for oversight of the remuneration system and policies. It is also
responsible for evaluating the performance of the Executive Directors and monitoring performance of the executive management
team. The Board, upon recommendation of the Remuneration & Nomination Committee, determines the remuneration of the
Executive Directors. The Remuneration & Nomination Committee reviews and approves the remuneration of the executive
management team (other than the Executive Directors).
The objective of the Remuneration & Nomination Committee is to ensure that remuneration system and policies attract and retain
executives and directors who will create sustained value for shareholders.
Services from remuneration consultants
The Remuneration & Nomination Committee engaged BDO Remuneration and Reward to provide market data relating to the
remuneration packages of the Group’s Senior Executives to assist the Committee in assessing the positioning and competitiveness
of current remuneration packages.
BDO were engaged by the Remuneration & Nomination Committee Chair, and reported to the Committee and the Board. Further,
BDO has processes and procedures in place to minimise potential opportunities for undue influence from Senior Executives. The
Board is satisfied that the interaction between BDO and Senior Executives is minimal, principally relating to provision of relevant
Group information for consideration by the respective consultants. The Board is therefore satisfied that the advice received from
BDO is free from undue influence from the Senior Executives to whom the remuneration recommendations apply.
The information provided by BDO was provided to the Remuneration & Nomination Committee and the Board as inputs into decision making
only. The Committee and the Board considered the information, along with other factors, in making its ultimate remuneration decisions.
Total fees paid to BDO for services during the year ended 30 June 2019 were A$23,100.
BASE RESOURCES | REMUNERATION REPORT | 39
Remuneration Report - audited (cont.)
Remuneration policy
Base Resources is committed to the close alignment of remuneration to shareholder return, particularly that of the Senior
Executives. To this end, the Group’s remuneration system is designed to attract, motivate and retain people by identifying
and rewarding high performers and recognising their contribution to the continued growth and success of the Group.
Key objectives of the Group’s remuneration policy are to ensure that remuneration practices:
• Facilitate the achievement of the Group’s objectives.
• Provide strong linkage between executive incentive rewards and creation of value for shareholders.
•
Are simple to understand and implement, openly communicated and are equitable across the Group.
•
Attract, retain and motivate employees of the required capabilities.
•
Comply with applicable legal requirements and appropriate standards of governance.
Key principles of Senior Executive remuneration
Remuneration comprises fixed remuneration, and variable (or at-risk) remuneration, which is determined by individual and Group
performance. The Group targets total fixed remuneration (TFR) at the 50th market percentile and total remuneration package (TRP),
including at-target variable remuneration, at the 75th market percentile, for Senior Executives. As a consequence, the Group’s Senior
Executives have a higher proportion of remuneration at-risk than industry averages.
Questions and answers about Senior Executive remuneration:
Remuneration mix
What is the balance between fixed and at-risk remuneration?
The mix of fixed and at-risk remuneration varies depending on the organisational level of executives, and also depends on the
performance of the Group and individual executives. More senior positions have a greater proportion of their remuneration at-risk.
For all executives, it is possible that no at-risk remuneration will be earned and that fixed remuneration will represent 100 per cent
of total remuneration.
If target at-risk remuneration is earned, the proportion of total remuneration represented by fixed and at-risk remuneration would be:
• Executive Directors (includes Managing Director): 36% fixed and 64% at-risk.
• Other Senior Executives: 53% fixed and 47% at-risk.
Fixed remuneration
What is included in fixed remuneration?
TFR includes a base salary, inclusive of superannuation. Allowances and other benefits may be provided and are as agreed,
including leased motor vehicles and additional superannuation, provided that no extra cost is incurred by the Group.
When and how is fixed remuneration reviewed?
TFR is reviewed annually. Any adjustments to the TFR for the Executive Directors must be approved by the Board after
recommendation by the Remuneration & Nomination Committee. The Executive Directors determine the TFR of other Senior
Executives within specified guidelines approved by the Board, subject to final approval by the Remuneration and Nomination
Committee. The Group seeks to position fixed remuneration at the 50th market percentile of salaries for comparable companies
within the mining industry with which the Group competes for talent and equity investment, utilising datasets and specific
advice provided by independent remuneration consultants.
40 | BASE RESOURCES | ANNUAL REPORT 2019
Short Term Incentive Plan (STIP)
What is the STIP?
The STIP is the cash component of at-risk remuneration, payable based on a mix of Group and individual annual performance standards.
Why does the Board consider the STIP is appropriate?
At-risk remuneration strengthens the link between pay and performance. The purpose of these programs is to reward executives
for annual performance relative to expectations of their role accountabilities, required behaviours and KPI’s as well as delivery
of annual business plans and priorities. A reward structure that provides at-risk remuneration is also necessary as a competitive
remuneration package in the Australian and global marketplace for executives.
Does the STIP take into account different levels of performance compared to objectives?
The size of any STIP payment is linked to the extent of achievement. Levels of performance required for target levels of STIP are set
such that they are challenging but achievable.
Required performance levels for each performance criteria are set at three levels being:
• Threshold - a performance level that is below optimal but nevertheless acceptable. It is the minimum for which a small STIP
award would be payable. The STIP is designed such that there is an 80% probability the executive will achieve or exceed this
level of achievement.
•
Target - a performance level that represents a challenging but achievable level of performance. The STIP is designed such that
there is a 50% to 60% probability the executive will achieve or exceed this level of achievement.
• Stretch - a performance level that is clearly at the upper limit of what may be achievable. The STIP is designed such that there
is a 10% to 20% probability the executive will achieve or exceed this level of achievement.
The probabilities of achievement are set at these levels such that, over time, awards approximately equal to the target level would
become payable, assuming performance to role. The achievement of this target level of award would support the 75th market
percentile TRP policy objective for executives.
What are the performance criteria?
Performance criteria are assigned for both individual and Group performance. Performance criteria may change from year to year.
For Executive Directors and other Senior Executives, 50% of the STIP is attached to individual performance criteria and 50% to
corporate performance criteria.
Reflecting the importance attached to role clarity within Base Resources, individual performance criteria are drawn directly from the
role accountabilities in the participant’s role description. Each performance criteria is allocated a weighting that reflects the relative
importance of that performance criteria for the year.
Corporate performance criteria are set at the commencement of each financial year and are usually derived from the annual
operating plan and may vary from time to time to include other aspects of performance for which there is shared accountability
and which the Group wishes to emphasise.
The target corporate performance criteria for the 2019 financial year were:
• Budgeted group EBITDA, assuming fixed AUD:USD exchange rate and the inclusion of only 25% of variances in actual sales prices
against budgeted prices, reflecting a limited measure of management control over product pricing outcomes.
• Achievement of a fully funded decision to proceed to construction on the Toliara Project by 31 March 2020, unless extended by
the Board in its absolute discretion.
Where budgeted group EBITDA is used as the basis for the target corporate performance, the Remuneration & Nomination
Committee will set the performance criteria for the year (i.e. the “Threshold”, “Target” and “Stretch” performance ranges) on the basis
of an assessment of the degree of challenge represented by the particular year’s budget. Consequently, these ranges may change
from year to year. This approach is designed to ensure the appropriate degree of challenge in both budgets committed to and STIP.
BASE RESOURCES | REMUNERATION REPORT | 41
Remuneration Report - audited (cont.)
Is there an overriding financial performance or other conditions?
For each year, a gate or gates may be determined by the Board. The gate may be a minimum level of earnings for the Group
or a safety performance threshold that must be achieved for any awards to become payable under the STIP.
Irrespective of whether a gate is achieved, the Board retains the absolute discretion to increase or decrease awards. It is intended
that the exercise of this discretion is used sparingly to take account of significant events and/or factors that were not anticipated
when the year commenced and the performance criteria were set.
The following gates were in place for the 2019 financial year:
• No workplace fatalities.
• No major reputational or environmental events.
What is the value of the STIP award opportunity?
Executive Directors have a target STIP opportunity of 60% of TFR, with a minimum opportunity (if only threshold level is met)
of 20% of TFR and a maximum opportunity (if the stretch targets are achieved) of 100% of TFR. With effect from 1 July 2019,
the target STIP opportunity for Executive Directors has been reduced to 50% of TFR and the maximum opportunity has been
reduced to 80% of TFR.
Other Senior Executives have a target STIP opportunity of 30% of TFR, with a minimum opportunity (if only threshold level is met)
of 15% of TFR and a maximum opportunity (if the stretch targets are achieved) of 60% of TFR.
These percentages are set based on external advice to achieve the remuneration policy intent of 75th market percentile
TRP market positioning.
How is the STIP assessed?
Individual performance criteria - are assessed using a performance rating scale. In making the assessment in respect of a particular
area of accountability, consideration is given to the extent to which the behaviours and performance indicators identified in the role
description have been modelled and observed. This assessment is undertaken by the participant’s manager and then signed-off by
the manager-once-removed. In the case of the Executive Directors, the assessment is undertaken by the Remuneration & Nomination
Committee and approved by the Board. Specific outcomes during the 2019 financial year relevant to STIP awards have included:
• The successful ramp up and optimisation post completion of the Kwale Phase 2 mine optimisation project.
• The continued consistent performance of Kwale operations.
• Successful transition of mining operations to Kwale South Dune.
• Tight control of operating costs.
• Maintenance of high safety standards.
• Securing of additional exploration tenure at Kwale and execution of planned exploration drilling.
• Establishment of the Base Toliara organisation, building community and government support and establishing capacity
building programs.
• Delivery of a high quality Toliara Project Pre-Feasibility Study.
Corporate performance criteria – the Board determines the extent to which each corporate performance criteria has been achieved.
42 | BASE RESOURCES | ANNUAL REPORT 2019
Long Term Incentive Plan (LTIP)
What is the LTIP?
The LTIP is the equity component of at-risk remuneration and is linked to the Group’s Total Shareholder Return (TSR) performance
over a 3 year period.
The LTIP aims to reward participants for Base Resources’ TSR performance, both relative to its peer group and in absolute terms.
How often are LTIP awards made?
The LTIP operates on the basis of a series of cycles. Each cycle commences on 1 October and is followed by a 3 year performance
period, with a test date on the 3rd anniversary of commencement of the cycle.
Why does the Board consider a LTIP is appropriate?
The Group believes that a well designed LTIP can:
• Attract executives with the required capability.
•
Retain key talent.
•
Maintain a stable leadership team.
•
Explicitly align and link the interests of the Base Resources leadership team and shareholders.
What types of equity may be granted under the LTIP?
Performance rights are granted under the Base Resources LTIP. Performance rights are a right granted to acquire one share
in Base Resources, subject to satisfying the specified performance criteria (outlined below).
A participant is not entitled to participate in or receive any dividends or other shareholder benefits until the performance right
has vested and a share has been allocated and transferred to the participant.
What is the value of the LTIP award opportunity?
Executive Directors are awarded performance rights worth 120% of TFR. Other Senior Executives are awarded performance rights
worth 60% of TFR. The LTIP performance criteria are designed to target 50% vesting of awarded performance rights over time.
These award opportunities and target vesting outcome are set based on external advice to achieve the remuneration policy intent
of 75% market percentile TRP market positioning.
What are the LTIP performance criteria?
The Group uses two LTIP performance criteria to determine the proportion of performance rights which vest, as follows:
• Half of the performance rights are subject to a relative TSR criteria (the relative TSR performance rights).
•
Half of the performance rights are subject to an absolute TSR criteria (the absolute TSR performance rights).
The Board considers that TSR is an appropriate performance hurdle because it ensures that a proportion of each participant’s
remuneration is explicitly linked to shareholder value and ensures that participants only receive a benefit where there is a
corresponding direct benefit to shareholders. The blend of absolute and relative performance rights is considered to mitigate
the weaknesses of those measures in isolation.
Relative TSR performance rights
The proportion of relative TSR performance rights which vest will be determined on the basis of Base Resources’ TSR relative
to the TSR of the comparator group over the performance period, as set out below:
Base Resources relative 3-year TSR performance
Percentage of relative TSR performance rights that vest
Less than 40th percentile
40th percentile
Between 40th and 50th percentile
Between 50th and 75th percentile
75th percentile and above
Nil
25%
Pro rata between 25% and 50%
Pro rata between 50% and 100%
100%
Notwithstanding the above, the Board has the absolute discretion to determine that no relative TSR performance rights vest
if Base Resources’ TSR is negative (despite its relative placing within the TSR comparator group).
BASE RESOURCES | REMUNERATION REPORT | 43
Remuneration Report - audited (cont.)
LTIP performance criteria are designed to target 50% vesting over time to achieve the Company’s policy intent for remuneration market
positioning, whilst providing incentive for out performance. A threshold level of TSR performance at the 40th percentile of the peer group,
being a result that is below target, results in only 25% vesting and represents a 25% loss of this component of at-risk remuneration relative
to target positioning and is considered appropriate in the context of the LTIP as a whole. TSR performance below the 40th percentile of the
peer group results in nil vesting and represents a 50% loss of this component of at-risk remuneration.
Absolute TSR performance rights
The proportion of absolute TSR performance rights which vest will be determined on the basis of Base Resources’ TSR on
the following scale:
Base Resources 3-year TSR
Percentage of absolute TSR performance rights that vest
Less than 40.5%
40.5%
Between 40.5% and 56%
Between 56% and 73%
73% or greater
Nil
25%
Pro rata between 25% and 50%
Pro rata between 50% and 100%
100%
The number of performance rights granted for the cycle commencing 1 October 2018 is by reference to the 20-day volume
weighted average price (VWAP) of A$0.2480 per share (A$0.2891 for cycle commencing 1 October 2017 and A$0.1529 for cycle
commencing 1 October 2016). In order to achieve 100% vesting for the cycle commencing 1 October 2018, a 30-day VWAP of
A$0.4290 or greater would be required (A$0.5001 for cycle commencing 1 October 2017 and A$0.2645 for cycle commencing
1 October 2016) at the conclusion of the 3-year performance period.
What is the comparator group?
The TSR comparator group is comprised of the 26th to 75th ranked companies, from the top 150 ASX listed resource companies
(excluding oil and gas) by market capitalisation, at the time of the offer. The comparator group for each of the performance rights
cycles is comprised of the following companies:
44 | BASE RESOURCES | ANNUAL REPORT 2019
Companies
Aeon Metals Limited
Alacer Group Corp.
Alderan Resources Limited
Alkane Resources Limited
Altura Mining Limited
Argosy Minerals Limited
Artemis Resources Limited
Atlas Iron Limited
Atrum Coal NL
Aurelia Metals Limited
Avanco Resources Limited
AVZ Minerals Limited
Bathurst Resources Limited
Beadell Resources Limited
Berkeley Energia Limited
Blackham Resources Limited
Blue Energy Limited
Brockman Mining Limited
Cardinal Resources Limited
Champion Iron Limited
CI Resources Limited
Copper Mountain Mining Corp
CuDeco Limited
Dacian Gold Limited
Danakali Limited
Dome Gold Mines Limited
Doray Minerals Limited
Eastern Goldfields Limited
Energy Resources of Australia Limited
Finders Resources Limited
Flinders Mines Limited
Galaxy Resources Limited
Gascoyne Resources Limited
Global Geoscience Limited
Gold Road Resources Limited
Grange Resources Limited
Havilah Resources Limited
Heron Resources Limited
Highfield Resources Limited
Jupiter Mines Limited
Kangaroo Resources Limited
Kidman Resources Limited
LTIP Cycle
Commencing 1 October
2018
2017
2016
Companies
LTIP Cycle
Commencing 1 October
2018
2017
2016
Lucapa Diamond Company Limited
Lynas Corporation Limited
Magnis Resources Limited
Medusa Mining Limited
Metals X Limited
Metro Mining Limited
Millennium Minerals Limited
Mineral Deposits Limited
Mount Gibson Iron Limited
Neometals Limited
New Century Resources Limited
Nickel Mines Limited
OM Holdings Limited
Orocobre Limited
Paladin Energy Limited
Panoramic Resources Limited
Pantoro Limited
Perseus Mining Limited
Pilbara Minerals Limited
Ramelius Resources Limited
Rand Mining Limited
Range International Limited
Realm Resources Limited
Resolute Mining Limited
Sandfire Resources NL
Sheffield Resources Limited
Silver Lake Resources Ltd
Stanmore Coal Limited
Syrah Resources Limited
Tawana Resources NL
Teranga Gold Corporation
Terracom Limited
Terramin Australia Limited
Tribune Resources Limited
Troy Resources Limited
Tungsten Mining NL
West African Resources Limited
West Gold Resources Limited
Western Areas Limited
Yancoal Australia Limited
Zimplats Holdings Limited
BASE RESOURCES | REMUNERATION REPORT | 45
Remuneration Report - audited (cont.)
Was a grant made in 2019?
Performance rights were granted to eligible participants in the LTIP for the cycle commencing 1 October 2018. The number of
performance rights granted for each executive was calculated by reference to the VWAP on the twenty trading days up to the
start of the cycle, being A$0.2480 per share, and the LTIP award opportunity.
What happens to performance rights granted under the LTIP when a participant ceases employment?
Where a participant ceases to be employed by a Group member (and is not immediately employed by another Group member)
for any reason other than a qualifying reason, all unvested performance rights of that participant are automatically forfeited.
Where a participant ceases to be employed by a Group member because of a qualifying reason, then the Board must determine,
in its absolute discretion, the number of unvested performance rights of a participant (if any) that will remain on foot and become
capable of vesting in accordance with LTIP rules.
The Board will generally exercise its discretion in the following manner:
• Performance rights granted in the cycle beginning on the 1 October immediately prior to the participant ceasing to be employed
by a Group member are automatically forfeited.
•
All other performance rights will continue to be held by the participant and will be tested for vesting on the test date for the
relevant performance right.
Qualifying reasons include but are not limited to death, total and permanent disablement, retirement or redundancy.
What happens in the event of a change of control?
Subject to the Board determining otherwise, if a change of control event occurs then a test date arises on the date that the change
of control event occurs with the Board to test the extent to which the performance criteria have been satisfied:
• On the basis of the offer price of the relevant transaction.
•
In the case of absolute TSR performance rights, reducing the percentage TSR performance hurdle pro rata to the unexpired
portion of the performance period as at the date the change in control event occurs.
Do shares granted upon vesting of performance rights dilute existing shareholders’ equity?
Shares allocated to the participants in the LTIP upon vesting of performance rights may be satisfied by the Group issuing shares
to the plan trustee or purchases by the plan trustee on market. In the event the Group issues shares to the plan trustee to satisfy
the vesting of performance rights then shareholders’ pre-existing equity will be diluted.
Does the Group have a policy in relation to hedging at-risk remuneration?
A participant in the LTIP must not enter into an arrangement if the arrangement would have the effect of limiting the exposure
of the participant to risk relating to performance rights that have not vested.
Did any performance rights vest in 2019?
All 45,748,431 of the 45,748,431 performance rights granted under the LTIP for the cycle commencing 1 October 2015 vested.
These rights completed the 3 year performance period on 30 September 2018, with vesting as follows:
• Relative TSR performance rights
Base Resources TSR over the performance period placed it in the 96th percentile, resulting in 100% of the relative performance
rights vesting.
• Absolute TSR performance rights
Base Resources TSR over the performance period, by reference to a final VWAP of A$0.256, equated to a TSR of 340%, resulting
in 100% of the absolute performance rights vesting.
Shares issued to the participants in the LTIP upon the vesting of the above performance rights were satisfied through a combination
the Company issuing shares and ordinary shares previously acquired on market by the Base Resources Long Term Incentive Plan Trust.
46 | BASE RESOURCES | ANNUAL REPORT 2019
Group performance and its link to shareholder return
The following graph compares the change in the cumulative TSR of Base Resources’ shares during the period 1 July 2014 to
30 June 2019, against the cumulative total return of the ASX 200 Resources Index over the same period. The graph illustrates
the cumulative return from Base Resources over the past five years, assuming A$100 was invested. No dividends have been
declared during this period.
Cumulative Total Shareholder Returns
1 July 2014 through 30 June 2019
A$150
A$150
A$150
A$100
A$100
A$50
A$50
A$0
A$0
A$127
A$87
A$147
A$69
A$83
A$73
A$90
A$84
A$41
A$41
4
1
-
n
u
J
-
0
3
4
1
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3
4
1
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D
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1
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a
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5
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p
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S
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5
1
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c
e
D
-
1
3
6
1
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r
a
M
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1
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1
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1
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1
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a
M
-
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3
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-
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3
9
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0
3
ASX 200 Resources Index
Base Resources Limited
Executive remuneration outcomes for 2019
Total Fixed Remuneration (TFR)
The Company seeks to ensure that executive remuneration is market competitive, easy to understand and can be clearly
communicated to executives and shareholders. A comprehensive market benchmarking of senior executive remuneration
was completed during the year. By reference to this benchmarking, and being mindful of the need to retain our key
employees in a competitive market as the Company grows, the Board approved the following increases in TFR for:
• Tim Carstens from A$509,000 to A$580,000 reflecting market movements and seeking to achieve the Company’s
remuneration policy positioning intent of the 50th percentile for TFR.
• Colin Bwye from A$509,000 to A$580,000 reflecting market movements and seeking to achieve the Company’s
remuneration policy positioning intent of the 50th percentile for TFR.
• Kevin Balloch from A$395,000 to A$407,000 inflationary adjustment.
• Andre Greyling from A$350,000 to A$385,000 recognising the increased scope of the role compared with benchmark.
• Stephen Hay from A$415,350 to A$427,811 inflationary adjustment.
• Chadwick Poletti from A$325,000 to A$355,000 recognising the increased scope of the role compared with benchmark.
BASE RESOURCES | REMUNERATION REPORT | 47
Remuneration Report - audited (cont.)
Short Term Incentives (STI)
At the end of the 2019 financial year, a review of the performance of each Senior Executive was undertaken against each of their
2019 individual performance measures as explained above. The 2019 financial year corporate performance was measured against
two equally weighted criteria: financial performance and achievement of the Toliara Project FID by 31 March 2020 (unless extended
by the Board in its absolute discretion). The financial performance achieved was between threshold and target performance levels,
and incentives are payable in relation to this component commensurate with the performance level achieved. The achievement of
the FID will be assessed when it occurs. STIP entitlements earned for 2019 performance are paid in the 2020 financial year.
The following table outlines the STI that was earned in comparison with the target STI for the 2019 financial year:
Target STI
STI Awarded
Corporate
performance
Corporate
performance
Name
T Carstens
C Bwye
K Balloch
A Greyling
S Hay
C Poletti
Individual
performance %
Financial
performance %
Toliara
Project FID %
Individual
performance %
Financial
performance %
Toliara (i)
Project FID
30
30
15
15
15
15
15
15
7.5
7.5
7.5
7.5
15
15
7.5
7.5
7.5
7.5
36
36
20
21
20
25
11
11
6
6
6
6
yet to be assessed
yet to be assessed
yet to be assessed
yet to be assessed
yet to be assessed
yet to be assessed
(i) 50% of corporate performance relates to achieving the Toliara Project FID, which spans more than one financial year. The extent to which this
is achieved can only be assessed once the target FID date has passed.
LTIP Performance Rights
The LTIP operates on the basis of a series of 3-year performance cycles commencing on 1 October each year. Accordingly,
LTIP performance rights issued in the year ending 30 June 2019 are subject to a 3-year performance period ending on
30 September 2021. Performance rights issued under the plan in the 2016 financial year, totalling 45,748,431, completed
their 3-year performance period on 30 September 2018, with 45,748,431 performance rights vesting.
The table below outlines the vesting outcomes of performance rights for the last three LTIP cycles completed:
Relative Performance Rights
Absolute Performance Rights
Grant date
Vesting date
No. performance
rights granted
No. vested
1 October 2013
30 September 2016
7,518,865
-
1 October 2014
30 September 2017
10,030,672
4,961,983
1 October 2015
30 September 2018
45,748,431
22,874,215
%
0
99
100
No. vested
-
-
22,874,216
%
0
0
100
48 | BASE RESOURCES | ANNUAL REPORT 2019
Take home pay for 2019
The remuneration detailed in this table represents the Senior Executives “take home pay” and is aligned to the current reporting
period, and therefore is particularly useful in understanding actual remuneration received during the year. The table excludes
adjustments made for accounting purposes and included in Statutory Remuneration (refer page 50) specifically the probability
and value of an employee obtaining long service leave and the fair value of performance rights under three outstanding LTIP cycles
expensed during the 2019 financial year. The remuneration packages for all Senior Executives are shown in the following table in
their employment currency.
Currency
Salary
STIP award
Superannuation
Vesting of
performance
rights (ii)
Take home pay (i)
(before tax)
Key
Management
Person
2019
Executive Directors
T Carstens
C Bwye
AUD
AUD
Other Key Management Personnel
K Balloch
A Greyling
S Hay
C Poletti
2018
Executive Directors
T Carstens
C Bwye
AUD
AUD
AUD
AUD
AUD
AUD
Other Key Management Personnel
K Balloch
A Greyling
S Hay
C Poletti
AUD
AUD
AUD
AUD
555,000
555,000
382,000
360,000
402,811
330,000
484,000
484,000
370,000
325,000
390,350
300,000
274,703
274,703
104,339
104,474
112,883
109,646
422,579
399,674
163,953
142,650
172,401
139,773
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
1,845,674
1,845,674
739,453
665,507
823,962
380,290
243,289
243,289
97,472
14,460
108,611
31,124
2,700,377
2,700,377
1,250,792
1,154,981
1,364,656
844,936
1,174,868
1,151,963
656,425
507,110
696,362
495,897
(i) Base Resources’ financial results are reported under International Financial Reporting Standards (IFRS). The above table includes certain
non-IFRS measures including vested performance rights and take home pay. These measures are presented to enable understanding of
the underlying remuneration of KMPs.
The value of performance rights vesting on 30 September 2018 has been calculated by reference to the price on the vesting date of A$0.2650.
The value of performance rights vesting on 30 September 2017 has been calculated by reference to the price on the vesting date of A$0.2733.
(ii)
BASE RESOURCES | REMUNERATION REPORT | 49
Remuneration Report - audited (cont.)
Statutory remuneration disclosures for the year ended 30 June 2019
The statutory remuneration disclosures for the year ended 30 June 2019 are detailed below and are prepared in accordance
with Australian Accounting Standards, are stated in US dollars and differ from the take home pay summary on page 49. These
differences arise due to the accounting treatment of long service leave and share-based payments.
Key
Management
Person
Short term
employment benefits
Post-
employment
benefits
Salary
STIP bonus (i) Superannuation
Other long
term
Long service
leave (ii)
Share based
payments
Performance
Rights (iii)
Total
Performance
related
2019
US$
US$
US$
US$
US$
US$
Executive Directors
T Carstens (iv)
C Bwye (iv)
396,881
396,881
196,440
196,440
Other Key Management Personnel
17,878
17,878
17,878
17,878
17,878
17,878
273,168
257,436
288,050
235,983
74,613
74,709
80,722
78,408
1,848,399
701,332
107,268
Executive Directors
T Carstens (iv)
C Bwye (iv)
375,245
375,245
Other Key Management Personnel
327,626
309,867
127,113
110,597
133,662
108,366
19,383
19,383
19,383
19,383
19,383
19,383
286,861
251,973
302,638
232,590
1,824,552
1,117,231
116,298
K Balloch (iv)
A Greyling (iv)
S Hay (iv)
C Poletti (iv)
Total
2018
K Balloch (iv)
A Greyling (iv)
S Hay (iv)
C Poletti (iv)
Total
16,371
14,418
9,890
2,717
10,022
5,094
58,512
15,962
19,020
11,518
1,710
10,987
2,471
61,668
271,680
271,680
103,458
93,829
110,854
76,315
899,250
897,297
479,007
446,569
507,526
413,678
927,816
3,643,327
245,196
245,196
97,123
82,428
106,079
59,489
983,412
968,711
541,998
466,091
572,749
422,299
835,511
3,955,260
%
52.1
52.2
37.2
37.7
37.7
37.4
58.2
57.3
41.4
41.4
41.9
39.7
(i) Current year STIP awards are accrued in the financial year to which the performance relates.
(ii) Long service leave entitlement represents the movement in the provision.
(iii) The fair value of performance rights is calculated at the date of grant using a Monte Carlo Simulation model and recognised over the period in
which the minimum service conditions are fulfilled (the vesting period). The value disclosed is the portion of the fair value of the performance rights
recognised in the reporting period. The amount included as remuneration is not necessarily the benefit (if any) that individual Senior Executive may
ultimately receive.
(iv) Total remuneration package denominated in Australian dollars (A$) and converted to US dollars (US$) for reporting purposes using the average
exchange rate for the 2019 financial year of 0.7151 (2018: 0.7753).
50 | BASE RESOURCES | ANNUAL REPORT 2019
Reconciliation of take home pay to statutory remuneration
A reconciliation of the Managing Director’s take home pay to statutory remuneration is detailed below as an example:
Take home pay for the Managing Director (A$)
Take home pay converted to US$ using average exchange rates
Treatment of Long Service Leave:
2019
$
2,700,377
1,931,040
2018
$
1,174,868
910,876
Add: Movement in the accounting provision for long service leave entitlements
16,371
15,962
Treatment of performance rights:
Add: accounting fair value (non-cash) of performance rights recognised in the period
Less: value of performance rights vested at date of vesting (US$)
Statutory pay for the Managing Director (US$)
271,680
(1,319,841)
899,250
245,196
(188,622)
983,412
Non-executive director remuneration
Shareholders approve the maximum aggregate remuneration for non-executive directors. Fees paid to non-executive directors are
recommended by the Remuneration & Nomination Committee and the Board is responsible for approving any recommendations,
if appropriate. As approved at the Annual General Meeting on 28 November 2011, the aggregate limit of fees payable per annum
is A$750,000 in total.
The Group’s policy is that non-executive director remuneration is structured to exclude equity-based remuneration and reviewed annually.
All directors have their indemnity insurance paid by the Group.
Non-executive directors receive a fixed fee remuneration consisting of a cash fee and statutory superannuation contributions made
by the Group and additional fees for committee roles as set out below:
Base fees
Chair
Other non-executive directors
Remuneration & Nomination Committee
Chair
Committee member
Audit Committee
Chair
Committee member
Risk Committee
Chair
Committee member
2019
A$
148,500
80,850
-
5,250
14,000
7,000
7,900
3,900
2018
A$
148,500
77,000
-
5,250
14,000
7,000
7,900
3,900
BASE RESOURCES | REMUNERATION REPORT | 51
Remuneration Report - audited (cont.)
Non-executive remuneration for the year ended 30 June 2019 and comparative 2018 remuneration:
Base fees
US$
Audit committee
US$
Remuneration
& Nomination
committee
US$
Risk committee
US$
2019
K Spence
S Willis
M Macpherson
M Stirzaker
D Radley
Total
2018
K Spence
S Willis
M Anderson (ii)
M Macpherson
M Stirzaker
D Radley (iii)
Total
106,192
57,816
57,816
57,816
57,816
337,456
115,132
59,698
9,950
59,698
59,698
24,874
329,050
-
10,011
5,006
-
5,006
20,023
-
10,854
905
5,427
-
1,809
18,995
-
3,754
3,754
3,754
-
11,262
-
4,070
-
4,070
4,070
-
-
2,789
5,649
-
2,789
11,227
-
3,024
-
6,125
3,024
1,008
Total (i)
US$
106,192
74,370
72,225
61,570
65,611
379,968
115,132
77,646
10,855
75,320
66,792
27,691
12,210
13,181
373,436
(i) Total remuneration packages denominated in Australian dollars (A$) and converted to US dollars (US$) for reporting purposes using the average
exchange rate for the 2019 financial year of 0.7151 (2018: 0.7753).
Retired 31 August 2017.
Appointed 1 February 2018.
(ii)
(iii)
52 | BASE RESOURCES | ANNUAL REPORT 2019
Equity instruments
Performance Rights
The table below outlines movements in performance rights during 2019 and the balance held by each Senior Executive at
30 June 2019.
Name
Grant date (i)
Number of
performance
rights
Fair value
of each
performance
right
Number
vested
during year
Number
lapsed
during year
Balance at
end of year
Vesting date (ii)
T Carstens
1 October 2015
6,964,806
A$0.0380
30 September 2018
6,964,806
1 October 2016
1,725,567
A$0.1625
30 September 2019
1 October 2017
2,113,056
A$0.2150
30 September 2020
1 October 2018
2,806,452
A$0.2480
30 September 2021
-
-
-
13,609,881
6,964,806
C Bwye
1 October 2015
6,964,806
A$0.0380
30 September 2018
6,964,806
1 October 2016
1,725,567
A$0.1625
30 September 2019
1 October 2017
2,113,056
A$0.2150
30 September 2020
1 October 2018
2,806,452
A$0.2480
30 September 2021
-
-
-
13,609,881
6,964,806
K Balloch
1 October 2015
2,790,387
A$0.0380
30 September 2018
2,790,387
1 October 2016
1 October 2017
1 October 2018
691,333
819,899
984,677
5,286,296
A$0.1625
30 September 2019
A$0.2150
30 September 2020
A$0.2480
30 September 2021
-
-
-
2,790,387
A Greyling
1 October 2015
2,511,348
A$0.0380
30 September 2018
2,511,348
1 October 2016
1 October 2017
1 October 2018
622,200
726,493
931,452
4,791,493
A$0.1625
30 September 2019
A$0.2150
30 September 2020
A$0.2480
30 September 2021
-
-
-
2,511,348
S Hay
1 October 2015
3,109,289
A$0.0380
30 September 2018
3,109,289
1 October 2016
1 October 2017
770,343
862,139
A$0.1625
30 September 2019
A$0.2150
30 September 2020
1 October 2018
1,035,027
A$0.2480
30 September 2021
-
-
-
5,776,798
3,109,289
C Poletti
1 October 2015
1,435,056
A$0.0380
30 September 2018
1,435,056
1 October 2016
1 October 2017
1 October 2018
355,543
674,600
858,871
3,324,070
46,398,419
A$0.1625
30 September 2019
A$0.2150
30 September 2020
A$0.2480
30 September 2021
-
-
-
1,435,056
23,775,692
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1,725,567
2,113,056
2,806,452
6,645,075
-
1,725,567
2,113,056
2,806,452
6,645,075
-
691,333
819,899
984,677
2,495,909
-
622,200
726,493
931,452
2,280,145
-
770,343
862,139
1,035,027
2,667,509
-
355,543
674,600
858,871
1,889,014
22,622,727
(i) The amount expensed per the statutory remuneration table reflects the period since commencement of services when the Group and the Senior
(ii)
Executive had a shared understanding of the award.
On the vesting date, performance rights are tested against the performance criteria and only those performance rights that satisfy the performance
criteria vest.
BASE RESOURCES | REMUNERATION REPORT | 53
Remuneration Report - audited (cont.)
Key Management Personnel performance rights movements
Balance 1 July
Granted
Vested
Lapsed
Balance 30 June
2019
T Carstens
C Bwye
K Balloch
A Greyling
S Hay
C Poletti
10,803,429
10,803,429
4,301,619
3,860,041
4,741,771
2,465,199
36,975,488
2,806,452
2,806,452
984,677
931,452
1,035,027
858,871
9,422,931
6,964,806
6,964,806
2,790,387
2,511,348
3,109,289
1,435,056
23,775,692
-
-
-
-
-
-
-
6,645,075
6,645,075
2,495,909
2,280,145
2,667,509
1,889,014
22,622,727
Key Management Personnel shareholdings
The number of ordinary shares in Base Resources held by each director and KMP of the Group during the financial year is as follows:
Balance 1 July
Vesting of
Performance Rights
Purchased
Sold
Balance 30 June
2019
K Spence
T Carstens
C Bwye
S Willis
M Macpherson
M Stirzaker
D Radley
K Balloch
A Greyling
S Hay
C Poletti
666,667
2,655,640
3,164,199
350,000
-
-
500,000
620,759
1,952,081
529,837
171,947
-
6,964,806
6,964,806
-
-
-
-
2,790,387
2,511,348
3,109,289
1,435,056
-
-
-
-
-
-
-
-
-
-
-
-
(3,800,000)
(4,050,000)
-
-
-
-
(1,411,146)
(1,200,000)
(2,500,000)
(800,000)
666,667
5,820,446
6,079,005
350,000
-
-
500,000
2,000,000
3,263,429
1,139,126
807,003
10,611,130
23,775,692
0
(13,761,146)
20,625,676
54 | BASE RESOURCES | ANNUAL REPORT 2019
Executive Key Management Personnel employment arrangements
The employment arrangements of the executive KMPs are formalised in standard employment agreements.
Details of the termination provisions contained in the agreements are provided below.
Name
Term of contract
Notice period by either party
Termination benefit
T Carstens
Permanent – ongoing
until notice has been
given by either party
3 months’ notice by the employee
1 month’s notice for termination by Company
if unable to perform duties by reason of illness
No notice required for termination by Company
for cause
12 months fixed
remuneration in the
case of termination
by the Company
C Bwye
K Balloch
A Greyling
S Hay
C Poletti
Permanent – ongoing
until notice has been
given by either party
3 months’ notice by the employee
1 month’s notice for termination by Company
for serious breach of employment agreement,
incompetence, gross misconduct or refusing to
comply with lawful direction given by the Company
No notice required for termination by Company if
convicted of any major criminal offence
Company may elect to make payment in lieu of notice
6 months fixed
remuneration in the
case of termination
by the Company
(3 months remuneration
for A Greyling)
This Report of Directors, incorporating the Remuneration Report, is signed in accordance with a resolution of the Board of Directors.
Keith Spence,
Chair
Dated: 24 August 2019
BASE RESOURCES | RENUMERATION REPORT | 55
Corporate Governance
The Company is committed to implementing high standards of corporate governance that create and deliver value for shareholders
and uphold its culture of meticulous ethical behaviour and integrity.
As an ASX listed entity, the Company must comply with the ASX Listing Rules and report against the ASX Corporate Governance
Council’s Corporate Governance Principles and Recommendations (ASX Recommendations). This year, the Council released a new
set of principles against which the Company will be required to measure its governance practices for the financial year commencing
1 July 2020 (ASX Recommendations 4th Edition) and listed entities have been encouraged to adopt those principles earlier.
The Board considers that throughout the financial year ended 30 June 2019 the Company complied with the ASX Recommendations
and, in anticipation of their implementation, has started the process of adjusting its governance practices to align with the
requirements of the ASX Recommendations 4th Edition.
This statement is current as at 30 June 2019 and has been approved by the Board. Where appropriate, the statement highlights
relevant events that have occurred since 30 June 2019 with respect to the governance practices of the Company.
Board of directors
Role of the Board
The Board Charter sets out the Board’s role, powers and duties and establishes the functions and responsibilities reserved for the Board
and those which are delegated to EXCO (comprising the Managing Director and the Executive Director – Operations & Development) and
the broader executive management team. The Board expressly reserves responsibility for matters including:
• Overseeing the business and affairs of the Company, including its control and accountability systems.
• Setting the strategic direction of the Company.
• Reviewing and ratifying systems of risk management, internal compliance and control, codes of conduct and legal compliance.
• Ensuring a high standard of corporate governance practice and regulatory compliance.
• Promoting ethical and responsible decision making.
The Board delegates responsibility for the day-to-day operations, management and administration of the Company to EXCO in accordance
with the strategy approved by the Board. EXCO’s joint responsibilities include:
• Effective leadership of the Company.
• Preparing and implementing development and operational plans, policies and procedures to achieve the strategic, operational
and financial objectives of the Company.
• Managing the day to day affairs of the Company.
• Identifying and managing business risks.
• Managing the Company’s financial and other reporting mechanisms.
These delegations are further documented in the Delegation of Authority Standard which the Board reviews and approves at least annually.
The Chair, Mr Spence, is responsible for leadership and effective performance of the Board and for maintaining open and cordial relations
between Directors and management that are conducive to productive cooperation.
The Company Secretary, Mr Poletti, is appointed by the Board and is accountable to the Board, through the Chair, on all matters to do with
the proper functioning of the Board. The Company Secretary’s role includes providing advice to the Board on corporate governance matters,
with all Directors having access to the advice and services provided by the Company Secretary.
56 | BASE RESOURCES | ANNUAL REPORT 2019
Composition of the Board
As at 30 June 2019, the Board consisted of five non-executive Directors and two executive Directors - being the Managing Director and
the Executive Director – Operations & Development. The Board assesses each Director’s independence in accordance with the Definition
of Independence in the Board Charter and confirms that the Board is majority independent.
Independent Director Non-Executive Director
Executive Director
Keith Spence (Chair)
Tim Carstens (Managing Director)
Colin Bwye (Executive Director – Operations and Development)
Malcolm McPherson
Diane Radley
Michael Stirzaker
Samuel Willis
Acknowledging that Mr Willis has served on the Board since May 2007, the Board remains comfortable that this period of tenure
has not compromised the independence of Mr Willis or otherwise materially interfered with Mr Willis’ ability to act in the best
interests of the Company in accordance with the definition of independence provided in the Board Charter.
Mr Stirzaker is not considered independent due to his involvement with the Company’s major shareholder, Pacific Road Capital.
Skills and experience
The Board is confident that, collectively, the Directors have the range of skills, knowledge, experience and competencies necessary
to effectively direct the Company.
The Board has established a set of core competencies to assist it to assess the skills and experience of each Director and to ensure
that the combined capabilities of the Board provide suitable coverage across each competency.
The table below identifies Directors’ particular skills and indicates the Directors on which the Board principally relies in relation to each
core competency, recognising that each Director contributes a far broader and diverse range of skills and experience to their role.
Area
Resources
industry
experience
Mineral sands
industry
experience
Strategy
Competency
Experience in the resources industry, including broad knowledge of exploration, operations,
project development, markets, shipping and competitors.
Key Directors
C Bwye, T Carstens,
M Macpherson,
K Spence, M Stirzaker
Specific experience in the mineral sands industry, including an in-depth knowledge of exploration,
operations, project development, markets, shipping, competitors and relevant technology.
C Bwye, T Carstens,
M Macpherson
Identifying and critically assessing strategic opportunities and threats to an organisation
and developing and implementing successful strategies in context to the organisation’s policies
and business objectives.
Mergers &
acquisitions
Experience managing, directing or advising on mergers, acquisitions, divestments and
portfolio optimisations.
Finance
Senior executive or other relevant experience in financial accounting and reporting, internal
financial and risk controls, corporate finance and, restructuring corporate transactions and
project financing.
Risk management Experience working with and applying broad risk management frameworks in various country,
regulatory or business environments, identifying key risks to an organisation, monitoring risks
and compliance and knowledge of legal and regulatory requirements.
T Carstens,
M Macpherson,
D Radley, K Spence
Government
relations
Senior management or equivalent experience working in diverse international political, cultural,
regulatory and business environments.
T Carstens, K Spence
African business
experience
Capital projects
and project
management
Experience in the successful development and operation of reputable businesses in Africa.
Experience with projects involving contractual negotiations, project management, significant
capital outlays and long investment horizons.
C Bwye, T Carstens,
M Macpherson,
D Radley, M Stirzaker
C Bwye, K Spence
BASE RESOURCES | CORPORATE GOVERNANCE | 57
C Bwye, T Carstens,
M Macpherson,
D Radley, K Spence,
M Stirzaker, S Willis
M Macpherson,
D Radley, K Spence,
M Stirzaker, S Willis
T Carstens, D Radley,
M Stirzaker, S Willis
Corporate governance (cont.)
Area
Competency
Sustainable
development
Senior management or equivalent experience in workplace health and safety, environmental
and social responsibility, and community.
Previous board
experience and
governance
Serving on boards of varying size and composition, in varying industries and for a range of
organisations. Implementing the high standards of governance in a major organisation that is
subject to rigorous governance standards and identifying key issues for an organisation and
developing appropriate policy parameters within which the organisation should operate.
Executive
leadership
Experience in evaluating the performance of senior management, overseeing strategic human
capital planning, industrial relations, organisational change management and sustainable
success in business at a senior level.
Remuneration
Remuneration and/or nomination committee membership or management experience in relation
to succession planning, remuneration, talent management (including incentive programs,
superannuation), and the legislative and contractual framework governing remuneration.
Key Directors
T Carstens, K Spence
M Macpherson,
D Radley, K Spence,
M Stirzaker, S Willis
C Bwye, T Carstens,
M Macpherson,
D Radley, K Spence,
M Stirzaker, S Willis
T Carstens,
M Macpherson,
D Radley, K Spence,
M Stirzaker, S Willis
The diagram below further illustrates the Board’s depth of coverage across its core competencies.
Number of Directors proficient or greater
Proficient
Skilled
Expert
0
1
2
3
4
5
6
7
Resources industry experience
Mineral sands industry experience
Strategy
Mergers & acquisitions
Finance
Risk management
Government relations
African business experience
Capital projects; management
Sustainable development
Previous board experience and governance
Executive leadership
Remuneration
The composition of the Board is diverse, with Directors coming from Australia, New Zealand, South Africa and Kenya, with a key
component of the Board bringing strong knowledge of doing business in Africa and its cultures. Director ages range from 47-74
years, with currently one woman on the Board of seven. Average time served on the Board is 6.9 years. Further details of the skills,
experiences, expertise and period of service of each Director are set out on pages 33 to 36 of the Annual Report.
Director appointment, induction, training and continuing education
All newly appointed non-executive Directors execute a letter of appointment containing the key terms and conditions of their appointment,
including duties, rights and responsibilities, anticipated time commitments and the Board’s expectations with respect to committee work.
Executive directors and all senior executives enter employment agreements which govern their terms of employment.
New appointees to the Board receive an induction plan tailored for their specific needs. The induction process typically includes
a comprehensive overview of the Company’s governance policies and procedures, in-depth discussions with each member of
EXCO and the executive management team and a site visit to the Company’s key operating asset in Kwale, Kenya and development
project in Toliara, Madagascar. The induction materials provided to new appointees include information on the Company’s governance
and culture, including the “Base Way” (the core beliefs and principles that permeate every aspect of the Company’s business and
describe the Company’s desired culture).
Directors are expected to maintain the skills necessary to discharge their obligations to the Company and its shareholders. The Company
provides the Board with regular information on industry-related matters and new developments with the potential to affect the Company
and its business. The Company organises relevant professional development opportunities for Directors when a need is identified, for
example, from a Board function review or through the Remuneration & Nomination Committee’s Board education oversight role.
58 | BASE RESOURCES | ANNUAL REPORT 2019
The Board manages succession planning with the assistance of the Remuneration & Nomination Committee. If a vacancy exists or if
it is appropriate for other Board changes to be implemented, the Remuneration & Nomination Committee identifies and recommends
candidates to the Board. Before recommending any candidate, the Remuneration & Nomination Committee considers the necessary
and desirable competencies of new Board members to ensure the appropriate mix of skills, experience, expertise and diversity across
the Board and assesses how each candidate would contribute to the strategic direction of the Company. The Board may engage
an independent recruitment firm to undertake the search for suitable candidates and leverages the networks of existing Directors
as a means of identifying high calibre candidates. The Company conducts appropriate background and screening checks before
nominating any candidate for appointment as a Director or for election by shareholders and provides shareholders all material
information in its possession concerning a candidate in the explanatory memorandum accompanying the relevant notice of meeting.
Board performance evaluation
It is Company policy that the Board reviews and critically evaluates the performance of the Board, the Board Committees and
individual Directors once a year. The Board sets the method and scope of the performance evaluation annually, which typically
includes self-assessments designed to effectively review the performance of the Board and each of its Committees against the
requirements of their specific charters and the individual performance of each Director. The Board Charter contains additional
information regarding the process for the annual review.
The Board performance evaluation may involve engagement of a third-party Board advisor, which was the approach taken for
the reporting period ended 30 June 2019. Given the time since the last externally facilitated review in 2014 and the evolution of
the Board since that time, the Company considered it appropriate to engage Barrington Consulting Group to externally facilitate
a performance evaluation and review of the Board, the Chair, individual Directors and each Committee and its respective Chair.
The evaluation was conducted initially by questionnaire completed by each Director assessing each of the Board, the Chair,
individual Directors and each Committee and its respective Chair, combined with one-on-one discussions between the Chair
and each Director. The combined outcomes of this process were analysed and discussed in depth at a workshop facilitated by
Barrington Consulting. The key outcomes of the Committee reviews were also further considered at subsequent Committee
meetings. The evaluation demonstrated positively that the Board, the Directors and each Committee and each respective Chair
are considered to be functioning well and performing their respective roles effectively. The review process also identified areas
for growth, refinement and continual improvement that the Board will address in the coming year.
Director retirement and re-election
With the exception of the Managing Director, Directors must retire at the third AGM after their last election or re election. At least
one Director must stand for election at each AGM. Any Director appointed to fill a casual vacancy since the date of the previous
AGM retires at the next AGM and is eligible for election. Board support for a Director’s election or re-election is not automatic and
is subject to satisfactory Director performance.
The Remuneration & Nomination Committee considers and recommends candidates for re-election to the Board. The Company
provides shareholders all material information in its possession concerning any Director standing for re election in the explanatory
memorandum accompanying the relevant notice of meeting.
Senior executive performance evaluation
Managers are required to conduct regular (typically quarterly) performance enhancement conversations with members of their team,
with annual judgement-based assessments of performance against the accountabilities, behaviours and indicators established in an
individual’s role description. This process applies equally to Senior Executives, coupled with an annual assessment of achievement of
each individual’s accountabilities as described in their annual Short Term Incentive Plan statement. In the case of EXCO, the assessment
is undertaken by the Remuneration & Nomination Committee and approved by the Board. In the case of General Managers, the
assessment is undertaken by EXCO and then considered and approved by the Remuneration & Nomination Committee. The annual
reviews have been completed for the year ended 30 June 2019.
Refer further to pages 47 to 48 of the Annual Report.
Committees of the Board
The Company’s Constitution provides that the Board may delegate its powers as it considers appropriate. The Board has established
an Audit Committee, a Remuneration & Nomination Committee and a Risk Committee.
The Committees generally operate in a review or advisory capacity, except in limited circumstances where the Board’s powers
are specifically delegated to a Committee. Each Committee has a charter detailing its role, duties and membership requirements.
These charters are reviewed regularly, at least annually, and are updated as required.
Details of the skills, experiences and expertise of each member of the respective Committees of the Board is set out on
pages 33 to 36 of the Annual Report. Details of the Committee meetings held during the year and attendances of members
at those meetings is set out on page 37 of the Annual Report.
BASE RESOURCES | CORPORATE GOVERNANCE | 59
Corporate governance (cont.)
Audit Committee
The role of the Audit Committee is to assist the Board to meet its oversight responsibilities in relation to the Company’s financial
reporting, compliance with legal and regulatory requirements and external audit function.
The Audit Committee members for the year were Mr Macpherson, Ms Radley, Mr Spence and Mr Willis (as Chair) (all independent
non executive Directors).
Remuneration & Nomination Committee
The role of the Remuneration & Nomination Committee with respect to remuneration matters is to assist the Board to fulfil its oversight
responsibilities in relation to the overall remuneration strategy of the Company. The Committee also considers the specific application of
that strategy to EXCO and senior management and reviews and approves equity based plans and other incentive schemes. This aspect
of the Committee’s role assists the Board to ensure that the executive remuneration policy demonstrates a clear relationship between
executive performance and remuneration.
The role of the Committee with respect to nomination matters is to support the Board to fulfil its responsibilities by maintaining a Board
with an appropriate mix of skills and experience. The Committee develops the processes for evaluation of performance of the Board and
its Committees, ensures the Company’s Diversity Policy is implemented in respect of the Board and manages the process for identifying
and selecting new Directors for appointment and subsequent consideration by shareholders.
The Remuneration & Nomination Committee members for the year were Mr Macpherson, Mr Spence (as Chair), Mr Stirzaker and Mr Willis
(all non executive Directors, the majority of whom are independent).
Risk Committee
The role of the Risk Committee is to assist the Board to identify and manage business and operational risks faced by the Company
to a standard that considers the reasonable expectations of the Company’s shareholders, employees, customers, suppliers,
creditors and the broader community in which the Company operates.
The Risk Committee typically conducts a full review and update of the Company’s material business risk register and risk
management framework at each Committee meeting and at least annually.
The Risk Committee members for the year were Mr Macpherson (as Chair), Mr Spence, Ms Radley and Mr Willis (all independent
non executive Directors).
Shareholder communication
General
The Board recognises the importance of regular and proactive interaction with the market to ensure investors and key stakeholders
remain informed about the Company’s activities. The Company has an investor relations program designed to facilitate effective
two-way communication with shareholders.
The Company’s Continuous Disclosure and Market Communications Policy sets out the Company’s commitment to:
• Communicate effectively with shareholders via ASX and AIM, information mailed to shareholders (e.g. notices of meetings
and explanatory material and periodic disclosure, such as annual, half yearly and quarterly reporting of exploration,
production and corporate activities) and the general meetings of the Company.
• Give shareholders ready access to balanced and understandable information about the Company and corporate proposals.
• Make it easy for shareholders to participate in general meetings of the Company.
The Board further recognises the rights of shareholders and encourages the effective exercise of those rights by:
• Ensuring notices of meeting and other meeting materials are drafted in concise, clear language and are distributed in accordance
with the provisions of the Corporations Act 2001.
• Encouraging shareholders to use their attendance at meetings to ask questions on relevant matters, with time specifically set
aside at each meeting for shareholder questions.
• Encouraging shareholders to vote on proposed resolutions by either attending the meeting or by way of lodgement of proxies,
if shareholders are unable to attend the meeting. Since 2018, the Company has implemented poll voting on all resolutions to
be considered at shareholder meetings and in doing so has met Recommendation 6.4 from ASX Recommendations 4th Edition.
• Establishing a general practice to include a presentation to shareholders on the Company’s recent activities at each annual
general meeting.
• Ensuring that the lead engagement partner is present at the annual general meeting to answer any questions regarding
the conduct of the audit and the preparation and content of the auditor’s report.
60 | BASE RESOURCES | ANNUAL REPORT 2019
The Company’s website (baseresources.com.au) provides information about the Company generally for the benefit of its
shareholders, market participants and key stakeholders. The Company promptly updates the website with material released
to ASX and AIM after confirmation of release by ASX. All information available on the website is regularly reviewed and updated
to ensure that information is current, or appropriately dated and archived. The following website sections contain relevant
information for shareholders:
• Governance: containing the Company’s current Constitution, relevant governance policies and practices, Board and Board
Committee Charters.
• Board and Management: containing the names and brief biographical information for each of the Directors and senior executives.
• Reports: containing copies of annual, half yearly and quarterly reports.
• Market Releases: containing ASX announcements (including full text of notices of meeting and explanatory material) and a
presentations section containing power point presentations.
Shareholders can also access further information about operations at the Kwale Project from the website of the Company’s
wholly owned operating subsidiary, Base Titanium (basetitanium.com) and about the Toliara Project from the project’s website
(basetoliara.mg).
The Company provides opportunities for and encourages shareholders to communicate electronically to and from the Company
and its securities registry. Alternatively, telephone, fax and email contact details are available on the website and shareholders
are welcome to contact the Company using their preferred method.
Continuous disclosure and market communications
The Company is committed to ensuring that shareholders and the market are provided with full and timely information about the Company
and its activities and that all investors have equal opportunity to receive externally available information issued by the Company.
The Company’s Continuous Disclosure and Market Communications Policy provides that the Managing Director and the Company
Secretary are primarily responsible for ensuring that the Company complies with its disclosure obligations and for overseeing
and co-ordinating the disclosure of information to relevant stock exchanges, shareholders and applicable regulatory authorities.
To assist in this process, it is the responsibility of every Director and employee to report to the Company Secretary any potentially
price sensitive information which they obtain. To the full extent practical (having regard to the requirement for immediate
disclosure in certain circumstances) the Board is given the opportunity to review and comment on material announcements
before their release and otherwise the Board receives all material market announcements promptly after they have been made.
Promoting responsible and ethical behaviours
The “Base Way”, Code of Conduct and Integrity System
The “Base Way” sets out the unifying set of beliefs and behavioural expectations for the Company and its employees, including
the Company’s absolute commitment to conducting its business in a legal, honest and ethical manner.
The Company’s Code of Conduct provides an overview of the framework for decision making and actions in relation to ethical
conduct in employment at the Company and its subsidiaries. The Code of Conduct summarises the key business systems
(including relevant Policies and Standards) adopted by the Company that apply to the Company and its subsidiaries and their
respective employees which underpin the Company’s commitment to integrity and fair dealing in its business affairs and to its
duty of care to employees, customers and stakeholders. Breaches of the Code of Conduct may lead to disciplinary action, as
outlined in the Company’s Unacceptable Performance and Misconduct System.
The Company’s Integrity Policy expands on the Company’s commitment to conducting its business in a legal, honest and ethical manner by:
• Prohibiting bribery and corruption in all forms. Employees must not commit, be a party to, or be involved in bribery or corruption.
• Ensuring that gifts, entertainment, travel and per diem reimbursements are not given or received as a reward or encouragement
for preferential treatment.
• Ensuring that the Company does not participate in party politics, including not making payments to political parties or
individual politicians.
• Prohibiting charitable donations or sponsorships that could be perceived as bribes or payments to gain an improper
business advantage.
• Requiring employees to ensure that their personal activities and interests do not conflict with their responsibilities to the Company.
• Requiring third parties who act on the Company’s behalf to comply with the Integrity Policy and the Integrity Standard.
• Requiring employees to confront inappropriate behaviour in others.
• Including a specific accountability of demonstrating the “Base Way” in every employee’s role description.
BASE RESOURCES | CORPORATE GOVERNANCE | 61
Corporate governance (cont.)
The Integrity Standard further delineates the responsibilities and limits of discretion of Company personnel when observing and
upholding the absolute prohibition on bribery, corruption and related improper conduct. It contains information and guidance on
how to recognise and deal with instances of potential bribery and corruption. The Company provides Integrity Standard training
to all employees assessed to be in high risk roles, for example those employees engaging with government or communities. A
breach of the Integrity Standard by a member of the Company’s personnel will be regarded as serious misconduct and will lead
to disciplinary action which may include termination of employment. The Company also has a Whistleblower System providing
a confidential mechanism for employees to hold their leaders and co-workers accountable if not behaving with absolute integrity.
The Company is a signatory to the Extractive Industries Transparency Initiative (EITI), which was launched in 2002 at the World
Summit for Sustainable Development. The EITI has established a reporting system to encourage transparency and accountability
by Governments with respect to their receipt and use of revenues from extractive industries. EITI supports good governance
through the verification and full publication of payments by companies and use of government revenues derived from oil, gas
and mining. For its operations in Kenya, the Company publishes these payments in the governance section of the Base Titanium
website (basetitanium.com). Once payments to Government commence in Madagascar following development of the Toliara
Project, the Company will publish relevant payment details on the Base Toliara website (basetoliara.mg).
Securities ownership and dealing
The Company’s Securities Trading Policy (which was last updated with effect from 1 September 2016) applies to Directors and
employees of the Company and its subsidiaries. This policy summarises the law on insider trading and sets out the requirements
for the sale, purchase and conversion/exercise of the Company’s securities by Directors and employees. The policy aims to:
• Assist Directors and employees to avoid insider trading.
• Explain the type of conduct in relation to dealings in securities of the Company that is prohibited under the Corporations Act
and the European Union’s Market Abuse Regulation.
• Establish a procedure relating to dealing in the Company’s securities that provides best practice protection to the Company,
its Directors and employees against the misuse of unpublished information which could materially affect the price or value
of the Company’s securities.
Any dealing in the Company’s securities by Directors is notified to ASX, and any dealing by directors or other persons discharging
management responsibility is notified to AIM and the United Kingdom’s Financial Conduct Authority, without delay. Directors
and employees participating in equity based incentive plans are also prohibited from entering into any transaction which would
have the effect of hedging or otherwise transferring to any other person the risk of any fluctuation in the value of any unvested
entitlement in the Company’s securities.
Strict compliance with the Securities Trading Policy is mandatory for all Directors and employees of the Company and its
subsidiaries. Any breach of this policy is taken seriously and results in the person being subject to disciplinary action, including
possible termination of their employment or appointment.
Risk management and internal controls
Approach to risk management internal controls
The Company recognises that risk is an integral and unavoidable component of its business and is characterised by both downside
risk and upside opportunity. The effective management of risk enables the Company to enhance opportunities, reduce threats and
in so doing represents a source of competitive advantage. The Company is committed to managing risk in a proactive manner that
is integrated throughout the business and informs all decision making as part of day to day management.
Risk management roles and responsibilities
The Company does not have a formal internal audit function, however it has a well-established Risk Management Framework
and the Board’s Risk Committee has operated since 2015.
The Risk Committee annually reviews the need for a formal internal audit function from a risk management perspective, which
is also considered by the Audit Committee from an assurance perspective. When considered by the Board in November 2018, it
was determined that a formal internal audit process was not required or justifiable at this time. During the year, however, the Audit
Committee reviewed the external and independent assurance measures currently in place as relevant to the group’s key systems,
with these assurance measures subsequently mapped against the Material Business Risk Register as a means of highlighting
those risks for which there was no independence assurance. Following this review and analysis, the Board remained comfortable
with the current and future planned assurance programs with respect to the Company’s material business risks. Minor changes
to the respective charters of the Audit Committee and the Risk Committee were also approved during the year to clarify the
delineation of responsibilities with respect to internal audit.
62 | BASE RESOURCES | ANNUAL REPORT 2019
The Risk Committee’s role is to assist the Board in monitoring risk, with a full review and update of the Company’s Material
Business Risk Register and Risk Management Framework typically occurring for each Committee meeting, and at least annually.
The Risk Committee’s responsibilities include:
• Ensuring that management designs and implements a risk management and internal control system to manage the Company’s
material business risks.
• Reviewing, at least annually, the Company’s risk management and internal control system and reporting to the Board on its
efficiency and effectiveness.
• Reviewing the risk reports produced by management and the efficiency and effectiveness of that risk management and
internal control system.
• Developing and maintaining a risk register which identifies the material business risks to the Company and its operations
(including economic, environmental and social sustainability risks) and assessing the likelihood of their occurrence.
• Periodically reviewing the scope and adequacy of the Company’s insurance, having regard to the Company’s business
and its associated insurable risks.
• Overseeing the Company’s operational and environmental risk management and occupational health and safety processes.
• Overseeing procedures for whistleblower protection.
• Ensuring that management designs and implements an anti-bribery and corruption system to minimise the Company’s risks
with respect to bribery and corruption.
• Reviewing at least annually the Company’s anti-bribery and corruption system and reporting to the Board on its efficiency
and effectiveness.
Management is responsible for promoting and applying the Risk Policy, which involves establishing a risk-aware culture, identifying
and assessing business and operational risks, developing and implementing appropriate risk strategies, systems and controls,
monitoring the effectiveness of risk controls and reporting on risk management and performance. Management also maintains
the Material Business Risk Register.
The Company is exposed to several risks across its business, which it seeks to manage in a manner consistent with its Risk Management
Framework. The Company identifies each risk as falling within the following categories:
• Strategic – such as the Company’s ability to execute its growth strategy or access to exploration opportunities.
• Financial – such as funding continuity.
• Regulatory – such as political, mining and fiscal policy.
• Operational – such as community, safety, security, human resources and production.
• Project – such as risks to planned project development.
The Company has identified that it has a material exposure to certain environmental and social sustainability risks associated with
its operation of the Kwale Project and its development of the Toliara Project. The Company implements a structured and integrated
community engagement approach with the communities affected by the Kwale Project and the Toliara Project. The integral role
communities play in the Company’s overall success has been identified and is therefore a clear focus. The Company strives to build
lasting and beneficial relationships with the communities in which it operates. By supporting equitable development, the Company
seeks to establish a model for future development opportunities in Kenya, Madagascar and beyond, in a manner that emphasises
the value of local community participation and recognises each community’s diverse cultural heritage. The Company’s Communities
Policy is based on working together in a way that allows broad participation of affected people through mutual respect and
demonstrates the Company’s long-term commitment to delivering real, tangible and sustainable benefits.
The Company’s social management systems have been prepared to the highest international standards to guide the Company
in achieving this objective.
The Company is also committed to undertaking its activities in a way that minimises impact on the environment. The Company’s
Environmental Policy and the “Base Way” drive the Company’s commitment to minimising pollution, minimising overall impacts,
contributing to protecting and conserving biodiversity and driving environmentally responsible behaviour.
The Company believes that good environmental performance contributes to business success. The Company empowers its employees
to work in an environmentally responsible manner and encourages everyone to take responsibility in this regard. The Company works
in partnership with its host communities, conservation groups and environmental experts to realise its objectives and regularly reviews
environmental performance to achieve continuous improvement. A comprehensive understanding of the environmental impacts during
design, construction, operations and ultimately closure of the Kwale Project and the Toliara Project directs the Company’s environmental
programs. Management of the Company’s environmental function is based on an environmental management system as guided by the
Environmental Policy. Refer to pages 14 to 21 of the Annual Report for more detail on the Company’s current sustainability practices.
BASE RESOURCES | CORPORATE GOVERNANCE | 63
Corporate governance (cont.)
CEO and CFO assurance
The Board receives monthly reports on the group’s financial and operational results. Before the Board adopted the 31 December 2018
half-year and 30 June 2019 full-year financial statements, the Managing Director and the Chief Financial Officer declared in writing to
both the Audit Committee and the Board that (in their opinion):
• The financial records of the Company had been properly maintained.
• The financial statements comply with the appropriate accounting standards.
• The financial statements give a true and fair view of the financial position and performance of the Company.
• Their opinion had been formed on the basis of a sound system of risk management and internal control which was operating effectively.
Diversity
The Company values and encourages a diverse workforce and provides a work environment in which everyone is treated fairly,
with respect and can realise their full potential. As set out further in the Employment Policy, the Company seeks to achieve this by:
• Employing staff based on job requirements and merit without discriminating on the grounds of age, ethnic or social origin, gender,
sexual orientation, politics or religion.
• Training its people to work in safe, healthy and environmentally responsible ways, and then ensuring that they work in that manner.
• Requiring managers to be models of the highest standards of behaviour and to demonstrate visible leadership. Requiring
employees to treat each other and those they deal with externally with dignity, fairness and respect and to guard against
harassment in the workplace.
• Maintaining codes of conduct and performance standards that establish sound conditions of work and disciplinary procedures in
compliance with all applicable laws and which uphold human rights principles. Ensuring that its remuneration and incentive systems
are equitable and transparent.
• Establishing and developing integrated employment management systems that seek to elevate employee engagement within the
Company to a recognised competitive advantage.
• Including in every employee’s role description a specific accountability of demonstrating the “Base Way”.
A key focus of the Company since before commencement of Kwale Project operations in late 2013 has been establishment of an
operational workforce that delivers on commitments to maximise employment opportunities for local communities, whilst achieving
the highest standards of operational and safety performance. As at 30 June 2019, the Company is pleased to report that it employed
98.0% Kenyan national employees at Kwale, an increase from the 97% employed as at 30 June 2018. This increase evidences the
continued effectiveness of the Company’s systems which are designed to drive a structured transfer of skills over time. While the
Company is in the early stages of the proposed development of the Toliara Project, there will be a similar and structured focus on
maximising employment opportunities for local communities against the backdrop of achieving the necessarily high standards of
operational and safety performance. This requirement is documented in the project’s Labour Recruitment and Influx Management Plan.
While the primary focus to date has been on maximising local participation, workforce establishment and performance enhancement,
in July 2015 the Company’s Diversity Standard was revised to require that the Board set measurable objectives for achieving gender
diversity, for those objectives to be reviewed annually and for the Board to assess annually progress in achieving those objectives.
The Board determined to maintain the existing measurable diversity objectives it set last year for the financial year ended 30 June 2019.
These are:
• Increase the overall percentage of women employed by the group.
• Maintain female representation in the intake for graduate and apprentice programmes at or above one third, subject to the
constraint of the operation of the Company’s established system for prioritising employment opportunities to local communities.
• Subject to vacancies, increase the percentage of women in executive roles (Manager level and above).
• Subject to vacancies, to consider diversity when reviewing Board succession plans with the aim to further balance gender
representation and achieve greater diversity.
The above objectives were considered appropriate for the Company given its current state of operations, in particular reflecting
the relative stability of the Company’s workforce which naturally reduces the opportunities to increase gender diversity as
rapidly going forward. However, there should be greater opportunities for driving greater diversity as the Company progresses
development of its Toliara Project.
64 | BASE RESOURCES | ANNUAL REPORT 2019
For the financial year ended 30 June 2019, the group met its objectives of achieving an increase in the overall percentage of women
employed, maintained female representation in the intake for graduate and apprentice programs at or above one third, increased the
percentage of women in executive roles and maintained Board gender diversity with Ms Radley being elected by shareholders at the
2018 annual general meeting.
The Company considers that, given the relatively low turnover of senior employees, the group’s graduate and apprenticeship
programs continue to represent the greatest opportunity to increase female representation within the Company over time –
particularly at executive level. Apprentice employment for the Toliara Project is in a pre-selection phase and the Company is
expecting between 35% - 45% of those new appointments to be women. In addition, the Company has undertaken an education
piece for local communities in Madagascar with a view to dispelling a commonly held perception that mining is an unsuitable
career for women and has held “women only” registration days when targeting registrations for local training and job opportunities.
The graduate program for the Toliara Project has not yet entered the pre-selection phase, but the Company has identified this as a
key opportunity for seeking to achieve its set objectives.
Shown below is the Company’s performance in achieving its set objectives during the year ended 30 June 2019, as compared
to the two prior periods.
Objective
Increase the overall percentage of women
Female representation in graduate and apprentice
programs at or above one third
Women in executive roles (Stratum III and above)
Board gender diversity
FY2017
(%)
117/717
16.3
10/21
47.6
3/22
13.6
0
FY2018
(%)
139/829
16.8
11/33
33.3
4/28
14.3
14.3
FY2019
(%)
163/892
18.3
11/33
33.3
6/31
19.4%
14.3
Change FY18
to FY19 (%)
1.5
No change
5.1
No change
The Board has determined to maintain the existing measurable objectives for the coming financial year. The Board will report its
progress in achieving the objectives in next year’s corporate governance statement.
Availability of key corporate governance documents
The following suite of the Company’s key corporate governance policies and procedures are available from the Company’s website
at baseresources.com.au/company-profile/governance.
• Constitution
• Board Governance Plan (including Board Committee Charters)
• Code of Conduct
• Securities Trading Policy
• Continuous Disclosure and Market Communications Policy
• Risk Management Policy
• Environment Policy
• Communities Policy
• Employment Policy
• Diversity Standard
• Health and Safety Policy
BASE RESOURCES | CORPORATE GOVERNANCE | 65
Lead Auditor’s Independence Declaration
66 | BASE RESOURCES | ANNUAL REPORT 2019
KPMG, an Australian partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity.Liability limited by a scheme approved under ProfessionalStandards Legislation.Lead Auditor’s Independence Declaration under Section 307C of the Corporations Act 2001 To the Directors of Base Resources Limited I declare that, to the best of my knowledge and belief, in relation to the audit of Base Resources Limited for the financial year ended 30 June 2019 there have been: i.no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the audit; and ii.no contraventions of any applicable code of professional conduct in relation to the audit. KPMG R Gambitta Partner Perth 24 August 2019 S
E
T
O
N
D
N
A
S
T
N
E
M
E
T
A
T
S
L
A
I
C
N
A
N
F
I
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 67
Consolidated statement of profit or loss and other
comprehensive income
FOR THE YEAR ENDED 30 JUNE 2019
Sales revenue
Cost of sales
Profit from operations
Corporate and external affairs
Community development costs
Selling and distribution costs
Other income/(expenses)
Profit before financing costs and income tax
Financing costs
Profit before income tax
Income tax expense
Net profit for the year
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Foreign currency translation differences - foreign operations
Total other comprehensive loss for the year
Total comprehensive income for the year
Net Earnings per share
Basic earnings per share (US cents per share)
Diluted earnings per share (US cents per share)
The accompanying notes form part of these consolidated financial statements.
Note
3
4
5
7
6
6
2019
US$000s
209,456
(131,791)
77,665
(10,315)
(3,607)
(2,501)
201
61,443
(11,555)
49,888
(10,735)
39,153
(1,915)
(1,915)
37,238
Cents
3.39
3.34
2018
US$000s
198,810
(119,799)
79,011
(9,338)
(3,000)
(4,056)
(765)
61,852
(18,489)
43,363
(9,389)
33,974
(1,197)
(1,197)
32,777
Cents
3.66
3.44
68 | BASE RESOURCES | ANNUAL REPORT 2019
Consolidated statement of financial position
AS AT 30 JUNE 2019
Note
30 June 2019
US$000s
30 June 2018 (i)
US$000s
Current assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Inventories
Other current assets
Total current assets
Non-current assets
Capitalised exploration and evaluation
Property, plant and equipment
Total non-current assets
Total assets
Current liabilities
Trade and other payables
Borrowings
Provisions
Income tax payable
Deferred consideration
Other liabilities
Total current liabilities
Non-current liabilities
Borrowings
Provisions
Deferred tax liability
Deferred revenue
Deferred consideration
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
9
10
11
12
13
14
15
16
14
15
7
16
17
Retained earnings/accumulated losses
Total equity
(i) Restated, refer to Note 24.
The accompanying notes form part of these consolidated financial statements.
39,242
-
62,397
19,574
6,313
29,686
29,591
38,726
19,789
5,993
127,526
123,785
115,891
205,586
321,477
449,003
33,138
19
3,398
14,463
17,000
625
68,643
18,913
24,355
16,500
-
-
59,768
128,411
320,592
306,512
(19,230)
33,310
320,592
97,115
240,509
337,624
461,409
27,865
53,266
1,506
75
7,000
891
90,603
35,532
22,458
20,969
625
10,000
89,584
180,187
281,222
305,277
(16,384)
(7,671)
281,222
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 69
Consolidated statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2019
Retained
earnings/
(Accumulated
losses)
US$000s
Share based
payment
reserve
US$000s
Foreign
currency
translation
reserve
US$000s
Issued
capital
US$000s
Treasury
shares
reserve
US$000s
Balance at 1 July 2017 as previously reported
231,079
Impact of prior year error (i)
Restated balance at 1 July 2017
Profit for the year
Other comprehensive income
Total comprehensive income for the year
-
231,079
-
-
-
Transactions with owners, recognised directly in equity
Shares issued during the year, net of costs
73,669
Own shares acquired
Share based payments
Balance at 30 June 2018
-
529
305,277
(36,341)
(5,863)
(42,204)
33,974
-
33,974
-
-
559
(7,671)
5,250
(19,517)
-
-
5,250
(19,517)
-
-
-
-
-
556
5,806
-
(1,197)
(1,197)
-
-
-
Total
US$000s
180,471
(5,863)
174,608
33,974
(1,197)
32,777
73,669
(1,476)
1,644
-
-
-
-
-
-
-
(1,476)
-
(20,714)
(1,476)
281,222
Restated balance at 1 July 2018 (i)
305,277
(7,671)
5,806
(20,714)
(1,476)
281,222
Profit for the year
Other comprehensive income
Total comprehensive income for the year
-
-
-
39,153
-
39,153
-
-
-
-
(1,915)
(1,915)
-
-
-
39,153
(1,915)
37,238
Transactions with owners, recognised directly in equity
Share based payments
Balance at 30 June 2019
(i) Restated, refer to Note 24.
1,235
306,512
1,828
33,310
(2,407)
3,399
-
1,476
2,132
(22,629)
-
320,592
The accompanying notes form part of these consolidated financial statements.
70 | BASE RESOURCES | ANNUAL REPORT 2019
Consolidated statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2019
Note
2019
US$000s
2018
US$000s
Cash flows from operating activities
Receipts from customers
Payments in the course of operations
Other
Net cash from operating activities
8
Cash flows from investing activities
Purchase of property, plant and equipment
Payments for exploration and evaluation
Other
Net cash used in investing activities
Cash flows from financing activities
Proceeds from issue of shares
Payment of share issue costs
Purchase of treasury shares
Proceeds from borrowings
Repayment of borrowings
Receipts from/(transfers to) restricted cash
Payments for debt service costs and re-scheduling fees
Net cash used in financing activities
Net increase in cash held
Cash at beginning of year
Effect of exchange fluctuations on cash held
Cash at end of year
The accompanying notes form part of these consolidated financial statements.
188,493
(91,146)
(704)
96,643
(17,493)
(18,557)
661
(35,389)
-
-
-
48,180
(120,653)
29,591
(8,060)
(50,942)
10,312
29,686
(756)
39,242
205,807
(88,623)
(42)
117,142
(32,862)
(78,077)
621
(110,318)
76,133
(2,464)
(1,476)
12,500
(72,553)
(3,425)
(13,611)
(4,896)
1,928
28,278
(520)
29,686
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 71
Notes to the consolidated financial statements
Note 1: Basis of preparation
Base Resources Limited is a company domiciled in Australia. The registered address is located at Level 1, 50 Kings Park Road,
West Perth, WA, 6005. The consolidated financial statements of the Company, as at and for the year ended 30 June 2019,
comprises the Company and its wholly owned subsidiaries (together referred to as the Group). The Group is a for-profit entity and
primarily involved in the operation of its Kwale Mineral Sands Mine in Kenya and development of its Toliara Project in Madagascar.
The consolidated financial statements of the Group for the year ended 30 June 2019:
• Is a general purpose financial report prepared in accordance with Australian Accounting Standards (AASBs) adopted by the
Australian Accounting Standards Board (AASB) and the Corporations Act 2001.
• Comply with International Financial Reporting Standards (IFRSs) and interpretations adopted by the International Accounting
Standards Board.
• Are presented in United States dollars and all values are rounded to the nearest thousand dollars (US$000s) unless otherwise
stated, in accordance with ASIC instrument 2016/191. The functional currency of the Parent is Australian dollars, whilst all
other subsidiaries are United States dollars.
• Have been prepared on an accruals basis and is based on historical costs, modified, where applicable, by the measurement
at fair value of selected non-current assets, financial assets and financial liabilities.
The consolidated financial statements were approved by the Board of Directors on 24th August 2019.
Foreign currency transactions
Transactions in foreign currencies are translated to the respective functional currencies of Group entities at exchange rates
at the dates of the transactions. Monetary assets and liabilities denominated in foreign currencies at the reporting date are
re-translated to the functional currency at the exchange rate at that date. Non-monetary items in a foreign currency that are
measured at historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences
arising on re-translation are recognised in the Statement of Profit or Loss and Comprehensive Income.
Critical accounting estimates and judgements
Estimates and judgements used in developing and applying the Group’s accounting policies are continually evaluated and are based
on experience and other factors and are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period
in which the estimate is revised. The critical estimates and judgements that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities are discussed in the respective sections of the Consolidated Financial Statements.
To assist in identifying critical accounting judgements, we have highlighted them with the following formatting:
Ore reserves and resources estimates
The estimated quantities of economically recoverable reserves and resources are based upon interpretations of geological and
geophysical models and require assumptions to be made regarding factors such as future operating costs, future commodity prices,
future capital requirements and future operating performance. Changes in reported reserves and resources estimates can impact the
carrying value of PP&E, provisions for mine closure and rehabilitation obligations, the recognition of deferred tax assets, as well as the
amount of depreciation and amortisation charged to the Statement of Profit or Loss and Other Comprehensive Income.
Note: this is an example presentation.
72 | BASE RESOURCES | ANNUAL REPORT 2019
Notes to the consolidated financial statements
PERFORMANCE FOR THE YEAR
This section analyses the financial performance of the Group for the year ended 30 June 2019. It includes segment performance,
earnings per share and taxation.
Note 2: Segment reporting
Segment
Principal activities
Kwale Operation
Toliara Project
Other
The Group’s 100% owned Kwale Operation is located in Kenya and generates revenue from the sale of rutile,
ilmenite and zircon.
The Toliara Project in Madagascar was acquired in January 2018. The Project is progressing through an accelerated
feasibility study program that aims to advance toward a decision to proceed to construction in 2020.
Includes Group head office, all corporate expenditure not directly attributable to the Kwale Operation or Toliara Project
and exploration activities not directly related to Kwale Operations or the Toliara Project.
Reportable segment
Sales revenue
Cost of sales
Profit from operations
2019
2018
Kwale
Operation
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
Kwale
Operation
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
209,456
(131,791)
77,665
-
-
-
-
-
-
209,456
198,810
(131,791)
(119,799)
77,665
79,011
-
-
-
-
-
-
198,810
(119,799)
79,011
Corporate and external affairs
(4,024)
(249)
(6,042)
(10,315)
Community development costs
Selling and distribution costs
Other income/(expenses)
(3,607)
(2,501)
850
-
-
-
-
-
(3,607)
(2,501)
(649)
201
(4,312)
(3,000)
(4,056)
28
Profit before financing and tax
68,383
(249)
(6,691)
61,443
67,671
(87)
(4,939)
(9,338)
(3,000)
(4,056)
(765)
-
-
(89)
(5,028)
61,852
-
-
(704)
(791)
Financing costs
Profit before tax
Income tax expense
Reportable profit
(9,728)
58,655
(10,735)
47,920
-
(1,827)
(11,555)
(15,929)
-
(2,560)
(18,489)
(249)
(8,518)
49,888
51,742
(791)
(7,588)
43,363
-
-
(10,735)
(9,389)
-
-
(9,389)
(249)
(8,518)
39,153
42,353
(791)
(7,588)
33,974
2019
2018
Kwale
Operation
US$000s
Toliara
Project
US$000s
18,506
17,257
326,484
116,529
109,113
17,666
Other
US$000s
Total
US$000s
Kwale
Operation
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
287
5,990
1,632
36,050
31,189
449,003
361,955
128,411
150,086
79,060
94,433
17,157
690
110,939
5,021
461,409
12,944
180,187
Reportable segment
Capital expenditure
Total assets
Total liabilities (i)
(i) Restated, refer to Note 24.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 73
Notes to the consolidated financial statements - performance for the year (cont.)
Determination and presentation of operating segments
Operating segments are components of the Group about which separate financial information is available that is evaluated
regularly by the Group’s senior executives in deciding how to allocate resources and in assessing performance.
The division of the Group’s results into segments has been ascertained by identification of revenue/cost centres and where
interrelated segment costs exist, an allocation has been calculated on a pro rata basis.
Note 3: Revenue
Revenue from contracts with customers
Revenue from contracts subject to provisional pricing (a)
Total sales revenue
2019
US$000s
203,226
6,230
209,456
2018
US$000s
192,067
6,743
198,810
a. Revenue from contracts subject to provisional pricing
Contract terms for the Group’s rutile sales allow for a retrospective final price adjustment after the date of sale, based on average market
prices in the quarter that the product is sold. Average market prices are derived from an independently published quarterly dataset of all
rutile trades, available approximately four months after the end of each quarter. During the reporting period, revenue arising from the final
price adjustment was US$4.9 million (2018: US$4.3 million) with a further US$1.3 million (2018: US$2.4 million) in revenue recognised
from rutile sales repriced to reflect the latest available market data at 30 June 2019, but remain subject to final market pricing.
Sales revenue made under these terms that have not yet been subject to a final price adjustment are recognised at the estimated fair
value of the total consideration receivable, which takes into account the latest available market data at the balance date. As a result, rutile
sales revenue of US$12.6 million remains subject to final market pricing at 30 June 2019 (2018: US$20.5 million). Adjustments between
the provisional and final price are accounted for under AASB 9 and are separately disclosed.
Change in accounting standards recognised during the period
AASB 15 Revenue from Contracts with Customers establishes a comprehensive framework for determining whether, how much,
and when revenue is recognised. It replaces existing revenue recognition guidance, including AASB 118 Revenue, AASB 111
Construction contracts, and IFRIC 13 Customer Loyalty Programmes. AASB 15 is effective for annual reporting periods beginning
on or after 1 January 2018. Base Resources has assessed that the implementation of this standard does not have a material
impact on its existing revenue contracts.
Recognition and measurement of revenue
The Group sells mineral sands under a range of International Commercial Terms (Incoterms). Previously, under AASB 118 product
sales were recognised as revenue when the Group had transferred both the significant risks and rewards of ownership and control of
the products sold and the amount of revenue can be measured reliably. The passing of risk to the customer is usually realised at the
point that the physical control is transferred from the Group to the customer. The Incoterms set out the point at which the transfer of
risk to the customer takes place and are the ultimate determinant. Under AASB 15, revenue is recognised when control of the product
is transferred to the customer, replacing the requirements to consider the transfer of the significant risks and rewards of ownership.
The application of AASB 15 has no impact on the recognition of revenue for the Group with the Incoterms for each product sale the
ultimate determinant of the point at which control is transferred, in the same manner as under AASB 118.
Note 4: Cost of sales
Operating costs
Changes in inventories of concentrate and finished goods
Royalties expense
Depreciation and amortisation
74 | BASE RESOURCES | ANNUAL REPORT 2019
2019
US$000s
63,234
2,075
14,597
51,885
2018
US$000s
56,658
2,114
13,678
47,349
131,791
119,799
Note 5: Financing costs
Interest expense, inclusive of withholding tax
Amortisation of capitalised borrowing costs
Unwinding of discount on provision for rehabilitation
Other financing costs
2019
US$000s
4,042
4,045
621
2,847
11,555
2018
US$000s
10,884
3,488
481
3,636
18,489
Following the early retirement of the Kwale Project Debt Facility (note 14), US$2.8 million of capitalised borrowing costs were
expensed during the period.
Finance income and expenses
Financing income includes interest income on cash held and is recognised as it accrues.
Financing expenses include:
• Interest on borrowings.
• Amortisation of costs incurred to establish the borrowings.
• Finance lease charges.
• The unwinding of discount on provisions for mine closure and rehabilitation.
Financing expenses are calculated using the effective interest rate method. Finance expenses incurred for the development of
mining projects are capitalised up to the point at which commercial production is achieved. Other financing expenses are expensed
as incurred.
Note 6: Earnings per share
Earnings used to calculate basic/diluted earnings per share
2019
US$000s
39,153
2018
US$000s
33,974
a. Weighted average number of ordinary shares on issue used in the calculation of basic earnings per share
in thousands of shares
Issued ordinary shares at 1 July
Effect of performance rights vested under the Group’s LTIP
Effect of share placement
Effect of renounceable entitlement offer
Weighted average number of ordinary shares at 30 June
2019
1,127,575
28,885
-
-
1,156,460
b. Weighted average number of ordinary shares on issue used in the calculation of diluted earnings per share
in thousands of shares
Weighted average number of ordinary shares (basic)
Effect of performance rights on issue
Weighted average number of ordinary shares (diluted) at 30 June
2019
1,156,460
15,294
1,171,754
2018
742,232
3,643
69,390
113,657
928,922
2018
928,922
58,057
986,979
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 75
Notes to the consolidated financial statements - performance for the year (cont.)
Note 7: Income tax
a. Amounts recognised in profit or loss
Current income tax
Income tax expense
Deferred tax expense
Origination and reversal of temporary differences
Income tax expense reported in comprehensive income
2019
US$000s
2018
US$000s
15,204
129
(4,469)
10,735
9,260
9,389
b. Reconciliation of income tax expense to prima facie tax payable
The prima facie tax payable on loss from ordinary activities before tax is reconciled to the income tax expense as follows:
Accounting profit before tax
Prima facie tax on operating profit at 30% (2018: 30%)
Add/(less) tax effect of:
Non-deductible items
Share based payments
Tax losses not recognised
Other deferred tax assets not brought to account as realisation not considered probable
Effect of tax rates in foreign jurisdictions (i)
Income tax attributable to operating profit
(i) The Kenyan tax rate applicable to Base Titanium Limited is 15% (2018: 15%)
c. Deferred tax asset recognised
Tax losses Kenya
Impact of prior year error (i)
Other
Deferred tax liabilities recognised
Property, plant and equipment
Net deferred tax liability recognised
(i) Refer to Note 24
d. Deferred tax assets unrecognised
Deductible temporary differences
Tax losses Australia
Tax losses other
76 | BASE RESOURCES | ANNUAL REPORT 2019
49,888
14,966
2,374
272
1,737
1,193
(9,807)
10,735
-
-
1,156
1,156
43,363
13,009
2,256
253
1,649
1,767
(9,545)
9,389
5,638
(5,863)
1,543
1,318
(17,656)
(16,500)
(22,287)
(20,969)
292
8,468
231
8,991
313
6,819
231
7,363
Potential deferred tax assets attributable to tax losses and exploration expenditure carried forward, excluding those recognised
for Kwale Operations, have not been brought to account at 30 June 2019 and 2018 because the directors do not believe it is
appropriate to regard realisation of the deferred tax assets as probable at this point in time. These benefits will only be obtained if:
1. The Group derives future assessable income of a nature and of an amount sufficient to enable the benefit from the deductions
for the loss and exploration expenditure to be realised;
2. The Group continues to comply with conditions for deductibility imposed by law; and
3. No changes in tax legislation adversely affect the Group in realising the benefit from the deductions for the loss and
exploration expenditure.
Recoverability of deferred tax assets
Balances related to taxation disclosed are based on the best estimates of directors. These estimates take into account both
the financial performance and position of the Group as they pertain to current income taxation legislation, and the directors
understanding thereof. No adjustment has been made for pending or future taxation legislation. The current income tax position
represents the directors’ best estimate, pending an assessment by the tax authorities in Australia and jurisdictions where it has
foreign operations.
A deferred tax asset is recognised for unused tax losses only if it is probable that future taxable profits will be available to utilise
those losses. Determination of future taxable profits requires estimates and assumptions as to future events and circumstances,
in particular, whether successful development and commercial exploitation, or alternatively, sale of the respective areas of interest
will be achieved. This includes estimates and judgements about commodity prices, exchange rates, future capital requirements,
future operational performance and the timing of estimated cash flows. Changes in these estimates and assumptions could
impact on the amount and probability of estimated taxable profits and accordingly the recoverability of deferred tax assets.
Recognition and measurement of income taxes
The income tax expense/benefit for the year comprises current income tax expense/benefit and deferred tax expense/benefit.
Current income tax expense charged to the Statement of Profit or Loss and Other Comprehensive Income is the expected tax
payable or recoverable on the taxable income or loss calculated using applicable income tax rates enacted, or substantially
enacted, as at reporting date, and any adjustment to tax payable in respect of previous years. Deferred income tax expense
reflects movements in deferred tax asset and liability balances during the year as well as unused tax losses.
Current and deferred income tax expense/benefit is charged or credited directly to equity instead of the Statement of Profit or Loss
and Other Comprehensive Income when the tax relates to items that are credited or charged directly to equity.
Current tax assets and liabilities are measured at the amounts expected to be paid to/recovered from the relevant taxation authority.
Deferred tax assets and liabilities are ascertained based on temporary differences arising between the tax bases of assets and
liabilities and their carrying amounts in the financial statements.
Deferred tax assets and liabilities are calculated at the tax rates that are expected to apply to the period when the asset is realised
or the liability is settled, based on tax rates enacted or substantively enacted at reporting date. Their measurement also reflects
the manner in which management expects to recover or settle the carrying amount of the related asset or liability.
Deferred tax assets relating to temporary differences and unused tax losses are recognised only to the extent that it is probable
that future taxable profit will be available against which the benefits of the deferred tax asset can be utilised.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 77
Notes to the consolidated financial statements - performance for the year (cont.)
Note 8: Operating cashflows
The Group’s operating cashflow reconciled to profit after tax is as follows:
Profit for the year
Depreciation and amortisation
Share based payments
Exploration written off
Financing costs classified as financing activity
Amortisation of deferred revenue
Income tax expense
(Increase)/decrease in receivables and other assets
Decrease/(increase) in inventories
Increase in trade and other payables
Decrease in provisions
Cash flow from operations
2019
US$000s
2018
US$000s
39,153
51,885
1,688
466
11,555
(833)
10,031
(24,213)
215
6,844
(148)
96,643
33,974
47,349
1,835
-
18,489
(833)
9,389
3,924
(1,271)
4,427
(141)
117,142
78 | BASE RESOURCES | ANNUAL REPORT 2019
Notes to the consolidated financial statements
OPERATING ASSETS AND LIABILITIES
This section presents information about the Group’s assets and liabilities, including its policies and processes for measuring
and estimating these balances.
Note 9: Trade and other receivables
Current
Trade receivables
VAT receivables
Other receivables
30 June 2019
US$000s
30 June 2018
US$000s
37,305
25,003
89
62,397
16,912
21,321
493
38,726
Recoverability of construction period VAT receivable
The Group is owed US$24.2 million in VAT receivable by the Government of Kenya, of which US$16.9 million was incurred during
the construction of Kwale Operations and is overdue but not impaired. An estimation has been made as to the timing of the receipt
of this amount and forms the basis for its classification as a current asset.
Note 10: Inventories
Current
Heavy mineral concentrate and other intermediate stockpiles – at cost
Finished goods stockpiles – at cost
Stores and consumables – at cost
30 June 2019
US$000s
30 June 2018
US$000s
2,465
4,897
12,212
19,574
4,717
4,720
10,352
19,789
Net realisable value of inventories
Inventories are recognised at the lower of cost and net realisable value (NRV).
NRV is based on the estimated amount expected to be received when the product is sold, less all costs still to be incurred
in converting the relevant inventory to a saleable product, and delivering it to the customer. The computation of NRV for
inventories of heavy mineral concentrate and finished product involves significant judgements and estimates in relation to
timing of processing, processing costs, transport costs, commodity prices and the ultimate timing of sale. A change in any
of these critical assumptions will alter the estimated NRV and may therefore impact the carrying value of inventories.
Recognition and measurement of inventories
Inventories of heavy mineral concentrate and finished product are valued on a weighted average cost basis and include direct costs
and an appropriate portion of fixed and variable overhead expenditure, including depreciation and amortisation.
Inventories of consumable supplies and spare parts to be used in production are valued at weighted average cost. Obsolete or
damaged inventories are valued at NRV. A regular and ongoing review is undertaken to establish the extent of surplus items,
and a provision is made for any potential loss on their disposal.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 79
Notes to the consolidated financial statements - operating assets and liabilities (cont.)
Note 11: Capitalised exploration and evaluation
Toliara Project – Madagascar
Kenya
Tanzania (a)
Closing carrying amount
Movement in carrying amount
Opening balance
Toliara Project acquisition: up-front consideration
Toliara Project deferred consideration recognised
Exploration written off during the year
Transfer from property, plant and equipment
Exploration and evaluation expenditure during the period
30 June 2019
US$000s
30 June 2018
US$000s
111,990
3,901
-
115,891
94,250
2,399
466
97,115
2019
US$000s
2018
US$000s
97,115
-
-
(466)
95
19,147
115,891
2,038
75,000
17,000
-
-
3,077
97,115
a. Tanzania
Following completion of an economic and technical evaluation of the Tanzanian exploration projects, the Company decided to
relinquish these licenses. As a result, all carried forward capitalised expenditure for these licenses has been impaired in full during
the reporting period.
Recognition and measurement of exploration and evaluation expenditure
Exploration for and evaluation of mineral resources is the search for mineral resources after the entity has obtained legal rights to
explore in a specific area, as well as the determination of the technical feasibility and commercial viability of extracting the mineral
resource. Accordingly, exploration and evaluation expenditure are those expenditures incurred by the Group in connection with the
exploration for and evaluation of mineral resources before the technical feasibility and commercial viability of extracting a mineral
resource are demonstrable.
Accounting for exploration and evaluation expenditure is assessed separately for each ‘area of interest’. An ‘area of interest’ is an
individual geological area which is considered to constitute a favourable environment for the presence of a mineral deposit or has
been proved to contain such a deposit.
For each area of interest, the expenditure is recognised as an exploration and evaluation asset when the rights of tenure to that
area of interest are current and the expenditure is expected to be recouped through successful development and exploitation
of an area of interest, or alternatively by its sale, and where activities in the area have not yet reached a stage that permits
reasonable assessment of the existence of economically recoverable reserves.
General and administrative costs are allocated to, and included in, the cost of exploration and evaluation assets only to the extent
that those costs can be related directly to operational activities in the area of interest to which the exploration and evaluation assets
relate. In all other instances, these costs are expensed as incurred.
Accumulated costs in relation to an abandoned area are written off in full to the Statement of Profit or Loss and Other Comprehensive
Income in the year in which the decision to abandon the area is made.
Impairment testing of exploration and evaluation assets
Exploration and evaluation assets are assessed for impairment if sufficient data exists to determine technical feasibility
and commercial viability or facts and circumstances suggest that the carrying amount exceeds the recoverable amount.
80 | BASE RESOURCES | ANNUAL REPORT 2019
Note 12: Property, plant and equipment
2019
At cost
Accumulated depreciation
Closing carrying amount
Reconciliation of carrying amounts:
Balance at 1 July 2018
Additions
Transfers
Disposals
Transfer to capitalised exploration expenditure
Increase in mine rehabilitation asset
Depreciation expense
Effects of movement in foreign exchange
Balance at 30 June 2019
2018
At cost
Accumulated depreciation
Closing carrying amount
Reconciliation of carrying amounts:
Balance at 1 July 2017
Additions
Transfers
Disposals
Reduction in mine rehabilitation asset
Depreciation expense
Effects of movement in foreign exchange
Balance at 30 June 2018
Plant &
equipment
US$000s
251,140
(133,181)
117,959
Mine
property and
development
US$000s
163,161
(80,100)
83,061
Buildings
US$000s
6,292
(3,029)
3,263
Capital work
in progress
US$000s
1,303
-
Total
US$000s
421,896
(216,310)
1,303
205,586
144,735
2,297
4,215
(6)
(95)
-
(33,170)
(17)
117,959
US$000s
245,027
(100,292)
144,735
144,675
26,741
1,004
(9)
-
(27,676)
-
144,735
90,981
14,322
(3,402)
-
-
495
(18,178)
(1,157)
83,061
US$000s
153,771
(62,790)
90,981
106,901
5,000
-
-
(972)
(18,914)
(1,034)
90,981
3,874
17
-
-
-
-
(628)
-
3,263
919
1,198
(813)
-
-
-
-
(1)
240,509
17,834
-
(6)
(95)
495
(51,976)
(1,175)
1,303
205,586
US$000s
US$000s
6,275
(2,401)
3,874
4,541
106
49
(214)
-
(608)
-
3,874
919
-
919
1,096
889
(1,053)
-
-
-
(13)
919
US$000s
405,992
(165,483)
240,509
257,213
32,736
-
(223)
(972)
(47,198)
(1,047)
240,509
Impairment of assets
At each reporting date, the Group reviews the carrying values of its assets to determine whether there is any indication those assets
have been impaired. When impairment indicators are identified, the Group determines the recoverable value of the cash-generating
unit to which the assets are allocated, via an estimation of the fair value of the cash-generating unit. Estimating the fair value
amount requires management to make an estimate of expected future cash flows from the cash-generating unit over the forecast
period and also to determine a suitable discount rate in order to calculate the present value of those cash flows. Key estimates
supporting the expected future cash flows include commodity prices, production output and cost forecasts.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 81
Notes to the consolidated financial statements - operating assets and liabilities (cont.)
Ore reserves and resources estimates
The estimated quantities of economically recoverable reserves and resources are based upon interpretations of geological and
geophysical models and require assumptions to be made regarding factors such as future operating costs, future commodity
prices, future capital requirements and future operating performance. Changes in reported reserves and resources estimates
can impact the carrying value of PP&E, provisions for mine closure and rehabilitation obligations, the recognition of deferred
tax assets, as well as the amount of depreciation and amortisation charged to the Statement of Profit or Loss and Other
Comprehensive Income.
Recognition and measurement of property, plant and equipment
Each class of property, plant and equipment (PP&E) is carried at cost less, where applicable, any accumulated depreciation
and impairment losses.
PP&E is measured on a historical cost basis. Cost includes expenditure that is directly attributable to the acquisition of the asset.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is
probable that future economic benefits associated with the item will flow to the Group and the cost of the item can be measured
reliably. All other repairs and maintenance are recognised in the Statement of Profit or Loss and Comprehensive Income during
the financial period in which they are incurred.
Any gain or loss on disposal of an item of PP&E is determined by comparing the proceeds from disposal with the carrying amount,
and is recognised net within other income/other expenses in the Statement of Profit or Loss and Other Comprehensive Income.
Mine property and development assets include costs transferred from exploration and evaluation assets once technical feasibility
and commercial viability of an area of interest are demonstrable and a decision to proceed with development of the project has
been made, and also includes subsequent development costs required to bring the mine into production. Any ongoing costs
associated with mining which are considered to benefit mining operations in future periods are capitalised.
Depreciation
All PP&E, except freehold land, is depreciated on a straight line basis over the asset’s useful life to the Group commencing from
the time the asset is held ready for use. The depreciation methods used for each class of depreciable assets are:
Class of plant and equipment
Buildings
Depreciation method
Straight line at 5% per annum
Plant and equipment – process plant
Straight line over remaining mine life
Plant and equipment – other
Mine property and development
Straight line at 10% to 30% per annum
Straight line over remaining mine life
The assets’ residual values and useful lives are reviewed, and adjusted prospectively if appropriate, at each reporting date. An asset’s
carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated
recoverable amount.
82 | BASE RESOURCES | ANNUAL REPORT 2019
Note 13: Trade and other payables
Trade payables and accruals
Provision for increase in Government of Kenya royalty (a)
30 June 2019
US$000s
30 June 2018
US$000s
11,713
21,425
33,138
11,889
15,976
27,865
a. Government of Kenya (GoK) Royalty
The Group is in ongoing discussions with the GoK with respect to the royalty rate payable for the Kwale Operation in the context of
resolution of a number of outstanding issues, including refund of US$16.9 million VAT receivables related to the construction of Kwale
Operations (refer to Note 9). Royalty costs are provided for, and expensed, on the basis of a 5% royalty rate being payable to the GoK,
whereas the royalty rate applicable under the terms of the special mining lease, and currently being paid, is 2.5%.
Note 14: Borrowings
Current
Kwale Project Debt Facility (a)
Finance lease liabilities
Total current borrowings
Non-current
Kwale Project Debt Facility (a)
Revolving Credit Facility (b)
Capitalised borrowing costs (b)
Amortisation of capitalised borrowing costs (b)
Total non-current borrowings
Total borrowings
30 June 2019
US$000s
30 June 2018
US$000s
-
19
19
-
20,000
(1,393)
306
18,913
18,932
53,200
66
53,266
26,773
12,500
(18,395)
14,654
35,532
88,798
a. Kwale Facility
In October 2018, the US$80.0 million outstanding balance of the Kwale Project Debt Facility was repaid from a combination of
cash reserves and utilisation of the Revolving Credit Facility (RCF) following a concurrent increase in the RCF to US$75.0 million.
Following the early retirement of the Kwale Project Debt Facility, US$2.8 million of capitalised borrowing costs were expensed
during the period.
b. Revolving Credit Facility
In order to repay the outstanding balance of the Kwale Project Debt Facility, the RCF was increased by US$45.0 million to
US$75.0 million in October 2018. The parent entity, Base Resources Limited, was removed as a borrower, leaving Base Titanium
Limited as the sole borrower. The RCF benefits from the security package established for the Kwale Project Debt Facility, except
that the Base Resources parent guarantee has been removed, which allows maximum flexibility for the proposed development
funding of the Toliara Project. The RCF carries interest rates of LIBOR plus 463 basis points, inclusive of political risk insurance.
The remaining tenor of the loan is 2.5 years.
All transaction costs directly attributable to securing the RCF funding are capitalised and offset against drawn loan amounts.
Capitalised borrowing costs are amortised over the life of the loan using the effective interest rate method.
Recognition and measurement of capitalised borrowing costs
All transaction costs directly attributable to establishing a debt facility are capitalised and offset against drawn loan amounts.
Capitalised borrowing costs are amortised over the life of the loan using the effective interest rate method.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 83
Notes to the consolidated financial statements - operating assets and liabilities (cont.)
Note 15: Provisions
Current
Mine closure and rehabilitation
Employee benefits
Non-current
Mine closure and rehabilitation
Employee benefits
Movement in mine closure and rehabilitation:
Balance at 1 July
Increase in rehabilitation estimate
Rehabilitation activities
Unwinding of discount
Balance at 30 June
30 June 2019
US$000s
30 June 2018
US$000s
2,040
1,358
3,398
24,328
27
24,355
2019
US$000s
22,773
3,103
(129)
621
26,368
360
1,146
1,506
22,413
45
22,458
2018
US$000s
22,536
7
(251)
481
22,773
Mine closure and rehabilitation obligations
The calculation of the mine closure and rehabilitation provision requires assumptions such as application of environmental legislation,
plant closure dates, available technologies, engineering costs and inflation and discount rates. A change in any of the assumptions
used may have a material impact on the carrying value of mine closure and rehabilitation obligations.
The mine closure and rehabilitation provision is recorded as a liability at present value, assuming a risk-free discount rate equivalent
to the 5 year US Government bonds rate of 1.76% as at 30 June 2019 (2018: 2.73%) and an inflation factor of 1.41% (2018: 1.32%).
Although the ultimate amount to be incurred is uncertain, management has, at 30 June 2019, estimated the asset retirement
cost of work completed to date using an expected remaining mine life of 5 years and a total undiscounted estimated cash flow of
US$26,598,533 (2018: US$24,159,245). Management’s estimate of the underlying asset retirement costs are independently reviewed
by an external consultant on a regular basis for completeness.
Recognition and measurement of provisions
Provisions are recognised when the Group has a legal or constructive obligation, as a result of past events, for which it is probable that
an outflow of economic benefits will result and that outflow can be reliably measured.
A mine closure and rehabilitation provision is recognised at the commencement of a mining project and/or construction based
on the estimated costs necessary to meet legislative requirements by estimating future costs and discounting these to a present
value. The provision is recognised as a liability, separated into current (estimated costs arising within twelve months) and non-
current components based on the expected timing of these cash flows. A corresponding asset is included in mine property and
mine development assets, only to the extent that it is probable that future economic benefits associated with the restoration
expenditure will flow to the entity, and is amortised over the life of the mine.
At each reporting date the mine closure and rehabilitation provision is re-measured in line with changes in discount rates and timing or
amounts of the costs to be incurred. Adjustments to the estimated amount and timing of future closure and rehabilitation cash flows are
a normal occurrence in light of the significant judgements and estimates involved and are dealt with on a prospective basis as they arise.
Changes in the liability relating to mine closure and rehabilitation obligations are added to or deducted from the related asset
(where it is probable that future economic benefits will flow to the entity), other than the unwinding of the discount which is
recognised as a financing expense in the Statement of Profit and Loss and Other Comprehensive Income. Changes in the asset
value have a corresponding adjustment to future amortisation charges.
The mine closure and rehabilitation provision does not include any amounts related to remediation costs associated with
unforeseen circumstances.
84 | BASE RESOURCES | ANNUAL REPORT 2019
Note 16: Deferred consideration
Current
Deferred consideration – Toliara Project acquisition
Non-current
Deferred consideration – Toliara Project acquisition
30 June 2019
US$000s
30 June 2018
US$000s
17,000
17,000
-
-
7,000
7,000
10,000
10,000
In January 2018, Base Resources completed the acquisition of the Toliara Project in Madagascar, with payment of US$75.0 million in
up-front consideration, for an initial 85% interest. The Company will acquire the remaining 15% interest, with a further US$17.0 million
(deferred consideration) payable on achievement of key milestones, as the project advances to mine development. If the key milestones
have not been achieved within two years from acquisition, the remaining 15% interest automatically transfers to the Company, however
payment of deferred consideration remains payable on achievement of key milestones.
Despite retaining a 15% interest for up to two years, the seller will not contribute any development funding and will not have
access to the returns associated with their ownership stake. The Company has therefore elected to apply the anticipated
acquisition method, which treats the 15% non-controlling interest as already owned and the US$17.0 million is included as a
component of the Toliara Project asset value. This requires that the financial liability associated with the 15% non-controlling
interest is recognised at the acquisition date. An estimation has been made as to the timing of payment of the future
consideration, which has resulted in a current liability being recognised.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 85
Notes to the consolidated financial statements
CAPITAL STRUCTURE, FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
This section presents information about the Group’s financial assets and liabilities, its exposure to financial risks, as well as its objectives,
policies and processes for measuring and managing risks.
Note 17: Issued capital
Ordinary share capital:
Issued and fully paid
Date
1 July 2017
Partial vesting of 2014 performance rights under LTIP scheme
Institutional and retail entitlement offer and placement
Share issue costs
30 June 2018
1 July 2018
Performance rights vested under the Company’s LTIP (i)
30 June 2019
(i) Refer to Note 18c for treasury shares issued in satisfaction of performance rights vested
30 June 2019
US$000s
30 June 2018
US$000s
306,512
305,277
Number
742,231,956
4,961,983
380,381,075
-
1,127,575,014
1,127,575,014
39,048,026
1,166,623,040
US$000s
231,079
529
76,313
(2,644)
305,277
305,277
1,235
306,512
All issued shares are fully paid. The Group does not have authorised capital or par value in respect of its issued shares. The holders
of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per share at meetings
of the Group.
Recognition and measurement of issued capital
Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares and share options
are recognised as a deduction from equity, net of any tax effects.
Note 18: Share-based payments
a. Share options
On 31 December 2018, 61,425,061 options lapsed unexercised following their expiry.
b. Performance rights
Total expenses arising from share based payment transactions during the year as part of employee benefit expenses was
US$1.7 million (comparative period: US$1.6 million).
Granted performance rights are as follows:
Performance cycle date
KMP
Other employees
Total
Fair value at grant date
1 October 2016
1 October 2017
1 October 2018
5,890,553
7,309,243
9,422,931
5,623,788
7,818,765
12,520,782
11,514,341
15,128,008
21,943,713
A$0.1625
A$0.2150
A$0.1610
All performance rights are granted for nil consideration.
86 | BASE RESOURCES | ANNUAL REPORT 2019
The fair value of the performance rights granted during the 2019 financial year has been estimated at the date of grant using a
Monte Carlo Simulation model using the following assumptions: risk-free interest rate of 2.1%; no dividend yield; volatility factor of the
expected market price of the Company’s shares of 60%; and a remaining life of performance rights of 2.85 years at valuation date. The
fair value of the performance rights is recognised over the service period, which commenced on the date of grant of 1 October 2018.
The movement in the number of performance rights during the year is set out below:
Opening balance
Granted – cycle commenced during reporting period
Granted – cycles commenced in previous reporting periods
Vested
Lapsed
Closing balance
2019
71,952,345
21,943,713
438,435
(45,748,431)
-
48,586,062
2018
67,088,421
14,689,573
205,023
(4,961,983)
(5,068,689)
71,952,345
Recognition and measurement of share based payments
The Group LTIP is an equity settled employee share scheme. The fair value of the equity to which employees become entitled is
measured at grant date and recognised as an expense over the vesting period, with a corresponding increase to an equity account.
The fair value of performance rights is ascertained using a recognised pricing model which incorporates all market vesting conditions.
c. Treasury Shares
To satisfy the vesting of the performance rights granted under the cycle commencing 1 October 2015 and completing their three-
year performance period on 30 September 2018, LTIP participants received 45,748,431 Base Resources ordinary shares, through
a combination of 39,048,026 newly issued fully paid ordinary shares and 6,700,405 ordinary shares previously acquired on market
(Treasury Shares) by the Base Resources Long Term Incentive Trust.
Note 19: Financial risk management
The Group’s activities expose it primarily to the following financial risks:
• Market risk consisting of commodity price risk, interest rate risk and currency exchange risk.
•
Credit risk.
•
Liquidity risk.
The overall risk management strategy seeks to assist the Group in meeting its financial targets, whilst minimising potential adverse
effects on financial performance. The senior executives of the Group meet on a regular basis to analyse treasury risks and evaluate
treasury management strategies in the context of the prevailing economic conditions and forecasts. Risk management policies are
approved and reviewed by the Risk Committee and the Board on a regular basis. Financial assets and liabilities of the Group are
carried at amortised cost, which approximates fair value.
Change in accounting standards recognised during the period
AASB 9 Financial Instruments, published in July 2014, replaces the existing guidance in AASB 139 Financial Instruments:
Recognition and Measurement. AASB 9 includes revised guidance on the classification and measurement of financial instruments,
a new expected credit loss model for calculating impairment on financial assets, and new general hedge accounting requirements.
It also carries forward the guidance on recognition and derecognition of financial instruments from AASB 139. AASB 9 is effective
for the 30 June 2019 financial year for the Group. Base Resources has assessed that the implementation of this standard does not
have a material impact on the financial statements.
(i) Classification and measurement of financial instruments
AASB 9 contains three principal classification categories for financial assets: measured at amortised cost, fair value through
other comprehensive income (FVOCI) and fair value through profit or loss (FVTPL). The classification of financial assets
under AASB 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow
characteristics. AASB 9 eliminates the previous AASB 139 categories of held to maturity, loans and receivables and available
for sale. Under AASB 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are
never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 87
Notes to the consolidated financial statements - capital structure, financial instruments and risk management (cont.)
A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:
• It is held within a business model whose objective is to hold assets to collect contractual cashflows.
• Its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the
principal amount outstanding.
All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This
includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise
meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces
an accounting mismatch that would otherwise arise.
AASB 9 largely retains the existing requirements in AASB 139 for the classification and measurement of financial liabilities.
The adoption of AASB 9 has not had a significant effect on the Company’s accounting policies related to financial liabilities. The table
set out on below explains the original measurement categories under AASB 139 and the new measurement categories under AASB 9
for each class of the Company’s financial assets and liabilities as at 1 July 2018.
In US$000s:
Financial assets
Original classification
under AASB 139
New classification
under AASB 9
Original carrying
amount under
AASB 139
New carrying
amount under
AASB 9
Cash and cash equivalents
Loans and receivables
Amortised cost
Restricted cash
Loans and receivables
Amortised cost
Trade and other receivables
Loans and receivables
Amortised cost
29,686
29,591
38,726
29,686
29,591
38,726
The adoption of AASB 9 did not have a significant impact on the Company’s financial statements.
(ii) Impairment
AASB 9 replaces the ‘incurred loss’ model in AASB 139 with an ‘expected credit loss’ (ECL) model. The new impairment model applies
to financial assets measured at amortised costs, contract assets and debt investments at FVOCI but not to investments in equity
instruments. Under AASB 9, credit losses are recognised earlier than under AASB 139.
88 | BASE RESOURCES | ANNUAL REPORT 2019
The Group’s financial instruments consist of deposits with banks, accounts receivable and payables. The totals for each category
of financial instruments are as follows:
Note
2019
US$000s
2018
US$000s
Financial assets
Cash and cash equivalents
Restricted cash
Trade and other receivables
Financial liabilities
Trade and other payables
Kwale Project Debt Facility
Revolving Credit Facility
Finance lease liabilities
9
13
14
14
14
39,242
-
62,397
101,639
33,138
-
20,000
19
53,157
29,686
29,591
38,726
98,003
27,865
79,973
12,500
66
120,404
Commodity price risk
The Group is exposed to commodity price volatility on rutile sales made under contract terms which allow for a retrospective
final price adjustment based on average market prices in the quarter the product is sold. Average market prices are derived
from an independently published quarterly dataset of all rutile trades, available approximately four months after the end of each
quarter. Sales made under these terms that have not yet been subject to a final price adjustment are recognised at the estimated
fair value of the total consideration receivable, which takes into account the latest available market data at the balance date.
Rutile sales revenue of US$12.6 million remains subject to final market pricing at 30 June 2019 (2018: US$20.5 million). An interim
adjustment to sales revenue has been recorded at the reporting date to align the estimated fair value of these sales with the latest
available market data. If commodity prices increased/decreased by 10%, with all other variables held constant, the Group’s after
tax profit/loss would have increased/decreased by US$1.3 million (2018: US$2.1 million).
Interest rate risk
The RCF carries an interest rate of LIBOR plus 463 basis points, inclusive of political risk insurance. The weighted average effective
interest rate on the RCF at 30 June 2019 is 6.80%.
The majority of the Group’s cash deposits are held in accounts with Nedbank Limited at variable interest rates.
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Carrying amount
Realisable/payable within six months
2019
US$000s
2018
US$000s
2019
US$000s
2018
US$000s
-
(18)
(18)
39,242
(20,000)
19,242
-
(66)
(66)
59,277
(92,473)
(33,196)
-
-
-
39,242
-
39,242
-
-
-
29,686
(26,600)
3,086
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 89
Notes to the consolidated financial statements - capital structure, financial instruments and risk management (cont.)
Cash flow sensitivity analysis for variable rate instruments
A change of 100 basis points in interest rates would have increased or decreased equity and profit or loss before tax by the
amounts shown below. This analysis assumes that all other variables remain constant.
Variable rate instruments
Profit or loss
Equity
2019
US$000s
100bp increase
2019
US$000s
100bp decrease
2018
US$000s
100bp increase
2018
US$000s
100bp decrease
192
(192)
(192)
192
(332)
332
332
(332)
Currency risk
The Group is exposed to currency risk from bank balances, payables and receivables that are denominated in a currency other
than the respective functional currencies of Group entities, being USD and AUD.
The USD carrying amount of the Group’s financial assets and liabilities by its currency risk exposure at the reporting date is
disclosed below:
30 June 2019
In US$000s:
Cash and cash equivalents
Trade and other receivables
Other current assets
Trade and other payables
Net exposure
30 June 2018
In US$000s:
Cash and cash equivalents
Trade and other receivables
Other current assets
AUD
45
-
-
(83)
(38)
AUD
2
-
-
USD
3,062
-
-
(165)
2,897
USD
225
-
-
KES
2,038
24,234
385
(1,925)
24,732
KES
597
21,321
371
Trade and other payables
(191)
(124)
(2,075)
Borrowings
Net exposure
-
(12,500)
-
(189)
(12,399)
20,214
The following significant exchange rates applied during the year:
MGA
672
640
111
(411)
1,012
Other
Total USD
5
-
-
(131)
(126)
5,822
24,874
496
(2,715)
28,477
MGA
Other
Total USD
217
388
78
(98)
-
585
4
-
-
(88)
-
(84)
1,045
21,709
449
(2,576)
(12,500)
8,127
2018
1.351
101.05
3,314.67
USD : AUD
USD : KES
USD : MGA
Average rate
30 June spot rate
2019
1.398
101.15
3,503.66
2018
1.290
102.37
3,151.12
2019
1.4255
102.30
3,603.82
Sensitivity analysis
Based on the financial instruments held at reporting date, had the functional currencies weakened/strengthened by 10% and all
other variables held constant, the Group’s after-tax profit/(loss) for the year to date would have been US$2.8 million lower/higher
(2018: US$0.8 million lower/higher).
90 | BASE RESOURCES | ANNUAL REPORT 2019
Credit risk
Credit risk refers to the risk that a counterparty will default on its contractual obligations resulting in financial loss to the Group.
Credit risk arises from cash and deposits with financial institutions as well as credit exposures to outstanding receivables.
The Group is exposed to counterparty credit risk through sales of mineral sands products under normal terms of trade. Total
sales revenue for the year ended 30 June 2019 was US$209.5 million (2018: US$198.8 million). Base Resources had two major
customers who individually accounted for more than 10% of sales revenue, with one contributing $49.9 million (2018: $56.4 million)
and the other contributing $45.7 million (2018: $65.3 million). These customers represent 0% (2018: 13%) of the trade receivables
balance at 30 June 2019.
Credit risk arising from sales to customers is managed by the Group’s policy to only trade with reputable companies, with whom
a long term offtake agreement is held, or where such an agreement is not in place, sales are backed by Letters of Credit held with
internationally recognised banks.
The Group is owed US$24.2 million in VAT receivable by the Government of Kenya (Note 9), of which US$16.9 million relates to the
construction of Kwale Operations and is overdue but not impaired. An estimation has been made as to the timing of the receipt of
this amount and forms the basis for its classification as a current asset.
At the reporting date the carrying amounts of financial assets are adjusted for any impairment and represent the Group’s maximum
exposure to credit risk, excluding the value of any collateral or other security, which was as follows:
Financial assets – cash flow realisable
Cash and cash equivalents
Restricted cash
Trade and other receivables
Total anticipated inflows
2019
US$000s
2018
US$000s
39,242
-
62,397
101,639
29,686
29,591
38,726
98,003
At 30 June 2019, the ageing of trade and other receivables, excluding VAT receivable, that were not impaired was as follows:
Neither past due nor impaired
Past due 1 - 30 days
2019
US$000s
37,354
40
37,394
2018
US$000s
14,754
2,201
16,955
There were no impairment losses in relation to financial assets during the current or the comparative financial year. The maximum
exposure to credit risk for financial assets at the reporting date by geographic region of the customer was:
United Kingdom
Kenya
China
USA
Australia
Other
Total
2019
US$000s
26,103
28,177
26,462
7,700
5,832
7,365
101,639
2018
US$000s
53,364
22,522
10,418
2,176
3,814
5,709
98,003
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 91
Notes to the consolidated financial statements - capital structure, financial instruments and risk management (cont.)
Liquidity risk
Liquidity risk is the risk that the Group will encounter difficulty in meeting the obligations associated with financial liabilities. The Group
manages liquidity risk by conducting regular reviews of the timing of cash outflows and the maturity profiles of term deposits in order
to ensure sufficient funds are available to meet its obligations.
Financial liability maturity analysis
Carrying
amount
Total
2 months
or less
2 – 12
months
1 – 2
years
2 – 5
years
More than
5 years
Contractual cash flows
30 June 2019
US$000s
US$000s
US$000s
US$000s
US$000s
US$000s
US$000s
Trade and other payables
RCF
Finance lease liabilities
33,138
20,000
19
33,138
23,456
19
11,713
234
19
21,425
1,148
-
-
-
1,379
20,695
-
-
53,157
56,613
11,966
22,573
1,379
20,695
30 June 2018
Trade and other payables
Kwale Project Debt Facility
RCF
Finance lease liabilities
27,865
79,973
12,500
66
27,865
86,355
14,591
66
11,889
-
177
66
15,976
58,553
867
-
-
27,802
13,547
-
120,404
128,877
12,132
75,396
41,349
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Capital Management
Management controls the capital of the Group in order to maintain an appropriate working capital position to ensure that the Group
can fund its operations and continue as a going concern. Capital is managed by assessing the Group’s financial risks and adjusting
its capital structure in response to changes in these risks and in the market.
2019
US$000s
39,242
-
62,397
19,574
6,313
(33,138)
(19)
(3,398)
(14,463)
(625)
(17,000)
58,883
2018
US$000s
29,686
29,591
38,726
19,789
5,993
(27,865)
(53,266)
(1,506)
(75)
(891)
(7,000)
33,182
Cash and cash equivalents
Restricted cash
Trade and other receivables
Inventories
Other current assets
Trade and other payables
Borrowings
Provisions
Income tax payable
Other liabilities
Deferred consideration
Working capital position
92 | BASE RESOURCES | ANNUAL REPORT 2019
Notes to the consolidated financial statements
GROUP STRUCTURE AND OTHER INFORMATION
Note 20: Parent entity disclosures
As at, and throughout the financial year ended 30 June 2019, the parent entity of the consolidated group was Base Resources Limited.
Financial performance of the parent entity
Loss for the year
Total comprehensive loss for the year
Financial position of the parent entity
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Total liabilities
Net assets
Issued capital
Reserves
Accumulated losses
Total equity
2019
US$000s
(9,212)
(9,212)
2019
US$000s
5,905
211,752
217,657
3,341
30,717
34,058
183,599
225,465
3,133
(44,999)
183,599
2018
US$000s
(9,157)
(9,157)
2018
US$000s
3,867
211,804
215,671
2,804
11,624
14,428
201,243
236,646
4,036
(39,439)
201,243
Principles of consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Base Resources Limited at
the end of the reporting period. The Group controls an entity when it is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity. The financial statements of subsidiaries are
included in the consolidated financial statements from the date on which control commences until the date on which control ceases.
Where controlled entities have entered or left the Group during the year, the financial performance of those entities are included only
for the period of the year that they were controlled.
In preparing these financial statements, all inter-group balances and transactions between entities in the Group have been eliminated
on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with those adopted
by the parent entity.
Controlled entity
Base Titanium (Mauritius) Limited
Base Titanium Limited
Base Exploration Tanzania Limited
BTS Holdings (Mauritius) Limited
Madagascar Mineral Fields Limited
Malagasy Sands No. 2 Limited
Base Toliara SARL
Madagascar Resources SARL
Country of Incorporation
2019
2018
Ownership %
Mauritius
Kenya
Tanzania
Mauritius
Mauritius
Mauritius
Madagascar
Madagascar
100
100
100
100
85
85
85
85
100
100
100
100
85
85
85
85
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 93
Notes to the consolidated financial statements - group structure and other information (cont.)
Note 21: Related parties
KMP compensation:
Short-term employment benefits
Post-employment benefits
Share-based payments
Other long term
2019
US$
2018
US$
2,907,768
3,298,696
129,199
927,816
58,512
132,821
835,511
61,668
4,023,295
4,328,696
Refer to the Remuneration Report for further details.
Other related party transactions
In January 2017, one of the Company’s major shareholders, Pacific Road Capital Management Pty Limited (Pacific Road), acquired
a Kwale Operation royalty stream of 0.25% of sales revenue from Pangea Goldfields Inc. In the year to 30 June 2019, US$516,000
(2018: US$477,000) was paid or is payable to Pacific Road under this royalty arrangement. Mr Stirzaker, non-executive director of
the Group, is a partner of Pacific Road.
Recognition and measurement of short term employee benefits
STIP obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised
for the amount expected to be paid under the STIP where the Group has a present legal or constructive obligation as a result of past
services by the employee, and the obligation can be estimated reliably.
Recognition and measurement of defined contribution plans
Contributions are made by the Group to individual defined contribution superannuation plans for Australian directors and employees
and are expensed when incurred.
Note 22: Auditors’ remuneration
2019
US$
2018
US$
108,199
132,407
111,217
219,416
117,362
249,769
49,769
7,330
218,183
275,282
59,491
8,727
68,728
136,946
Audit services
KPMG Australia
Audit of financial report
Overseas KPMG firms
Audit services
Other services
KPMG Australia
Tax compliance and advisory services
Other services
Overseas KPMG firms
Tax compliance and advisory services
94 | BASE RESOURCES | ANNUAL REPORT 2019
Note 23: New accounting standards not yet adopted
There are a number of new standards effective for annual periods beginning after 1 July 2019, however the Group does not plan
to adopt these early. Those which may be relevant to the Group are set out below.
AASB 16 Leases removes the classification of leases as either operating or finance leases – for the lessee – effectively treating
all leases as finance leases. Short term leases (less than 12 months) and leases of low value assets are exempt from the lease
accounting requirements. Furthermore, there are changes in accounting over the life of the lease as a front-loaded pattern of expense
will be recognised for most leases, even when a constant annual rental is paid. Lessor accounting remains similar to current practice.
AASB 16 is effective for annual reporting periods beginning on or after 1 January 2019, with early adoption permitted. Base Resources
does not expect the implementation of this standard to have a material impact on the financial statements.
The following amended standards and interpretations are not expected to have a significant impact on the Group’s consolidated
financial statements:
• IFRIC 23 Uncertainty over Tax Treatments. IFRIC 23 is applicable for the financial period starting after 1 July 2019. IFRIC 23
clarifies how the recognition and measurement requirements of IAS12 Income and taxes are applied where there is uncertainty
over income tax treatments.
Note 24: Correction of error
During the year, the Company identified an understatement of net deferred tax liabilities in prior periods. This was due to the
incorrect application of translation of foreign currency transactions to the deferred tax asset recognised for carry forward tax
losses in Kenya. Past tax losses in Kenya, denominated in Kenyan Shillings (KES), were not re-translated to Base Titanium
Limited’s functional currency of United States Dollars (USD) at each reporting date, as required under the Australia Accounting
Standards for monetary items. The impact of the correction resulted in an increase in net deferred tax liabilities (reduction in the
deferred tax asset for carry forward tax losses in Kenya) of US$5.863 million at 1 July 2017, and consequently 1 July 2018, due
to the depreciation of the KES against the USD in prior periods. There was no material impact on the Statement of Profit or Loss
and Other Comprehensive Income or the Statement of Cash Flows for the Group for the year ended 30 June 2018.
The following table summarises the adjustments made to the Statement of Financial Position:
At 1 July 2017
Balances at 1 July 2017, previously reported
Reduction in deferred tax asset on tax losses
in Kenya
Deferred tax
liability
US$000s
5,846
5,863
Total
noncurrent
liabilities
US$000s
Total
liabilities
US$000s
Net assets
US$000s
Accumulated
losses
US$000s
Total equity
US$000s
117,635
200,325
180,471
(36,341)
180,471
5,863
5,863
(5,863)
(5,863)
(5,863)
Restated balances at 1 July 2017
11,709
123,498
206,188
174,608
(42,204)
174,608
At 1 July 2018
US$000s
US$000s
US$000s
US$000s
US$000s
US$000s
Balances at 30 June 2018, previously reported
Reduction in deferred tax asset on tax losses
in Kenya
15,106
5,863
83,721
5,863
174,324
287,085
5,863
(5,863)
(1,808)
(5,863)
287,085
(5,863)
Restated balances at 30 June 2018
20,969
89,584
180,187
281,222
(7,671)
281,222
Note 25: Events after the reporting date
There have been no significant events since the reporting date.
Note 26: Company details
The principal place of business and registered office of the Company is:
Base Resources Limited (ASX & AIM: BSE)
Level 1
50 Kings Park Road
West Perth 6005
Western Australia
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 95
Directors’ Declaration
1. In the opinion of the directors of Base Resources:
(a) the consolidated financial statements and notes that are set out on pages 68 to 95 and the Remuneration Report in
pages 39 to 55 in the Directors’ Report, are in accordance with the Corporations Act 2001, including:
(i) giving a true and fair view of the Group’s financial position as at 30 June 2019 and of its performance, for the financial
year ended on that date; and
(ii) complying with Australian Accounting Standards and the Corporations Regulations 2001; and
(b) there are reasonable grounds to believe that the Company will be able to pay its debts as and when they become due and payable.
2. The directors have been given the declarations required by Section 295A of the Corporations Act 2001 from the chief executive
officer and chief financial officer for the financial year ended 30 June 2019.
3. The directors draw attention to note 1 to the consolidated financial statements, which includes a statement of compliance with
International Financial Reporting Standards.
Signed in accordance with a resolution of the directors:
Keith Spence,
Chair
DATED at PERTH this 24th day of August 2019
96 | BASE RESOURCES | ANNUAL REPORT 2019
Independent auditor’s report
Independent Auditor’s Report
To the shareholders of Base Resources Limited
Report on the audit of the Financial Report
Opinion
We have audited the Financial Report of Base
Resources Limited (the Company).
In our opinion, the accompanying Financial
Report of the Company is in accordance with the
Corporations Act 2001, including:
• giving a true and fair view of the Group's
financial position as at 30 June 2019 and of its
financial performance for the year ended on
that date; and
• complying with Australian Accounting
Standards and the Corporations Regulations
2001.
The Financial Report comprises:
• Consolidated statement of financial position as at
30 June 2019
• Consolidated statement of profit or loss and other
comprehensive income, Consolidated statement
of changes in equity, and Consolidated statement
of cash flows for the year then ended
• Notes including a summary of significant
accounting policies
• Directors' Declaration.
The Group consists of the Company and the
entities it controlled at the year-end or from time to
time during the financial year.
Basis for opinion
We conducted our audit in accordance with Australian Auditing Standards. We believe that the audit
evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Our responsibilities under those standards are further described in the Auditor’s responsibilities for the
audit of the Financial Report section of our report.
We are independent of the Group in accordance with the Corporations Act 2001 and the ethical
requirements of the Accounting Professional and Ethical Standards Board’s APES 110 Code of Ethics for
Professional Accountants (the Code) that are relevant to our audit of the Financial Report in Australia. We
have fulfilled our other ethical responsibilities in accordance with the Code.
Key Audit Matters
Key Audit Matters are those matters that, in our professional judgement, were of most significance in
our audit of the Financial Report of the current period.
This matter was addressed in the context of our audit of the Financial Report as a whole, and in forming
our opinion thereon, and we do not provide a separate opinion on this matter.
KPMG, an Australian partnership and a member firm of the KPMG
network of independent member firms affiliated with KPMG
International Cooperative (“KPMG International”), a Swiss entity.
Liability limited by a scheme approved under
Professional Standards Legislation.
BASE RESOURCES | INDEPENDENT AUDITOR'S REPORT | 97
Independent auditor’s report (cont.)
98 | BASE RESOURCES | ANNUAL REPORT 2019
Value of property, plant and equipment (US$205,586,000) Refer to Note 12 to the Financial Report The key audit matter How the matter was addressed in our audit The value of property, plant and equipment was considered a key audit matter due to: •The size of the Kwale mine property, plant and equipment balance (being 46% of total assets); •The mineral sands sector, within which the Group operates, having experienced volatile commodity prices and uncertainty in the global demand for products, putting pressure on the recoverability of asset values; •The level of judgement required by us in evaluating assumptions used by the Group in its valuation assessment, and •The Group’s market capitalisation at 30 June 2019 being less than the net assets, bringing into question the value ascribed to property, plant and equipment. The valuation assessment of the Group’s property, plant and equipment, applies significant assumptions in a fair value less costs of disposal model. These assumptions include: •Forecast sales, production output, production costs, capital expenditure and expected commodity prices for mineral sands. The uncertainty and volatility described above increases the possibility of inaccurate forecasts; •Discount rate being complicated in nature and incorporating the assessment of Kenya country risk, and •Life of mineral reserves. The Group engages an external expert to assist in producing the Reserves statement which underlies the forecast production output within the Group’s model. In assessing this key audit matter, we involved senior team members and valuation specialists. Our procedures included: •We considered the appropriateness of the Group’s use of the fair value less costs of disposal methodology against the requirements in the accounting standards •We assessed the integrity of the fair value less costs of disposal model used, including the accuracy of the underlying calculation formulas •We evaluated the sensitivity of the valuation of property, plant and equipment by considering reasonably possible changes to the key assumptions, such as forecast commodity prices and the discount rate. We did this to identify those assumptions at higher risk of bias or inconsistency in application and to focus our further procedures •We assessed the historical accuracy of Group forecasts to inform our evaluation of the forecasts incorporated in the model. We noted previous trends where volatile commodity prices and uncertain market conditions existed and how they impacted the business, for use in further testing •We compared the forecast cash flows contained in the model to Board approved forecasts •We assessed key assumptions underlying the discounted cash flows in the fair value less costs of disposal model (including forecast sales, production output, production costs and capital expenditure) using our knowledge of the Group, their past performance, and our industry experience. We compared key events to the Board approved plan and strategy. •We compared expected commodity prices to published views of the market commentator on future trends •We assessed the scope, competence and objectivity of the external expert engaged by the Group. •We compared the life of mineral reserves and production output assumptions in the Group’s model to those in the Reserves statement commissioned by the Group for consistency. BASE RESOURCES | INDEPENDENT AUDITOR'S REPORT | 99
The key audit matter How the matter was addressed in our audit •Working with our valuation specialists, we independently developed a discount rate range considered comparable, using publicly available market data for comparable entities, adjusted for Kenya country risk. •We assessed the Group’s analysis of the market capitalisation shortfall versus the net assets of the Group. This included comparison of the market capitalisation range implied by broker target valuation ranges to the Group’s valuation. The Group’s EBITDA multiples were also assessed against comparable companies. Other Information Other Information is financial and non-financial information in Base Resources Limited’s annual reporting which is provided in addition to the Financial Report and the Auditor’s Report. The Directors are responsible for the Other Information. Our opinion on the Financial Report does not cover the Other Information and, accordingly, we do not express an audit opinion or any form of assurance conclusion thereon, with the exception of the Remuneration Report and our related assurance opinion. In connection with our audit of the Financial Report, our responsibility is to read the Other Information. In doing so, we consider whether the Other Information is materially inconsistent with the Financial Report or our knowledge obtained in the audit, or otherwise appears to be materially misstated. We are required to report if we conclude that there is a material misstatement of this Other Information, and based on the work we have performed on the Other Information that we obtained prior to the date of this Auditor’s Report we have nothing to report. Responsibilities of the Directors for the Financial Report The Directors are responsible for: • preparing the Financial Report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 • implementing necessary internal control to enable the preparation of a Financial Report that gives a true and fair view and is free from material misstatement, whether due to fraud or error • assessing the Group and Company's ability to continue as a going concern and whether the use of the going concern basis of accounting is appropriate. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate the Group and Company or to cease operations, or have no realistic alternative but to do so. Independent auditor’s report (cont.)
100 | BASE RESOURCES | ANNUAL REPORT 2019
Auditor’s responsibilities for the audit of the Financial Report Our objective is: • to obtain reasonable assurance about whether the Financial Report as a whole is free from material misstatement, whether due to fraud or error; and • to issue an Auditor’s Report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Australian Auditing Standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of this Financial Report. A further description of our responsibilities for the audit of the Financial Report is located at the Auditing and Assurance Standards Board website at: http://www.auasb.gov.au/auditors_responsibilities/ar1.pdf. This description forms part of our Auditor’s Report. Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Base Resources Limited for the year ended 30 June 2019, complies with Section 300A of the Corporations Act 2001. Directors’ responsibilities The Directors of the Company are responsible for the preparation and presentation of the Remuneration Report in accordance with Section 300A of the Corporations Act 2001. Our responsibilities We have audited the Remuneration Report included on pages 39 to 55 of the Directors’ report for the year ended 30 June 2019. Our responsibility is to express an opinion on the Remuneration Report, based on our audit conducted in accordance with Australian Auditing Standards. KPMG R Gambitta Partner Perth 24 August 2019 Additional shareholder information
The following additional information required by the ASX Listing Rules is current as at 1 August 2019.
Ordinary Shares
Distribution of shares
1 – 1,000
1,001 – 5,000
5,001 – 10,000
10,001 – 100,000
100,001 and over
Holders
135
220
190
506
189
1,240
Units
12,277
674,125
1,531,413
19,369,656
1,145,035,569
1,166,623,040
%
0.00
0.06
0.13
1.66
98.15
100.0
There were 163 holders of unmarketable parcels of shares (
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