DELIVERING
RETURNS
ANNUAL REPORT 2020
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Values & Vision
FY20 Highlights & Achievements
Chair’s Letter
Year at a Glance
Operating & Financial Review
Operations
Operational COVID-19 Response
Business Development
Sustainability
Markets
Corporate
Resources and Reserves Statement
Directors’ Report
Remuneration Report
Corporate Governance Statement
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
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. Such statements
may be (but are not necessarily) identified by the use of phrases
such as “will”, “expect”, “anticipate”, “believe” and “envisage”.
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.
Subject to any continuing obligations under applicable law or
relevant stock exchange listing rules, 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.
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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 Operations in Kenya
is a consistent and efficient high margin
operation. With mine life extension and
wider Kenyan mine exploration options
being pursued, there is opportunity for
further value creation. The Toliara Project
in Madagascar continued to progress, with
the Company’s definitive feasibility study
confirming its status as one of the best
mineral sands development opportunities
in the world.
Benefiting from consistent Kwale Operations
production and an ongoing strong price
environment, the Company has achieved
strong financial results despite the turbulent
global environment. This has enabled Base
Resources to continue to build a robust
financial platform from which to grow the
business and create a truly unique mineral
sands company.
Consistent with Base Resources’ growth
strategy, the Company seeks to provide
returns to shareholders through both
long-term growth in the Company’s share
price and appropriate cash distributions.
Cash not required to meet the Company’s
near-term growth and development
requirements, or to maintain requisite
balance sheet strength in light of prevailing
circumstances, could be expected to be
returned to shareholders.
BASE RESOURCES | INTRODUCTION | 1
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Base Resources exists to enrich our people,
our communities in which we operate and our
shareholders through the creative development
of mineral resources.
Our approach and business practices are founded on a set of core
principles that together form the “Base Way” which permeates every
aspect of our business.
The Base Way is based on our belief in:
• The potential of our people
• The power of the team
• The value of resources
• Absolute integrity
From project development through to operating mines, we have
adopted world-class, inclusive business practices that seek to
minimise any negative impacts and maximise positive outcomes
of our operations.
This includes a commitment to safety and operational performance,
the recruitment and training of local people, a preference to work
with local suppliers, extensive and effective community programs
and a commitment to operating in a sustainable and environmentally
responsible manner.
With this approach, Base Resources is recognised as a leader in the
African resources industry with an enviable track record of excellence
in safety, community engagement and environmental stewardship.
Building on this, our audacious goal is to be the pre-eminent African-
focused mining company with a portfolio of exceptional operations
and opportunities, fully valued by our stakeholders, by 2031.
• We will be the first thought of company when considering truly
successful resource development in Africa.
• We will be leveraging the expertise developed and honed
in Africa and successfully applying it elsewhere.
• Our opportunities will emerge from clever exploration, acquisition
and collaboration. They will represent an optioned pathway to
sustained performance.
• Governments and communities will invite us in and employees
will seek us out.
• Shareholders will fully value our sustained, predictable
and growing earnings.
2 | BASE RESOURCES | ANNUAL REPORT 2020
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3.5
MAIDEN DIVIDEND
CENTS PER
SHARE (AUD)
US$108.7M
EBITDA
466kt
PRODUCT PRODUCED
US$87.6M
NET CASH
US$3.4 M
INVESTED IN COMMUNITY
& ENVIRONMENT PROGRAMS
US$1.2M
FURTHER INVESTMENT TO SUPPORT OUR
COMMUNITIES TO NAVIGATE THE IMPACT OF COVID-19
BASE RESOURCES | INTRODUCTION | 3
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Dear Shareholders
In an unprecedented year globally, Base Resources has
continued to deliver results with our Kwale Operations
in Kenya exceeding expectations in its first full year
mining in the South Dune and good progress being
made with the world class Toliara development project
in Madagascar. With this high-quality asset portfolio
and a track record of excellence in safety, operations,
project development, community engagement and
environmental stewardship, we continue to build a
truly unique and resilient mineral sands company.
Base Resources adapted quickly to the COVID-19 pandemic,
altering workplace conditions as required to maintain a safe
environment for our people and the communities in which we
operate. The fact that Kwale Operations maintained full production
and met shipping schedules throughout the reporting period
is a testament to the commitment and flexibility of the whole
Base Resources team. The ongoing COVID-19 pandemic, and its
impacts on the Company’s business, people and stakeholders,
is the subject of ongoing close monitoring and response
development by management and the Board.
Kwale Operations continued to perform strongly with the Company
completing its first full year of mining the South Dune. As mining
progressed, the consistency of higher levels of rutile encountered
in the mineral assemblage and greater zircon separation efficiency
resulted in an increase to production guidance in January 2020, with
production for the year coming in at the higher end of that guidance.
Despite uncertainty caused by COVID-19, our markets remained
robust throughout the reporting period and supported a strong
price environment. However, it is expected that demand will
become more subdued in the near term. In the longer term,
forecast structural supply shortfalls will 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.
Our strong operational performance, combined with a healthy
pricing environment, allowed the Company to record revenue of
US$208.0 million. This result, along with a continued focus on
efficiency drove EBITDA of US$108.7 million and a net profit after
tax of US$39.6 million. Strong underlying cashflow enabled the
Company to end the year with US$87.6 million net cash.
Following another year of strong operational performance and cash
generation, the Board was pleased to determine its maiden dividend
of AUD3.5 cents per share, which will be payable in early October.
On site, the Company maintained its uncompromising focus on
safety, health and wellbeing with no workplace lost time injuries
during the reporting period, resulting in a lost time injury frequency
rate of zero. Base Resources’ employees and contractors have
now worked 20.9 million man-hours lost time injury free, with the
last lost time injury recorded in early 2014. One medical treatment
injury was recorded in the reporting period resulting in a total
recordable injury frequency rate of 0.24 per one million hours.
However, in January 2020, an incident involving Kwale Operations’
haulage contractor tragically resulted in a fatal injury to another
road user on a public road. An internal investigation was
immediately launched into the incident resulting in changes
implemented to improve oversight of maintenance and
safety practices across all contractors. With Base Resources’
fundamental commitment to conducting operations in a manner
that is safe for its people and the communities in which we
operate, the Board considered it appropriate to exercise its
discretion pursuant to the Company’s Short Term Incentive Plan
to reduce this year’s award by 25%.
Through the COVID-19 pandemic, we continued to play an
important role in our host communities with an extensive
and considered program to support vulnerable Kenyan and
Malagasy communities. This has included the distribution of
food, construction of hygiene facilities and donation of medical
supplies and equipment.
Kwale Operations also continued to set a benchmark for
sustainability in mining project implementation and operation with
a wide range of activities focused on our people, community and
environment. Highlights from these activities include the delivery
of over 240,000 training hours to employees and community
members, 53% of the Kwale tailings storage facility external walls
now being fully rehabilitated, 670 full scholarships being awarded
in the reporting period and participation in the Kwale Cotton
Project now reaching 3,000 small-holder farmers. The outcomes
of ongoing internal training, apprenticeships and graduate
programs all contributed to the workforce at Kwale Operations
now being 98% Kenyan nationals with 69% drawn from the local
Kwale County.
The Company remains focused on Kwale mine life extension
to maximise value creation from the Kwale development for
shareholders, employees, the community and the nation of Kenya.
A number of mine life extension and near mine exploration options
continue to be pursued and a pre-feasibility study on mining the
North Dune deposit was commenced in January 2020.
The Toliara Project in Madagascar represents a significant and
attractive growth opportunity for the Company. The definitive
feasibility study released in December 2019 reinforced our view
that we have secured one of the best undeveloped mineral sands
assets in the world. Subsequently, front end engineering design
was advanced and lenders due diligence commenced. This was
all achieved while complying with a temporary suspension of
on-the-ground activity required by the Government of Madagascar
in November 2019 pending the outcome of discussions on fiscal
terms. Discussion on these terms progressed positively during
the second half of the year, but slowed more recently while the
government focused on its COVID-19 response. We remain
confident that acceptable terms should be able to be secured and,
on this basis, the Company remains committed to development of
the Toliara Project.
The last 12 months have brought many challenges, but they
have also highlighted the resilience of Base Resources. Kwale
Operations remains a high cash generating asset with an enviable
revenue to cost of sales ratio and extensional opportunities.
We have a very strong balance sheet with enhanced liquidity.
Markets are proving relatively stable and we enjoy sound long
term relationships with our customers. We have the flexibility
to manage the progression of the Toliara Project to suit timing
of securing attractive fiscal terms and its development to suit
emerging market demand and we have an outstanding team with
a recognised reputation for successful mineral sands development
and operations. We are well positioned to deliver shareholder value
while weathering future global uncertainty. The commencement
of dividend flows to shareholders is both a statement and a major
milestone on this journey.
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
BASE RESOURCES | CHAIR’S LETTER | 5
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Kwale Operations
Kenya
Operational asset producing
rutile, ilmenite zircon.
Toliara Project
Madagascar
Mineral sands project progressing
towards development.
Base Resources
Perth
Company headquarters.
Production
355,093
78,920
31,657
TONNES OF ILMENITE PRODUCED
TONNES OF RUTILE PRODUCED
TONNES OF ZIRCON PRODUCED
Full year results financial summary
US$M
REVENUE
EBITDA
NET DEPRECIATION
EBIT
NET FINANCE EXPENSE
INCOME TAX EXPENSE
NPAT
EARNINGS PER SHARE (US CENTS)
REVENUE/COST OF SALES
DIVIDEND DETERMINED – CENTS PER SHARE (AUD)
FY20
208.0
108.7
(57.2)
51.5
(5.9)
(6.0)
39.6
3.38
2.5
3.5
FY19
209.5
113.5
(52.1)
61.4
(11.6)
(10.7)
39.2
3.39
2.6
N/A
6 | BASE RESOURCES | ANNUAL REPORT 2020
Historical ilmenite / rutile prices
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$
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1,500
1,250
1,000
750
500
250
0
FY16
FY17
FY18
FY19
FY20
Historical zircon prices
300
250
200
150
100
50
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$
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RUTILE
ILMENITE
ZIRCON
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$
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1,800
1,500
1,200
900
600
300
0
FY16
FY17
FY18
FY19
FY20
BASE RESOURCES | YEAR AT A GLANCE | 7
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Base Resources operates the 100% owned Kwale Operations in
Kenya, which commenced production in late 2013. Kwale Operations
is located 50 kilometres south of Mombasa, the principal port facility
for East Africa.
Kwale Operations is designed to process ore to recover three
main products: rutile, ilmenite and zircon. Base Resources
employs a hydraulic mining method which has proven cost
effective and well suited to the Kwale deposit and involves
blasting the mining face directly with high pressure jets of
water to create an ore slurry. The ore slurry is then pumped
to the wet concentrator plant where slimes are removed
before a number of gravity separation steps reject 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
Following the transition of mining operations to the lower
grade South Dune in July 2019, mining volume increased by
1% to 18.1 million tonnes in the reporting period (the year
ended 30 June 2020) compared to the prior period (the year
ended 30 June 2019). The average heavy mineral grade of
ore mined was 3.63%, lower than the prior period (3.90%) due
to the lower average ore grade in the South Dune compared
with the Central Dune mined in prior years.
Mining and Wet Concentrator
Plant (WCP)
2020
2019
Ore mined (tonnes)
18,056,841
17,822,324
Heavy mineral (HM) %
WCP heavy mineral concentrate
production (tonnes)
3.63
3.90
606,553
644,180
606,553 tonnes of HMC was produced in the reporting
period, lower than the prior period (644,180 tonnes) due to
the lower grade of ore mined. With HMC now the primary
constraint on production, all HMC produced was fed to the
mineral separation plant (MSP) and HMC stocks closed the
year at 16,450 tonnes (prior period: 20,100 tonnes).
Processing
Mineral Separation Plant
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
2020
2019
608,563
702,082
81
100
100
85
84
102
101
76
355,093
402,698
78,920
31,657
2,370
92,393
31,941
1,960
10 | BASE RESOURCES | ANNUAL REPORT 2020
As a consequence of MSP operations being constrained by
available HMC, plant utilisation and feed rates were lower in
this reporting period. As a result, production of all products
was lower than the prior period:
•
Ilmenite production was 355,093 tonnes in the reporting
period (prior period: 402,698 tonnes).
• Rutile production was 78,920 tonnes in the reporting
period (prior period: 92,393 tonnes) with higher contained
rutile in the feed partially offsetting the reduced feed rate.
• Zircon production was 31,657 tonnes for the reporting
period (prior period: 31,941 tonnes) with a higher proportion
of contained zircon in the HMC and improved MSP
recoveries offsetting the lower feed tonnes. The higher
zircon recovery is a function of the mineral properties
encountered in the South Dune, which contributed to
improved separation efficiency, as well as lower MSP feed
rates enabling further optimisation of the zircon wet circuit.
• Production of a low-grade zircon product continued
with a contained 2,370 tonnes produced during the year
(prior period: 519 tonnes).
Sales
Across each of its products, the Company maintains a balance
of multi-year 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 strength of the mineral sands market in the reporting
period for all products ensured that sales continue to closely
match production, with minimal inventories being maintained.
Product Sales
Sales (tonnes)
Ilmenite
Rutile
Zircon
Zircon low grade
2020
2019
356,836
395,378
79,644
30,267
2,971
94,070
32,992
1,173
BASE RESOURCES | OPERATIONS | 11
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As the COVID-19 pandemic developed in early
2020, its impacts on the Company’s business,
people and stakeholders was the subject of
close monitoring and response development.
12 | BASE RESOURCES | ANNUAL REPORT 2020
Kwale Operations have continued to be maintained,
balancing the considerations of employee and community
health, operational safety, community benefits, government
regulation, customer demand and financial prudence.
However, it must be acknowledged that a halt to, or
curtailment of, operations remains possible if circumstances
change and the balance of factors shifts as the pandemic
runs its course.
Base Resources implemented a number of changes to
operational workplaces in the reporting period to protect
the health and safety of employees and neighbouring
communities. These included:
• Substantially modifying workplace practices, such as
reducing the number of personnel on site where possible
and focusing on hygiene and social distancing measures
to minimise the risk of COVID-19 transmission.
• Working with local authorities to adjust practices to ensure
compliance with government COVID-19 transmission
reduction measures while maintaining operational
continuity. These included altering rosters to fit within
curfews as well as modifying arrangements to comply
with county border travel restrictions.
• Providing the option for fly-in-fly-out employees to return to
their home country, as the practicalities of complying with
isolation or quarantine restrictions in both Kenya and their
home country have rendered roster travel impractical.
• Temporarily closing offices in Madagascar and Perth
in alignment with applicable government measures.
The Company continues to monitor and manage the various
risks associated with COVID-19, including the following
specific to our Kwale Operations:
• Community support – Base Resources’ operations in
Kenya enjoy broad community and government support
due to recognition of the benefits the mine brings to the
region and nation. However, the Company’s social licence
to operate could be compromised by any mishandling of its
COVID-19 response. Base Resources monitors community
sentiment closely and, in addition, has instigated a
wide-ranging community support program to assist local
communities manage the impacts of COVID-19 (see page
19 for further details).
• Employee health – employee health is monitored closely
and there were no recorded infections of COVID-19 in our
workforce during the reporting period. However, subsequent
to year end, a handful of cases were detected in the
workforce. Isolation, contact tracing and testing measures
have seen this effectively contained.
• Market demand – demand for Kwale Operations products
remained firm in the reporting period and in the early
months of FY21. However, signs are emerging of more
subdued demand for the balance of the year. In the longer-
term, robust demand for mineral sands products
is expected to re-emerge.
• Continued supply of inputs (spares, fuel, etc.) – the
Company is closely managing its supply chain which is
supported by its close proximity to the port of Mombasa.
No supply issues arose in the reporting period.
• Security - the Company closely monitors the security
environment around Kwale Operations and has not
registered any indications of concerning civil unrest
emerging to date.
• Government policy – Base Resources worked closely with
national and county governments to ensure compliance
with any measures required and has the support of the
government to continue operations.
BASE RESOURCES | COVID-19 RESPONSE | 13
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Business development remained a core focus with the Toliara
Project progressed and opportunities to extend Kwale Operations’
mine life pursued.
Toliara Project
The Toliara Project is founded on the Ranobe deposit, located
approximately 45 kilometres north of the regional town of
Toliara in south west Madagascar. The Company acquired
the Toliara Project in 2018 and is currently progressing the
project towards development, with a definitive feasibility study
(DFS) being completed in December 2019. The DFS outcomes
confirm the Company’s view that the Toliara Project is a world
class mineral sands development opportunity, with estimated
average annual production of 780 thousand tones (kt) of
ilmenite, 53kt of zircon and 7kt of rutile over the assumed
33-year mine life1.
Following completion of the DFS, work commenced on
the front-end engineering design, including the equipment
selection, tender evaluation and preferred contractor
selection for a number of key packages including export
facility marine works, bridge, power and fuel supply.
Completion of the DFS also allowed the prospective lenders
due diligence process to commence, with independent
technical and environmental and social experts appointed.
In November 2019, the Government of Madagascar required
the Company to temporarily suspend on-the-ground activity on
the Toliara Project while discussions on fiscal terms applying
to the project were progressed. Activity remains suspended as
Base Resources continues to engage with the Government in
relation to the fiscal terms applicable to the Toliara Project, with
encouraging progress made.
The Toliara Project DFS anticipated a final investment
decision (FID) being made in September 2020. However, with
the effective shutdown of Government, international travel
restrictions and broader COVID-19 measures and impacts both
in Madagascar and globally, FID will be delayed. At this time, it
is not considered appropriate to provide a revised FID date until
there is greater clarity on the trajectory of resumption of global
economic activity.
Over the course of 2018 and 2019, the Company completed
29,753m of drilling from 770 holes to test the extent of
mineralisation to the west of the existing Ranobe Mineral
Resources and at depth. While assaying is still ongoing, with
only 67% of samples completed to date, results received
have revealed significant additional high-grade mineralisation,
particularly to the west of the current Ranobe Ore Reserves2.
These results demonstrate the potential to extend the Toliara
Project well beyond the current planned 33-year mine life.
Kwale Operations extensional exploration
Mining tenure arrangements continued to progress with
the Kenyan Ministry of Petroleum and Mining as a precursor
to an anticipated updated Ore Reserves estimate based on
the expanded 2020 Kwale South Dune Mineral Resources.
However, progress has slowed as the government focuses
on combating the COVID-19 pandemic.
Following completion of a concept study for mining the Kwale
North Dune deposit in early January 2020, a pre-feasibility
study was commenced to assess its potential to offer mine life
extension and is on target for completion in early 2021.
Completion of the remaining drilling program in the Kwale
North-East Sector and the northern sections of the Vanga
prospecting licence remain on hold pending community access
being secured. A number of additional prospecting licences
were applied for in the reporting period, including over an area in
the Kuranze region of Kwale county about 70 km west of Kwale
Operations, as well as over an area south of Lamu.
Drilled Holes
Planned Holes
Central Dune
South Dune
North Dune
Kwale East
Mukurumudzi Dam
SML
Prospecting Tenure
N
Vanga Prospect
PL/2018/0119
PL/2018/0119
App/No/1753
1. Excludes first and last partial operating years. For further information about the DFS, refer to Base Resources’ announcement on 12 December 2019 “DFS reinforces Toliara Project’s status as a world
class mineral sands development” (DFS Announcement) available at https://baseresources.com.au/investors/announcements. Base Resources confirms that all material assumptions underpinning the
production information disclosed in the DFS Announcement continue to apply and have not materially changed.
2. For further information in relation to the drill results, refer to Base Resources’ announcement on 21 January 2020 “Toliara Project drill assays reveal significant high-grade mineralisation” available at
https://baseresources.com.au/investors/announcements. Base Resources confirms that it is not aware of any new information or data that materially affects the information included that announcement.
14 | BASE RESOURCES | ANNUAL REPORT 2020
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BASE RESOURCES | BUSINESS DEVELOPMENT | 15
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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.
These practices are based on the understanding that
achieving our long-term goals is reliant on building
beneficial relationships with the communities in which we
operate and establishing a balanced flow of mutual benefit.
Through these mutual benefits we aim to maximise
the positive outcomes of our operations for all our
stakeholders. Many of our programs seek to extend these
positive outcomes past the life of the mine, creating
permanent positive change for our communities.
Base Resources focuses its sustainability activities
in the following three interrelated areas:
1. Our people
2. Community
3. Environment
The programs, and initiatives within these areas, are developed
taking into consideration international best practice and
feedback from stakeholders, including our communities
and host nations. 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, the Extractive Industries
Transparency Initiative and the United Nations Voluntary
Principles on Security and Human Rights.
The Board has ultimate oversight of the Company’s
sustainability strategy. In the reporting period, Base
Resources commenced a process to elevate and deepen
its sustainability reporting in the coming years.
16 | BASE RESOURCES | ANNUAL REPORT 2020
Our People
Health and Safety
Base Resources is committed to safety and has established a
best-practice safety culture across all of its operations. However,
in January 2020, an incident involving Kwale Operations’ haulage
contractor tragically resulted in a fatal injury to another road
user on a public road. The safety of Base Resources’ activities
for its people and the communities in which it operates is a
fundamental commitment for the Company and the incident
was addressed at the highest level. Consistent with the findings
of the internal investigation into this incident, changes have been
implemented to further improve oversight of maintenance and
safety practices across all contractors.
There were no workplace lost time injuries during the reporting
period. As such the lost time injury frequency rate remains at
zero. Base Resources employees and contractors have now
worked more than 20.9 million man-hours LTI free, with the
last lost time injury recorded in February 2014. One medical
treatment injury occurred in the reporting period and as such
the total recordable injury frequency Rate at the end of the
reporting period was 0.24 per 1 million hours.
Local employment and workforce development
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.
Base Resources’ employee fencing system has proved
highly effective at Kwale Operations and, of the 1,147 people
employed, 98% are Kenyan with 69% drawn from Kwale County.
It is expected that the expatriate 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.
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.
In Madagascar, more than 7,400 men and women from
communities surrounding the Toliara Project have registered
to participate in Base Resources training programs across a
range of skills and expertise with 570 commencing programs
including brickmaking, bricklaying and heavy mobile equipment
operation. 24 Malagasy apprentices have also commenced a
two-year apprenticeship program in Kenya at the Company’s
Kwale Operations.
Reflecting the Company’s continued commitment to skills
transfer, Base Resources invested US$0.7 million in training and
development across its operations during the reporting period,
resulting in the delivery of over 243,000 hours of training to
employees and members of the community.
BASE RESOURCES | SUSTAINABILITY | 17
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.
Additional key indicators of employee satisfaction
and motivation, as well as sources of competitive cost
advantage, are staff turnover and industrial action. The Group
voluntary staff turnover rate for the year was 1.8%, an increase
from the prior year’s 1%, but still very low. Kwale Operations
have not recorded any industrial action since commencement
of operations.
Diversity
Base Resources 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. While the primary focus to date has been on
maximising local participation, workforce establishment and
performance enhancement, the Company set measurable
objectives for the reporting period for achieving gender
diversity including an increase in the overall percentage
of women employed by the Group, maintaining female
representation in graduate and apprentice programs intakes
at or above one third and increasing the number of women in
management roles (Manager and above).
Base Resources met its objective to maintain female
representation in the intake for graduate and apprentice
programs at or above one third in the reporting period and
maintained Board gender diversity. However, the Company
did not meet its objectives of achieving an increase in the
overall percentage of women employed or an increase in
the percentage of women in management roles, with there
being a slight reduction in both percentages compared to
the prior period. However, in absolute terms, the number of
women employed did increase and the number of women in
management roles remained stable. Further details about the
Company’s diversity objectives are set out on page 67.
The Company’s diversity performance for the reporting
period and prior period is outlined below:
Objective
Overall percentage
of women
Female representation
in graduate and apprentice
programs at or above
one third
Women in management
roles (Manager and above)
Board gender diversity
FY20
FY19 Change (%)
17.7%
18.3%
(0.6)
33.3%
33.3% No change
16.7%
19.4%
(2.7)
14.3%
14.3% No change
Community
Base Resources engages with its local communities in a
structured and inclusive manner. Across its operations,
the Company has established various 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 across
Kenya and Madagascar community programs have been
developed based around four key pillars, with the first
supported by the latter three:
• Livelihood Improvement
• Community Health
• Education
• Community Infrastructure
More Information on Base Resources’ community programs
is available at baseresources.com.au.
18 | BASE RESOURCES | ANNUAL REPORT 2020
COVID-19 and our communities
Throughout the COVID-19 pandemic, Base
Resources continued to play an important
role in its host communities. The Company
worked with NGOs, and national and
local governments, in both Kenya and
Madagascar to identify areas of need and
provide support to vulnerable communities.
These communities were affected by both health
and economic related outcomes from the pandemic
including lack of personal protective equipment,
limited medical equipment, limited access to
clean water and unemployment due to movement
restrictions. Over a series of phased programs, the
Company has donated US$1.2 million for supplies
and other initiatives to combat COVID-19 in Kenya
and Madagascar, including:
• 100 high flow oxygen ventilators
• 22,000 surgical masks
• 125 thermometer guns
• 12,000 food and sustenance packages provided
to households in Kenya and over 45 tonnes of rice,
vegetables and other staples donated in Madagascar
• 220 handwashing stations of various sizes, set up
in high traffic areas or institutions
• Training and communication materials to raise
awareness of COVID-19
In Kenya, Base Resources was recognised by
President Kenyatta with a Madaraka (Independence)
Day national award for the Company’s contribution to
the COVID-19 response.
BASE RESOURCES | SUSTAINABILITY | 19
Environment
The Company is committed to undertaking its activities in a
way that minimises impact on the environment. The Company’s
Environmental Policy drives the Company’s commitment
to minimising pollution and overall impacts, contributing
to protecting and conserving biodiversity and driving
environmentally responsible behaviour.
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 reporting period.
Rehabilitation of the Kwale Operations tailings storage facility
external walls continued throughout the reporting period with
approximately 24.5 hectares (53%) now classified as fully
rehabilitated while an additional area has been re-vegetated
but is not yet considered fully rehabilitated. Seeds and
topsoil erosion control materials for this rehabilitation work
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
including the rare and endangered flora propagation research
program. Under this program, Base Resources targets species
of conservation significance, particularly local and threatened
indigenous plant species, for propagation in its nurseries.
The Kwale Operations nursery has 279 indigenous species
represented, and over 126,000 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, of which 90 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.
For more information on other environmental programs such
as biodiversity corridors, wetland restoration and recycling
programs visit baseresources.com.au.
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Livelihood improvement
Base Resources runs various livelihood
programs to support small-holder 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 develop cotton as an economically
sustainable cash crop through a cooperative which
is focussed on securing greater returns for farmers
through value addition in the sector. Run in partnership
with CottonOn and Business for Development, the
program has proved particularly successful to date
growing from an initial 15 farmers in 2014 to over
3,000 participating farmers in the 2019 season.
20 | BASE RESOURCES | ANNUAL REPORT 2020
Education
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
470 secondary school and 200 tertiary scholarships
to students living in communities around Kwale
Operations in the reporting period. Since the
scholarships program began, the Company has
awarded over 2,700 scholarships.
Community infrastructure
Base Resources works with governments
and communities to identify and provide
infrastructure that will improve living
standards, such as boreholes and
the construction of education and
health facilities.
In Madagascar, Base Resources commenced
several projects in the reporting period, including
construction of schools and health facilities,
community bore holes and other public facilities.
However, progression and completion of these
projects was halted when on-the-ground activities
were suspended by the Government of Madagascar
in November 2019. With positive engagement since,
we are optimistic that the suspension will be soon
lifted and project momentum re-established.
Community health
Base Resources supports initiatives
focused on the quality of, and access to,
healthcare in collaboration with local and
national government initiatives with the
objective of improving key measurable
health indicators.
Through Kwale County’s community health units,
more than 190 Community Health Volunteers were
provided with training and resources to cover villages
around Kwale Operations, 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 | 21
M
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S
With ongoing supply constraints, and despite the emergence of
COVID-19, Base Resources secured further price gains for rutile and
ilmenite in the reporting period. Sluggish demand meant that zircon
experienced a subdued first half of the reporting period before supply
discipline, in response to COVID-19 related demand uncertainty,
stabilised pricing.
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
Ilmenite and rutile 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.
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 aerospace and defence
industries as well as in medical devices, sporting equipment
and jewellery.
The global pigment industry experienced a steady start
to the reporting period following a period of de-stocking
between late 2018 through to mid-2019. Optimism was
building through the first half of the reporting period with
an expectation that pigment demand, fuelled by improved
underlying consumption and some re-stocking, would
increase through calendar year 2020. The pigment market
was strong through the January to April 2020 period and
production rates among Western producers increased.
However, growing concerns around COVID-19 through March
and April 2020 started to weigh on industry sentiment with
COVID-19 related shutdowns and economic impacts taking
effect from May 2020. Towards the end of the reporting
period, pigment producers reported expectations for a drop
in demand and, in response, began to scale back pigment
production at some plants.
Conditions within the titanium metal sector strengthened
through much of the reporting period. A significant
and growing backlog of orders with the major aircraft
manufacturers had led to strong demand for titanium metal
from the aerospace industry. However, COVID-19 related
shutdowns of aerospace manufacturing, followed by the
emergence of aircraft order cancellations, have resulted in
a much more subdued outlook for this sector.
Supply constraints on high grade titanium feedstocks
(which includes rutile) continued through the reporting
period. This was the result of some rutile deposits coming
to the end of their life and ongoing production issues
at some major rutile operations, further exacerbated by
COVID-19 related shutdowns in South Africa impacting
chloride slag and rutile output. Despite reduced pigment
production at the end of the reporting period, demand for
high grade feedstocks from all three end-user segments
(pigment, Ti02 metal and welding) exceeded supply through
most of the reporting period which resulted in steady price
gains. The average price for Base Resources’ rutile in the
reporting period was 18% higher than in the prior period.
Supply constraints on ilmenite also persisted through
the course of the year as bans on all private mining of
mineral sands deposits in India have remained in place and
Vietnamese ilmenite exports continue to be constrained by
the absence of export quota renewals. Ilmenite supply from
Mozambique has been lower than expected during the second
half of the reporting period and COVID-19 related shutdowns
in India resulted in the suspension of ilmenite production from
India’s government-owned mineral sands producer.
Chinese pigment plants operated at high utilisation levels
through most of the reporting period, delivering strong
production. While COVID-19 related shutdowns in China
22 | BASE RESOURCES | ANNUAL REPORT 2020
resulted in the temporary suspension of some pigment
production, overall output was not significantly impacted.
The Chinese domestic market for pigment softened through
February and March 2020 but the loss in domestic pigment
sales was offset by record exports during this period. From
April 2020 onwards, an improvement in the Chinese domestic
market for pigment has been offset by declining export
demand. The overall impact has been a modest net decrease
in demand which is expected to result in some production
consolidation and an overall reduction of Chinese pigment
production. Ilmenite demand remained firm for the reporting
period and this, combined with the restrictions on ilmenite
supply, resulted in ilmenite prices trending upwards through
the year. The average price for Base Resources’ ilmenite in
the reporting period was 30% higher than in the prior period.
Expectations of declining pigment and titanium metal
production are likely to see reduced demand for rutile
through the initial part of the coming period, which could
be expected to result in downward price pressure.
Ilmenite demand is expected to decline modestly at the start
of the coming period but supply constraints are expected to
offset this and keep pricing stable.
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.
Global trade tensions and economic uncertainties, combined
with increased environmental inspections in some of the
major zircon consuming regions in China, led to cautious
buying behaviour from consumers and an overall dampening
of demand through the first half of the reporting period.
As some major suppliers pushed increased zircon volume
into the market, prices experienced downward pressure at
the end of 2019 and into the start of 2020. Sentiment in the
zircon sector began to improve through January 2020 as
consumers became increasingly optimistic on the back of
progress being made on international trade issues and a
general improvement in the economic outlook.
However, COVID-19 related manufacturing shutdowns
in China during February 2020, followed by shutdowns in
Italy and Spain, resulted in a drop in zircon demand and a
renewed negative outlook. The reduced demand was partially
offset by the impact of COVID-19 related shutdown of major
zircon producers in South Africa, which subsequently led to
a number of large zircon consumers becoming concerned
over securing supply into the June quarter. Some major
zircon suppliers have indicated an intent to manage supply
to the market conditions to support market prices. As a
result, zircon pricing remained very stable through the
second half of the reporting period.
While zircon demand is expected to remain subdued into
the coming year, zircon prices are likely to remain stable for
as long as supply from major producers is managed to suit
the conditions.
Demand for zircon from Base Resources’ customers remains
firm and continues to match the Company’s production
levels. Given the characteristics of zircon in the South Dune,
Base Resources has amended its production profile from
two grades of zircon to a single high quality grade zircon
product, which has been very well received by the market.
The average price for Base Resources’ standard zircon in the
reporting period was 9% lower than the prior period.
BASE RESOURCES | MARKETS | 23
C
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Base Resources achieved a profit after tax of US$39.6 million for the
reporting period compared to US$39.2 million in the prior period with
lower sales volumes offset by higher product pricing.
2020
2019
Kwale
Operations
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
Kwale
Operations
US$000s
Toliara
Project
US$000s
Other
US$000s
Total
US$000s
Sales revenue
208,016
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
COVID-19 response costs
Other income
EBITDA (i)
(68,553)
502
(14,557)
(82,608)
(3,340)
(3,559)
(2,388)
(1,082)
641
-
-
-
-
-
-
-
-
-
-
208,016
209,456
(68,553)
(63,234)
502
(2,075)
(14,557)
(14,597)
(82,608)
(79,906)
-
-
-
-
-
-
-
-
-
-
209,456
(63,234)
(2,075)
(14,597)
(79,906)
(85)
(6,581)
(10,006)
-
-
-
-
-
-
-
(3,559)
(2,388)
(1,082)
(327)
314
(4,024)
(3,607)
(2,501)
-
850
(249)
(5,859)
(10,132)
-
-
-
-
-
-
-
(649)
(3,607)
(2,501)
-
201
115,680
(85)
(6,908)
108,687
120,268
(249)
(6,508)
113,511
Depreciation & amortisation
(56,725)
EBIT (i)
Net financing expenses
Income tax expense
58,955
(5,524)
(6,042)
(186)
(271)
-
-
(273)
(57,184)
(51,885)
-
(183)
(52,068)
(7,181)
51,503
68,383
(249)
(6,691)
61,443
(349)
(5,873)
(9,729)
-
(6,042)
(10,735)
-
-
(1,826)
(11,555)
-
(10,735)
NPAT (i)
47,389
(271)
(7,530)
39,588
47,919
(249)
(8,517)
39,153
(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 decreased 1% to US$208.0 million for the
reporting period (prior period: US$209.5 million), achieving
an average price of product sold of US$445 per tonne (prior
period: US$401 per tonne), with higher average realised
prices for rutile and ilmenite, partially offset by lower
prices for zircon. In addition, due to lower production as a
consequence of lower ore grades, sales volumes decreased
by 11% in comparison to the prior period, offsetting the
increase in sale prices.
Total operating costs of US$68.6 million for the reporting
period were 8% higher than the prior period (US$63.2 million)
due to increased pumping costs associated with the mining
operations being further from the wet concentrator plant
following the transition to the South Dune, and non-cash
movements in the rehabilitation and mine closure provision.
Operating cost per tonne produced was 22% higher at
US$146 per tonne for the reporting period (prior period:
US$120 per tonne), due to the increase in operating costs and
a 12% reduction in production as a result of lower ore grades.
Total cost of goods sold, excluding depreciation and amortisation,
was US$82.6 million for the reporting period, 3% higher than the
prior period (US$79.9 million) due to a combination of higher unit
operating costs, lower sales volumes and stockpile inventory
movements. The average unit cost was US$177 per tonne of
product sold, 16% higher than the prior period (US$153 per tonne)
due to the higher unit operating costs.
With a margin of US$268 per tonne sold for the reporting period
(prior period: US$248 per tonne) and an achieved revenue
to cost of sales ratio of 2.5 (prior period: 2.6), the Company
remains well positioned amongst mineral sands producers.
The Company’s COVID-19 response included providing
assistance to the governments and communities in both
Kenya and Madagascar through programs that included
construction of hygiene facilities, distribution of food and
provision of medical supplies and equipment. The cost
of these programs was US$1.1 million in Kenya, which
was expensed, and US$0.1 million in Madagascar, which
was capitalised to the Toliara Project, consistent with our
treatment of all community relations costs.
24 | BASE RESOURCES | ANNUAL REPORT 2020
Cash flow from operations was US$105.5 million for the
reporting period (prior period: US$96.6 million), lower than
Group EBITDA due to the payment of US$27.5 million in
corporate income tax to the Kenya Revenue Authority during
the reporting period, offset by a US$10.3 million reduction
in trade receivables and other working capital movements.
The operating cashflows were partially applied to the funding
of capital expenditure at Kwale Operations, Toliara Project
progression, as well as debt servicing.
Total capital expenditure for the Group was US$33.6 million
in the reporting period (prior period: US$36.1 million), with
US$10.6 million at Kwale Operations (prior period: US$18.5
million), primarily for pumping, piping and associated
infrastructure required to progress mining operations further
along the South Dune. US$22.8 million was spent on the
progression of the Toliara Project (prior period: US$17.3
million), including the definitive feasibility study which was
released in December 2019. A further US$0.2 million was
spent on Corporate capital works (prior period: US$0.3 million).
Net cash
Having repaid the US$20.0 million outstanding balance of the
Revolving Credit Facility (RCF) earlier in the reporting period,
in March 2020, the Company drew down the full US$75.0
million available under the RCF to secure enhanced liquidity
and provide flexibility as part of a prudent risk management
strategy for navigating the rapidly evolving uncertainty
associated with the COVID-19 pandemic. With a net cash
position at 30 June 2020 of US$87.6 million (prior period:
US$19.2 million), consisting of cash reserves of US$162.6
million and the fully drawn RCF balance of US$75.0 million,
the Company is in a robust financial position.
Capital management
Consistent with Base Resources’ growth strategy, the
Company seeks to provide returns to shareholders through
both long-term growth in the Company’s share price and
appropriate cash distributions. Cash not required to
meet the Company’s near-term growth and development
requirements, or to maintain requisite balance sheet strength
in light of prevailing circumstances, could be expected to be
returned to shareholders.
Reflecting this approach, the Board determined a maiden
dividend of A$0.035 per share, unfranked, with a record date
of 21 September 2020 and payment date of 7 October 2020.
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$17.9 million at 30 June 2020.
These claims are proceeding through the Kenya Revenue
Authority process, with a number of operational period
claims, totalling approximately US$11.0 million, settled
during the reporting period. Base Resources is continuing
to engage with the Kenyan Treasury and the Kenya Revenue
Authority to seek to expedite the remainder of the refunds.
BASE RESOURCES | CORPORATE | 25
Higher operating costs together with marginally lower
revenue and COVID-19 response costs have delivered a
reduced Kwale Operations EBITDA for the reporting period of
US$115.7 million (prior period: US$120.3 million) and a Group
EBITDA of US$108.7 million (prior period US$113.5 million).
The majority of Kwale Operations assets are depreciated
on a straight-line basis over the remaining mine life.
Depreciation and amortisation has increased 10% in the
reporting period to US$57.2 million (prior period: US$52.1
million) due to capital expenditure incurred on the transition
of mining operations to the South Dune being depreciated
over the short remaining period during which the existing
estimated Ore Reserves will be mined. Mining tenure
arrangements to extend the Kwale Special Mining Lease
No.23 are progressing with the Kenyan Ministry of Petroleum
and Mining. Should the extension be successful there is
the potential to increase the estimated Ore Reserves and
extend mine life, thereby spreading future depreciation and
amortisation charges over a longer period.
A net profit after tax of US$47.4 million was recorded by Kwale
Operations (prior period: US$47.9 million) and Group net profit
after tax of US$39.6 million (prior period: US$39.2 million).
Basic earnings per share for the Group was US3.38 cents per
share (prior period: US3.39 cents per share).
R
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The 2020 Mineral Resources and Ore Reserves estimates for Base Resources are summarised in the table below together with
the 2019 Mineral Resources and Ore Reserves estimates for comparison.
2020
as at 30 June 2020
2019
as at 30 June 2019
Project Tonnes
HM HM
SL
OS
HM Assemblage
Tonnes
HM HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
(%)
ILM RUT LEUC
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
Mineral Resources (Measured + Indicated + Inferred, inclusive of Ore Reserves)
Kwale
246
Ranobe
1,293
Kwale
Ranobe
40
586
4.9
66
1.4
38
2.0
5.1
3.4
6.5
34
6
26
3.9
2
0
1.7
0.1
51
72
13
2*
-
-
5
6
285
1,293
6.0
66
2.1
5.1
Ore Reserves (Proved + Probable)
57
74
13
1.1
-
6
0.9^
5.9
62
-
2.3
3.8
-
-
33
6
27
-
2
0
3
-
52
72
57
-
13
2
13
-
ZIR
(%)
6
6
6
-
Table subject to rounding differences
* Rutile reported is rutile + leucoxene mineral species.
^ Recovered Leucoxene will be split between Rutile and Chloride Ilmenite products depending on product specification requirements.
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 announcements3:
Deposit
Announcement Title
Kwale South Dune Mineral Resources
& Ore Reserves
Updated Kwale South Dune Mineral Resources
and Ore Reserves estimate
Estimate date
Release date
31 March 2020
27 July 2020
Kwale North Dune Mineral Resources
Mineral Resource for Kwale North Dune deposit
1 May 2019
1 May 2019
Ore Reserves
Maiden Ranobe Ore Reserves Estimate
27 November 2019
6 December 2019
Ranobe
Ranobe
Mineral Resources
2019 Comparatives Mineral Resources
& Ore Reserves
Updated Ranobe Deposit Mineral
Resources (corrected)
2019 Mineral Resources and Ore
Reserves Statement
23 January 2019
23 January 2019
30 June 2019
21 August 2019
Kwale Deposits
The Company’s 100% owned Kwale Operations in Kenya is located approximately 50 kilometres south of Mombasa and 10
kilometres inland from the Kenyan coast. The Company’s wholly owned subsidiary, Base Titanium Limited, holds Prospecting
Licence 2018/0119 (PL119) which hosts the Kwale South Dune and North Dune deposits. The majority of the Kwale South Dune
deposit resides within Special Mining Lease No. 23 (SML23), which sits within PL119 and is currently being mined. A pre-feasibility
study is currently underway to assess the potential to mine the North Dune deposit.
Mineral Resources
The 2020 Kwale Mineral Resources, as at 30 June 2020, are estimated to be 246 million tonnes (Mt) at an average heavy
mineral (HM) grade of 2.0% for 4.9Mt of contained HM, at a 1% HM cut-off grade.
3. ASX announcements are available at https://baseresources.com.au/investors/announcements/.
26 | BASE RESOURCES | ANNUAL REPORT 2020
2020 Kwale Mineral Resources estimate compared with the 2019 estimate at a 1% HM cut-off grade.
2020
as at 30 June 2020
2019
as at 30 June 2019
Category
Tonnes
HM
HM
SL
OS
HM Assemblage
Tonnes
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
Measured
Indicated
Total
Indicated
Inferred
Total
Measured
Indicated
Inferred
Total
55
20
76
136
34
171
55
157
34
246
1.8
0.6
2.3
2.1
0.5
2.6
1.8
2.7
0.5
4.9
3.2
2.9
3.1
1.5
1.4
1.5
3.2
1.7
1.4
2.0
24
26
25
38
36
38
24
37
36
34
Kwale South Dune
14
12
13
6
6
6
Kwale North Dune
12
13
12
5
6
5
58
52
57
45
46
45
81
33
114
136
34
171
Total Kwale Mineral Resources
58
47
46
51
14
12
13
13
6
5
6
5
81
169
34
285
1
7
3
2
3
2
1
2
3
2
2.6
0.8
3.5
2.1
0.5
2.6
2.6
2.9
0.5
6.0
3.2
2.5
3.0
1.5
1.4
1.5
3.2
1.7
1.4
2.1
25
26
25
38
36
38
25
36
36
33
1
7
3
2
3
2
1
3
3
2
59
52
56
45
46
45
59
47
46
52
14
12
13
12
13
12
14
12
13
13
ZIR
(%)
6
6
6
5
6
5
6
5
6
6
Table subject to rounding differences. Mineral Resources are inclusive of Kwale South Dune Ore Reserves.
The 2020 Kwale Mineral Resources estimate represents a decrease of 13.5% in material tonnes and 18.5% in contained HM
tonnes when compared with the 2019 Kwale Mineral Resources estimate.
The decrease was solely to the Kwale South Dune Mineral Resources which are estimated to be 76Mt at an average HM grade
of 3.1% for 2.3Mt of contained HM as at 30 June 2020, a decrease of 38Mt containing 1.1Mt of HM to the 2019 estimate.
The decrease was due to:
• Mining depletion, decreasing material by 18.5Mt containing 0.67Mt of HM.
• Mining sterilisation of 12.0Mt of material and 0.25Mt of contained HM comprising material that was not mined as it was
not considered economic to do so.
• A 5% reduction in the estimated material bulk density, decreasing material by 5.7Mt containing 0.17Mt of HM compared to
the 2019 estimate. As announced on 27 July 20204, the reduction in estimated material bulk density was the result of routine
reconciliations undertaken between the resource model predictions and run-of-mine operating data gained for ore mined
since mining commenced on the Kwale South Dune in July 2019.
• A prospecting licence area reduction, decreasing material by 2.2Mt containing 0.03Mt of HM. The previous prospecting
tenure instrument, Special Prospecting Licence 173 (SPL173), which was granted under the previous Kenyan Mining Act,
was converted to PL119 in May 2018, which was granted under the 2016 Kenyan Mining Act, requiring a 50% reduction in
size. Material excluded by the reduction was not considered economic.
The Kwale North Dune Mineral Resources as at 30 June 2020 are unchanged from the 2019 estimate.
4. Refer to Base Resources’ market announcement “Updated Kwale South Dune Mineral Resources and Ore Reserves estimate” released
on 27 July 2020, which is available at https://baseresources.com.au/investors/announcements/.
BASE RESOURCES | RESOURCES & RESERVES | 27
Reserves and resources (cont.)
Ore Reserves
Contained within the Kwale South Dune Mineral Resources are the Kwale Ore Reserves, estimated as at 30 June 2020 to be
40Mt at an average HM grade of 3.4% for 1.4Mt of contained HM.
The 2020 Kwale Ore Reserves estimate compared with the 2019 estimate.
2020
as at 30 June 2020
2019
as at 30 June 2019
Project
Tonnes
HM
HM
SL
OS
HM Assemblage
Tonnes
HM
HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
Kwale South Dune
Proved
Probable
Total
35
5
40
1.2
0.2
1.4
3.5
2.9
3.4
26
27
26
0.8
7
1.7
58
51
57
14
12
13
6
5
6
39
23
62
1.6
0.8
2.3
4.0
3.3
3.8
27
26
27
1
5
3
59
53
57
14
13
13
ZIR
(%)
6
6
6
Table subject to rounding differences.
The 2020 Kwale Ore Reserves estimate represents a decrease of 35% in total ore tonnes and 41% in contained HM tonnes
compared to the 2019 Kwale Ore Reserves estimate. This decrease was due to:
• Mining depletion, decreasing ore by 18.3Mt containing 0.68Mt of HM.
• A 5% reduction in the estimated material bulk density of the resource model, decreasing ore by 3.1Mt containing 0.11Mt of HM.
• Other minor changes, including updates to the resource model (other than for material bulk density), altering the mine design
to reflect the switch from dozer mining to hydraulic mining and sterilisation of ore, resulting in total reduction in ore of 0.16Mt
containing 0.16Mt of HM.
The estimated material and contained HM tonnes for the 2020 Kwale South Dune Mineral Resources are significantly higher
than the 2020 Kwale South Dune Ore Reserves estimate because the Ore Reserves are constrained within SML23, whereas
the Mineral Resources are constrained within the much larger PL119. Mining tenure arrangements are being progressed with
the Kenyan Ministry of Petroleum and Mining to extend the SML23 boundary to incorporate some of these additional Mineral
Resources as a precursor to an anticipated updated Ore Reserves estimate.
No Ore Reserves estimate has been completed for the Kwale North Dune deposit.
Ranobe Deposit
The Company’s 100% owned Toliara Project is based on the Ranobe deposit, located approximately 45 kilometres north
of the town of Toliara and 15km inland from the coast in south west Madagascar. The Ranobe deposit sits within Permis
d’Exploitation 37242, which is a mining lease under Malagasy law. The Company is currently progressing the project towards
development, with a definitive feasibility study completed in December 20195.
Mineral Resources
The 2020 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. The Ranobe Mineral Resources at 30 June 2020 are unchanged from the 2019 estimate.
The 2020 Ranobe Mineral Resources estimate, compared with the 2019 estimate, at a 1.5% HM cut-off grade.
2020
as at 30 June 2020
2019
as at 30 June 2019
Category Material
HM HM
SL
OS
HM Assemblage Material
HM HM
SL
OS
HM Assemblage
In Situ
In Situ
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT*
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
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
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
ZIR
(%)
6
6
5
6
Table subject to rounding differences. Mineral Resources are inclusive of Ranobe Ore Reserves.
*Rutile reported in the table is rutile + leucoxene mineral species.
5. Refer to Base Resources’ market announcement “DFS reinforces Toliara Project’s status as a world class mineral sands development” released
on 12 December 2019, which is available at https://baseresources.com.au/investors/announcements/.
28 | BASE RESOURCES | ANNUAL REPORT 2020
Ore Reserves
Contained within the Ranobe Mineral Resources are the Ranobe Ore Reserves, estimated as at 30 June 2020 to be 586Mt at
an average HM grade of 6.5% for 38Mt of contained HM. The Ranobe Ore Reserves estimate as at 30 June 2020 are unchanged
from the maiden estimate announced on 6 December 20196.
The 2020 Ranobe Ore Reserves estimate.
2020
as at 30 June 2020
2019
as at 30 June 2019
Project Tonnes
HM HM
SL
OS
HM Assemblage
Tonnes
HM HM
SL
OS
HM Assemblage
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
(%)
ILM RUT LEUC
ZIR
(%)
(Mt)
(Mt)
(%)
(%)
(%)
(%)
(%)
ILM RUT
ZIR
(%)
Proved
Probable
Total
347
239
586
24
14
38
7.0
5.8
6.5
3.8
4.2
3.9
0.1
0.2
0.1
75
73
74
1.0
1.3
1.0
0.8
1.1
0.9^
5.9
5.7
5.9
Ranobe Ore Reserves
N/A
Table subject to rounding differences
^ Recovered Leucoxene will be split between Rutile and Chloride Ilmenite products depending on product specification requirements.
Mineral Resources and Ore Reserves Governance
A summary of the governance, internal controls and estimation process 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 resources 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 Mineral Resources estimate 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 Reserves estimate 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 Ore Reserves estimates.
6. Refer to Base Resources’ market announcement “Maiden Ranobe Ore Reserves Estimate” released on 6 December 2019, which is available
at https://baseresources.com.au/investors/announcements/.
BASE RESOURCES | RESOURCES & RESERVES | 29
Reserves and resources (cont.)
Competent Person Statements
The 2020 Mineral Resources and Ore Reserves Statement has been approved by the following competent persons on the basis
detailed below:
Mineral Resources – South Dune Deposit
The information in this statement that relates to the Kwale South Dune Mineral Resources estimate is based on, and fairly
represents, information and supporting documentation prepared by Mr. Scott Carruthers. Mr. Carruthers is a Member of The
Australasian Institute of Mining and Metallurgy. Mr. Carruthers is employed by Base Resources, he holds equity securities in
Base Resources, and is entitled to participate in Base Resources’ long-term incentive plan and receive equity securities under
that plan. Details about that plan are included in this Annual Report. Mr. Carruthers 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 JORC Code and as a qualified person for the purposes of the AIM Rules for Companies.
Mr. Carruthers has reviewed this statement and consents to the inclusion in this statement of the Kwale South Dune Mineral
Resources estimate and supporting information in the form and context in which the relevant information appears.
Mineral Resources – Kwale North Dune Deposit
The information in this statement that relates to Kwale North Dune Mineral Resources estimate is based on, and fairly represents,
information and supporting documentation prepared by Mr. Greg Jones, who acts as a 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 JORC Code and as a qualified person for the purposes of the AIM
Rules for Companies. Mr. Jones has reviewed this statement and consents to the inclusion in this statement of the Kwale North
Dune Mineral Resources estimate and supporting information in the form and context in which it appears.
Ore Reserves – South Dune Deposits
The information in this statement that relates to the Kwale South Dune Ore Reserves estimate is based on, and fairly represents,
information and supporting documentation prepared by Mr. Per Scrimshaw and Mr. Scott Carruthers. 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. Mr. Carruthers is employed by Base Resources, he holds equity securities
in Base Resources, and is entitled to participate in Base Resources’ long-term incentive plan and receive equity securities under
that plan. Details about that plan are included in this Annual Report. Mr. Scrimshaw and Mr. Carruthers each have sufficient
experience that is relevant to the style of mineralisation and type of deposits under consideration and to the activity which they
are each undertaking to qualify as Competent Persons as defined in the JORC Code and as qualified persons for the purposes
of the AIM Rules for Companies. Mr. Scrimshaw and Mr. Carruthers have each reviewed this statement and consent to the
inclusion in this statement of the South Dune Ore Reserves estimate and supporting information in the form and context in
which it appears.
Mineral Resources – Ranobe Deposit
The information in this statement that relates to the Ranobe Mineral Resources estimate 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 Fellow 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 JORC Code and as a qualified person for the purposes of the
AIM Rules for Companies. Mr. Jones has reviewed this statement and consents to the inclusion in this statement of the Ranobe
Mineral Resources estimate and supporting information in the form and context in which it appears.
Ore Reserves – Ranobe Deposit
The information in this statement that relates to Ranobe Ore Reserves estimate is based on, and fairly represents, information
and supporting documentation prepared by Mr. Chris Sykes and Mr. Scott Carruthers. Mr. Sykes is a Fellow and Mr. Carruthers
is a Member of The Australasian Institute of Mining and Metallurgy. Mr. Sykes acts as a Consultant Mining Engineer 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’ long-term incentive plan and receive equity securities under that plan. Details about that plan
are both included in this Annual Report. Both Mr. Sykes 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 each undertaking to qualify as a
Competent Person as defined in the JORC Code and as qualified persons for the purposes of the AIM Rules for Companies.
Mr. Sykes and Mr. Carruthers have each reviewed this statement and consent to the inclusion in this statement of the Ranobe
Ore Reserves estimate and the supporting information in the form and context in which the relevant information appears.
Defined terms
Acronyms and certain capitalised terms used in this statement have the meaning given in Base Resources’ market
announcement released on 13 August 2020 “2020 Mineral Resources and Ore Reserves Statement” available at
https://baseresources.com.au/investors/announcements/.
30 | BASE RESOURCES | ANNUAL REPORT 2020
I
I
D
C
H
R
A
E
C
R
T
M
O
A
R
N
S
S
R
L
E
E
P
T
O
T
R
E
T
R
’
’
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 2020 (the reporting period) compared with the financial
year ended 30 June 2019 (the prior 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 in Kenya
and the development of the Toliara Project in Madagascar which is being progressed toward development.
Operating results
The Group recorded a profit after tax of US$39,588,000 for the reporting period (2019: US$39,153,000).
Dividends paid or recommended
There were no dividends paid or recommended or declared for payment during the reporting period. The Directors have
determined to pay a maiden dividend of AUD 3.5 cents per ordinary share payable on 7 October 2020.
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
Since the end of the reporting period, on 21 August 2020, the Board has determined a maiden dividend of AUD 3.5 cents per
share, unfranked, with a record date of 21 September 2020 and payment date of 7 October 2020. The financial impact of the
dividend amounting to US$28.2 million has not been recognised in the Consolidated Financial Statements for the year-ended
30 June 2020.
There have been no other significant events since the reporting date.
Future developments, prospects and business strategies
Base Resources’ strategy is to continue to pursue mine life extension at Kwale Operations through exploration,
and progress the Toliara Project towards development.
32 | BASE RESOURCES | ANNUAL REPORT 2020
Information on Directors
Mr Keith Spence
Qualifications:
Appointed:
Experience:
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 1994 he was seconded to Woodside to lead
the North West Shelf Exploration team. 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.
Special responsibilities:
Chair of the Board; Chair of the Remuneration & Nomination Committee; member of the
Risk Committee; member of the Audit Committee
Other current listed
company directorships:
Past listed company
directorships held over
the last three years:
Independence Group NL (since 2014); Santos Limited (Chair, since 2018)
Oil Search Limited (resigned 2017); Murray and Roberts Holdings Ltd (resigned March 2020)
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. A chartered accountant by profession, 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; member of the Risk Committee
Other current listed
company directorships:
Past listed company
directorships held over
the last three years:
Nil
Nil
BASE RESOURCES | DIRECTOR'S 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 & Development. Mr Bwye has an
extensive knowledge of all aspects of the mineral sands industry, including downstream
processing and marketing of mineral sands products.
Special responsibilities:
Executive Director; member of the Risk Committee
Other current listed
company directorships:
Past listed 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 management consulting firm that specialises in driving high
performance for mid-market and emerging companies). 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 listed company
directorships:
Nil
Past listed company
directorships held over
the last three years:
Elixir Petroleum Limited (resigned 2017)
34 | BASE RESOURCES | ANNUAL REPORT 2020
Mr Michael Stirzaker
Non-Executive Director
Qualifications:
Appointed:
Experience:
BCom, CA
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,
before moving into investment banking with 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. From 2010 until 2019,
Mr Stirzaker was a partner with private equity mining fund manager, Pacific Road Capital
Management. 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.
Special responsibilities:
Member of the Remuneration & Nomination Committee
Other current listed
company directorships:
Past listed 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 listed company
directorships:
Past listed company
directorships held over
the last three years:
Nil
Nil
BASE RESOURCES | DIRECTOR'S 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), Redefine Properties Ltd (JSE) and a trustee of the DG
Murray Trust.
Special responsibilities:
Member of the Risk Committee; member of the Audit Committee
Other current listed company
directorships:
Murray & Roberts Holdings Ltd (since 2017); Transaction Capital Ltd (since 2018) ,
Redefine Properties Ltd (since 2020).
Past listed 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 2020
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
11
11
11
11
11
11
11
11
11
11
11
11
11
11
4
-
-
4
4
-
4
*Appointed as a Committee Member from 21 November 2019
3
-
-
4
4
-
4
3
-
-
3
3
3
-
3
-
-
3
3
3
-
3
2*
2*
3
3
-
3
3
2
2
3
3
-
3
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 the 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.
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 | DIRECTOR'S 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 also satisfied that the services
provided and disclosed below did not compromise the external auditor’s independence because 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 are payable to the Group external auditors for non-audit services provided during the year
ended 30 June 2020:
KPMG Australia
Routine tax compliance and advisory services for reporting period
Other services
Overseas KPMG firms
Assistance with Kenyan Revenue Authority audits for prior periods
for which KPMG was the incumbent tax advisor
Kenyan VAT compliance and advisory services
Other compliance and advisory services for reporting period
2020
US$
15,133
7,151
55,384
39,266
30,243
2019
US$
49,769
7,330
56,023
51,600
110,560
Auditor’s independence declaration
The lead auditor’s independence declaration for the year ended 30 June 2020 has been received and can be found on page
70 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 2020
Remuneration Report - audited
This Remuneration Report sets out the remuneration arrangements for Base Resources Limited for year ended 30 June 2020.
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
This 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 executive management considered to be KMP 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 BDO. 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 2020 were A$21,200.
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. For Senior Executives 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. 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 an executive, and also depends on the
performance of the Group and that individual executive. 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): 47% fixed and 53% at-risk.
• Other Senior Executives: 62% fixed and 38% 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 2020
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 criteria.
Why does the Board consider the STIP is appropriate?
At-risk remuneration strengthens the link between pay and performance. The purpose of the plan 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 the 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 2020 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 2021, 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 the Group’s EBITDA performance criteria.
BASE RESOURCES | REMUNERATION REPORT | 41
Remuneration Report - audited (cont.)
Are there 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 2020 financial year:
• No workplace fatalities.
• No major reputational or environmental events.
In January 2020, an incident with Kwale Operations’ haulage contractor tragically resulted in a fatal injury to another road
user on a public road. This incident was not considered a workplace fatality by industry standards and thereby did not
strictly result in the non-satisfaction of the “no workplace fatalities” gate for the assessment of STI. Notwithstanding this,
the safety of the Group’s activities for its people and the communities in which it operates is a fundamental commitment for
the Company, and the Board has elected to exercise its absolute discretion on this matter, and reduce the award opportunity
for all STIP participants by 25%.
What is the value of the STIP award opportunity?
Executive Directors have a target STIP opportunity of 50% 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 80% of TFR. This was effective
from 1 July 2019, with the target STIP opportunity for Executive Directors reduced from 60% of TFR and the maximum
opportunity reduced from 100% of TFR, whilst the minimum opportunity remained unchanged from 20% 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.
Following the Board’s discretion to reduce award opportunities for all STIP participants by 25% in the reporting period,
the target STIP opportunity for Executive Directors is reduced to 37.5% of TFR and to 22.5% for other Senior Executives.
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 2020
financial year relevant to STIP awards have included:
• The successful ramp up and optimisation of mining operations on the Kwale South Dune.
• The continued consistent performance of Kwale Operations with actual production achieved at the upper end of market guidance.
• Tight control of operating costs.
• Maintenance of high safety standards.
• Delivery of a high quality Toliara Project Definitive Feasibility Study.
• Development of the Base Toliara organisation, building community and government support and establishing capacity
building programs.
• A COVID-19 response that has been effective in maintaining the health and wellbeing of employees whilst maintaining
operational performance.
Corporate performance criteria – the Board determines the extent to which each corporate performance criteria has been achieved.
42 | BASE RESOURCES | ANNUAL REPORT 2020
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 been excercised 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 their TFR. Other Senior Executives are awarded
performance rights worth 60% of their 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 positioning TRP at the 75th market percentile.
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.
BASE RESOURCES | REMUNERATION REPORT | 43
Remuneration Report - audited (cont.)
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).
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 2019 was determined by reference to
the 20-day volume weighted average price (VWAP) of A$0.2587 per share (A$0.2480 for cycle commencing 1 October
2018 and A$0.2891 for cycle commencing 1 October 2017). In order to achieve 100% vesting of the absolute performance
rights for the cycle commencing 1 October 2019, a 30-day VWAP of A$0.4476 or greater would be required (A$0.4290 for
cycle commencing 1 October 2018 and A$0.5001 for cycle commencing 1 October 2017) at the conclusion of the 3-year
performance period, assuming no dividends are paid during the 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 2019, 2018 and 2017 performance rights cycles is as specified below:
44 | BASE RESOURCES | ANNUAL REPORT 2020
Companies
Adriatic Metals Plc
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 Limited
Aurelia Metals Limited
Avanco Resources Limited
AVZ Minerals Limited
Bardoc Gold Limited
Bathurst Resources Limited
Bellevue Gold Limited
Beadell Resources Limited
Berkeley Energia Limited
Blue Energy Limited
Capricorn Metals Limited
Cardinal Resources Limited
Catalyst Metals Limited
Champion Iron Limited
CI Resources Limited
Copper Mountain Mining Corporation
Dacian Gold Limited
Danakali Limited
Echo Resources 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
Greenland Minerals Limited
Hastings Technology Metals Limited
Heron Resources Limited
Highfield Resources Limited
Image Resources
ioneer Limited
Jervois Mining Limited
Jupiter Mines Limited
LTIP Cycle
Commencing 1 October
2019
2018
2017
Companies
LTIP Cycle
Commencing 1 October
2019
2018
2017
Kangaroo Resources Limited
Kidman Resources Limited
Liontown Resources Limited
Lynas Corporation
Magnis Resources Limited
Medusa Mining Limited
Metals X Limited
Metro Mining Limited
Millennium Minerals Limited
Mincor Resources NL
MOD Resources Limited
Mineral Deposits Limited
Mount Gibson Iron Limited
Neometals Limited
New Century Resources Limited
Nickel Mines Limited
Northern Minerals Limited
OM Holdings Limited
Orocobre Limited
Paladin Energy Limited
Panoramic Resources Limited
Pantoro Limited
Perseus Mining Limited
Pilbara Minerals Limited
Poseidon Nickel Limited
Ramelius Resources Limited
Rand Mining Limited
Red 5 Limited
Realm Resources Limited
Resolute Mining Limited
Sandfire Resources NL
Sheffield Resources Limited
Silver Lake Resources Limited
Stanmore Coal Limited
Syrah Resources Limited
Tawana Resources NL
Terracom Limited
Terramin Australia Limited
Tribune Resources Limited
Tungsten Mining NL
West African Resources Limited
Western Areas Limited
Westgold Resources Limited
Zimplats Holdings Limited
BASE RESOURCES | REMUNERATION REPORT | 45
Remuneration Report - audited (cont.)
Was a grant made in 2020?
Performance rights were granted to eligible participants in the LTIP for the cycle commencing 1 October 2019. The number of
performance rights granted for each executive was calculated by reference to the VWAP over the twenty trading days up to the
start of the cycle, being A$0.2587 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:
• A pro rata number of performance rights granted for the cycle beginning on the 1 October immediately prior to the participant
ceasing to be employed a Group member that reflects the proportion of the 12-month period beginning on that date that the
participant will not be an employee will be 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 and valid exercising of performance rights dilute existing shareholders’ equity?
Shares allocated to the participants in the LTIP upon vesting and valid exercise 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 and exercising 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 2020?
All 11,514,341 of the 11,514,341 performance rights granted under the LTIP for the cycle commencing 1 October 2016 vested.
These rights completed the 3 year performance period on 30 September 2019, with vesting as follows:
• Relative TSR performance rights
Base Resources TSR over the performance period placed it in the 80th 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$0.258, equated to a TSR of 77%,
resulting in 100% of the absolute performance rights vesting.
Shares issued to the participants in the LTIP upon the vesting and valid exercise of the above performance rights were
satisfied through the Company issuing shares.
46 | BASE RESOURCES | ANNUAL REPORT 2020
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 2015 to
30 June 2020, 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.
Executive remuneration outcomes for 2020
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, effective
from 1 July 2019 for:
• Tim Carstens from A$580,000 to A$628,000 reflecting market movements and seeking to achieve the Company’s remuneration
policy positioning intent of the 50th percentile for TFR. This increase in TFR was partly offset by a reduced STIP award opportunity
for the 2020 financial year, relative to the 2019 financial year.
• Colin Bwye from A$580,000 to A$628,000 reflecting market movements and seeking to achieve the Company’s remuneration
policy positioning intent of the 50th percentile for TFR. This increase in TFR was partly offset by a reduced STIP award
opportunity for the 2020 financial year, relative to the 2019 financial year.
• Kevin Balloch from A$407,000 to A$419,210 representing an inflationary adjustment.
• Andre Greyling from A$385,000 to A$410,000 recognising the increased scope of the role compared with benchmark.
• Stephen Hay from A$427,811 to A$440,645 representing an inflationary adjustment.
• Chadwick Poletti from A$355,000 to A$385,000 recognising the increased scope of the role compared with benchmark.
BASE RESOURCES | REMUNERATION REPORT | 47
1 July 2015 through 30 June 2020Base Resources LimitedASX 200 Resources IndexCumulative Total Shareholder ReturnsA$0A$50A$150A$100A$200A$25030-Jun-1531-Aug-1531-Oct-1531-Dec-1529-Feb-1630-Apr-1630-Jun-1631-Aug-1631-Oct-1631-Dec-1628-Feb-1730-Apr-1730-Jun-1731-Aug-1731-Oct-1731-Dec-1728-Feb-1830-Apr-1830-Jun-1831-Aug-1831-Oct-1831-Dec-1828-Feb-1930-Apr-1930-Jun-2030-Jun-1931-Aug-1930-Oct-1931-Dec-1928-Feb-2030-Apr-20A$88A$108A$100A$152A$171A$129A$164A$176A$211A$204 Remuneration Report - audited (cont.)
Short Term Incentives (STI)
In January 2020, an incident with Kwale Operations’ haulage contractor tragically resulted in a fatal injury to another road user on
a public road. This incident was not considered a workplace fatality by industry standards and thereby did not strictly result in the
non-satisfaction of the “no workplace fatalities” gate for the assessment of STI. Notwithstanding this, the safety of the Group’s
activities for its people and the communities in which it operates is a fundamental commitment for the Company, and the Board
has elected to exercise its absolute discretion on this matter, and reduce the award opportunity for all STIP participants by 25%.
At the end of the 2020 financial year, a review of the performance of each Senior Executive was undertaken against each of
their 2020 individual performance measures as explained above. The 2020 financial year corporate performance was measured
against two equally weighted criteria: Group financial performance relative to budget and achievement of the Toliara Project FID
by 31 March 2021 (unless extended by the Board in its absolute discretion). The Group financial performance achieved relative
to budget was above stretch 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
2020 performance are paid in the 2021 financial year.
The following table outlines the STI that was earned in comparison with the target STI for the 2020 financial year:
Target STI (i)
STI Awarded (i)
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 (ii)
Project FID
18.75
18.75
11.25
11.25
11.25
11.25
9.375
9.375
5.625
5.625
5.625
5.625
9.375
9.375
5.625
5.625
5.625
5.625
22
23
14
17
15
16
15
15
11.25
11.25
11.25
11.25
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) Percentages quoted incorporate the 25% reduction to STI award opportunities following the exercise of the Board’s discretion.
(ii) 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 reporting period are subject to a 3-year performance period ending on 30 September
2022. Performance rights issued under the plan in the 2016 financial year, totalling 11,514,341, completed their 3-year
performance period on 30 September 2019, with 11,514,341 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 2014
30 September 2017
10,030,672
4,961,983
1 October 2015
30 September 2018
45,748,431
22,874,215
1 October 2016
30 September 2019
11,514,341
5,757,170
%
99
100
100
No. vested
-
22,874,216
5,757,171
%
0
100
100
48 | BASE RESOURCES | ANNUAL REPORT 2020
Take home pay for 2020
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 to 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 2020 financial year. The remuneration packages for all Senior Executives are
shown in the following table in their employment currency.
Currency
Salary
STIP award (ii)
Superannuation
Vesting of
performance
rights (iii)
Take home pay (i)
(before tax)
Key
Management
Person
2020
Executive Directors
T Carstens
C Bwye
AUD
AUD
Other Key Management Personnel
K Balloch
A Greyling
S Hay
C Poletti
2019
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
603,000
603,000
394,210
385,000
415,645
360,000
555,000
555,000
382,000
360,000
402,811
330,000
229,613
236,678
106,113
117,619
116,496
106,116
274,703
274,703
104,339
104,474
112,883
109,646
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
25,000
445,182
445,182
178,358
160,523
198,742
91,727
1,845,674
1,845,674
739,453
665,507
823,962
380,290
1,302,795
1,309,860
703,681
688,142
755,883
582,843
2,700,377
2,700,377
1,250,792
1,154,981
1,364,656
844,936
(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 KMP.
(ii) Current year STIP awards are accrued in the financial year to which the performance relates.
(iii) The value of performance rights vesting on 30 September 2019 has been calculated by reference to the price on the vesting date
of A$0.2580. The value of performance rights vesting on 30 September 2018 has been calculated by reference to the price on the
vesting date of A$0.2650.
BASE RESOURCES | REMUNERATION REPORT | 49
Remuneration Report - audited (cont.)
Statutory remuneration disclosures for the year ended 30 June 2020
The statutory remuneration disclosures for the year ended 30 June 2020 are detailed below and are prepared in accordance
with Australian Accounting Standards, are stated in US dollars and differ from the take home pay summary on page 49.
These differences arise due to the accounting treatment of long service leave and share-based payments.
Key
Management
Person
Short term
employment benefits
Post-
employment
benefits
Salary
STIP bonus (i) Superannuation
Other long
term
Share based
payments
Long service
leave (ii)
Performance
Rights (iii)
Performance
related
Total
2020
US$
US$
US$
US$
US$
US$
%
264,554
258,374
278,939
241,596
71,212
78,934
78,180
71,214
1,852,809
612,467
100,668
Executive Directors
T Carstens (iv)
C Bwye (iv)
404,673
404,673
154,093
158,834
Other Key Management Personnel
K Balloch (iv)
A Greyling (iv)
S Hay (iv)
C Poletti (iv)
Total
2019
Executive Directors
T Carstens (iv)
C Bwye (iv)
K Balloch (iv)
A Greyling (iv)
S Hay (iv)
C Poletti (iv)
Total
Other Key Management Personnel
396,881
396,881
196,440
196,440
273,168
257,436
288,050
235,983
74,613
74,709
80,722
78,408
16,778
16,778
16,778
16,778
16,778
16,778
17,878
17,878
17,878
17,878
17,878
17,878
1,848,399
701,332
107,268
12,540
12,519
5,991
5,882
10,490
8,631
56,053
16,371
14,418
9,890
2,717
10,022
5,094
58,512
280,944
280,944
102,060
94,563
107,690
85,785
869,028
873,748
460,595
454,531
492,077
424,004
951,986
3,573,983
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
50.1
50.3
37.6
38.2
37.8
37.0
52.1
52.2
37.2
37.7
37.7
37.4
(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 2020 financial year of 0.6711 (2019: 0.7151).
50 | BASE RESOURCES | ANNUAL REPORT 2020
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:
2020
$
1,302,795
874,306
2019
$
2,700,377
1,931,040
Add: Movement in the accounting provision for long service leave entitlements
12,540
16,371
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$)
Statutory pay for the Managing Director (US$)
280,944
(298,762)
869,028
271,680
(1,319,841)
899,250
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$750,000 in total.
The Group’s policy is that non-executive Director remuneration is structured to exclude equity-based remuneration and
reviewed annually. All Directors have the insurance premiums for their director’s and officer’s insurance paid for by the Group.
Non-executive Directors receive a fixed fee remuneration consisting of a cash fee and statutory superannuation contributions
made by the Group and additional fees for committee roles as set out below:
Base fees
Chair
Other non-executive directors
Remuneration & Nomination Committee
Chair
Committee member
Audit Committee
Chair
Committee member
Risk Committee
Chair
Committee member
2020
A$
148,500
82,467
-
5,250
14,000
7,000
7,900
3,900
2019
A$
148,500
80,850
-
5,250
14,000
7,000
7,900
3,900
BASE RESOURCES | REMUNERATION REPORT | 51
Remuneration Report - audited (cont.)
Non-executive Director remuneration for the year ended 30 June 2020 and prior year remuneration:
Base fees
US$
Audit committee
US$
Remuneration
& Nomination
committee
US$
Risk committee
US$
2020
K Spence
S Willis
M Macpherson
M Stirzaker
D Radley
Total
2019
K Spence
S Willis
M Macpherson
M Stirzaker
D Radley
Total
99,658
55,344
55,344
55,344
55,344
321,034
106,192
57,816
57,816
57,816
57,816
337,456
-
9,395
4,698
-
4,698
18,791
-
10,011
5,006
-
5,006
20,023
-
3,523
3,523
3,523
-
10,569
-
3,754
3,754
3,754
-
11,262
-
2,617
5,302
-
2,617
10,536
-
2,789
5,649
-
2,789
11,227
Total (i)
US$
99,658
70,879
68,867
58,867
62,659
360,930
106,192
74,370
72,225
61,570
65,611
379,968
(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 2020 financial year of 0.6711 (2019: 0.7151).
52 | BASE RESOURCES | ANNUAL REPORT 2020
Equity instruments
Performance Rights
The table below outlines movements in performance rights during 2020 and the balance held by each Senior Executive
at 30 June 2020.
Grant
date (i)
Number of
performance
rights
Fair value
of each
performance
right
Number
vested
during
year
Number
granted
during
year
Number
lapsed
during
year
Vesting
date (ii)
Name
T Carstens
1 Oct 2016
1,725,567
A$0.1625 30 Sep 2019 1,725,567
1 Oct 2017
2,113,056
A$0.2150 30 Sep 2020
1 Oct 2018
2,806,452
A$0.1610 30 Sep 2021
-
-
-
-
-
1 Oct 2019
-
A$0.1280 30 Sep 2022
- 2,913,027
6,645,075
1,725,567 2,913,027
C Bwye
1 Oct 2016
1,725,567
A$0.1625 30 Sep 2019 1,725,567
1 Oct 2017
2,113,056
A$0.2150 30 Sep 2020
1 Oct 2018
2,806,452
A$0.1610 30 Sep 2021
-
-
-
-
-
1 Oct 2019
-
A$0.1280 30 Sep 2022
- 2,913,027
6,645,075
1,725,567 2,913,027
K Balloch
1 Oct 2016
691,333
A$0.1625 30 Sep 2019
691,333
1 Oct 2017
819,899
A$0.2150 30 Sep 2020
1 Oct 2018
984,677
A$0.1610 30 Sep 2021
1 Oct 2019
-
A$0.1280 30 Sep 2022
-
-
-
-
-
-
972,269
2,495,909
691,333
972,269
A Greyling
1 Oct 2016
622,200
A$0.1625 30 Sep 2019
622,200
1 Oct 2017
726,493
A$0.2150 30 Sep 2020
1 Oct 2018
931,452
A$0.1610 30 Sep 2021
1 Oct 2019
-
A$0.1280 30 Sep 2022
-
-
-
-
-
-
950,908
2,280,145
622,200
950,908
S Hay
1 Oct 2016
770,343
A$0.1625 30 Sep 2019
770,343
1 Oct 2017
862,139
A$0.2150 30 Sep 2020
1 Oct 2018
1,035,027
A$0.1610 30 Sep 2021
-
-
-
-
-
1 Oct 2019
-
A$0.1280 30 Sep 2022
- 1,021,983
2,667,509
770,343 1,021,983
C Poletti
1 Oct 2016
355,543
A$0.1625 30 Sep 2019
355,543
1 Oct 2017
674,600
A$0.2150 30 Sep 2020
1 Oct 2018
858,871
A$0.1610 30 Sep 2021
1 Oct 2019
-
A$0.1280 30 Sep 2022
-
-
-
-
-
-
892,926
Total
1,889,014
22,622,727
355,543
892,926
5,890,553 9,664,140
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Balance
not yet
exercised
at end
of year
1,725,567
-
-
-
Balance
that remain
subject to
performance
testing at
end of year
-
2,113,056
2,806,452
2,913,027
1,725,567
7,832,535
1,725,567
-
-
-
-
2,113,056
2,806,452
2,913,027
1,725,567
7,832,535
691,333
-
-
-
-
819,899
984,677
972,269
691,333
2,776,845
622,200
-
-
-
-
726,493
931,452
950,908
622,200
2,608,853
770,343
-
-
-
-
862,139
1,035,027
1,021,983
770,343
2,919,149
355,543
-
-
-
-
674,600
858,871
892,926
355,543
2,426,397
5,890,553
26,396,314
(i) The amount expensed per the statutory remuneration table reflects the period since commencement of services when the Group
and the Senior Executive had a shared understanding of the award.
(ii) Performance rights are tested as at the vesting date 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 shareholdings
The number of ordinary shares in Base Resources held by each Director and other members of KMP of the Group during the financial
year was as follows:
Performance
rights vested and
exercised during
the year
Shares held -
1 July 2019
Purchased
Sold
Shares held -
30 June 2020
Balance of
performance rights
vested, but not
exercised(i)
2020
K Spence
T Carstens
C Bwye
S Willis
M Macpherson
M Stirzaker
D Radley
K Balloch
A Greyling
S Hay
C Poletti
666,667
5,820,446
6,073,671
350,000
-
-
500,000
2,000,000
3,263,429
1,139,126
807,003
20,625,676
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
666,667
5,820,446
6,073,671
350,000
-
-
500,000
2,000,000
3,263,429
1,139,126
807,003
-
1,725,567
1,725,567
-
-
-
-
691,333
622,200
770,343
355,543
20,625,676
5,890,553
(i) Senior Executives also hold vested performance rights which remain subject to exercise. Vested performance rights have a nil exercise
price and, unless exercised beforehand, expire on 30 September 2024.
54 | BASE RESOURCES | ANNUAL REPORT 2020
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 terminated by either
party
Permanent – ongoing
until terminated by either
party
C Bwye
K Balloch
A Greyling
S Hay
C Poletti
3 months’ notice by the employee or Company for
termination without cause
1 months’ 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
3 months’ notice by the employee
6 months’ notice for termination by Company without
cause (3 months for A Greyling)
1 months’ 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: 22 August 2020
BASE RESOURCES | REMUNERATION REPORT | 55
Corporate Governance Statement
The Company is committed to implementing high standards of corporate governance that create and deliver value for
shareholders and uphold its absolute commitment to acting in a legal, honest and ethical manner and with integrity.
To give effect to this commitment, the Board has established a corporate governance framework comprising a range of
governance policies, charters and system documents, a number of which are referred to and described below.
The Company’s approach and business practices are driven by a core set of principles that together form the “Base Way”
and which are based on its belief in:
• The potential of our people
• The power of the team
• The value of resources
• Absolute integrity.
The Company’s governance framework is based on these core principles. As an ASX listed entity, the Company complies with
the ASX Listing Rules and, for the financial year ended 30 June 2020 (reporting period), will report against the third edition of
the ASX Corporate Governance Council’s Corporate Governance Principles and Recommendations (ASX Recommendations).
The Board considers that, throughout the reporting period, the Company has followed the ASX Recommendations.
In 2019, the Council released a new edition of their principles and recommendations (ASX Recommendations 4th Edition).
Ahead of the effective date for their application, the Company undertook a review of its governance practices against the
ASX Recommendations 4th Edition. While the Company’s practices were largely consistent with the ASX Recommendations
4th Edition, a small number of areas were highlighted for adjustment which was completed prior to 30 June 2020. For the
next financial year ending 30 June 2021 and beyond, the Company will measure its governance practices against the ASX
Recommendations 4th Edition.
This statement is current as at 21 August 2020 and has been approved by the Board. This statement should be read in
conjunction with the balance of the Annual Report. Where appropriate, the statement highlights relevant events that have
occurred since 30 June 2020 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 senior 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 and objectives 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 practices 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 and objectives 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 as determined by the Board
• managing the day to day affairs of the Company
•
identifying and managing business risks
• managing the Company’s financial and other reporting mechanisms.
56 | BASE RESOURCES | ANNUAL REPORT 2020
These delegations are further documented in and supported by the Company’s Delegation of Authority Standard which the
Board reviews and approves at least annually and sets out cascading authority limits for transactions for EXCO and other
employees and consultants of the Group.
The Chair, Mr Spence, is responsible for leadership and effective performance of the Board and for promoting constructive
and respectful relations between Directors, and between Directors and management.
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.
Composition of the Board
As at 30 June 2020, 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 paragraph 11 of the Board Charter, which was updated in March 2020 to align with the commentary to
Recommendation 2.3, including Box 2.3, in the ASX Recommendations 4th Edition (which the Company will report against
for the financial year ending 30 June 2021).
As set out in paragraph 11 of the Board Charter, unless the Board determines otherwise, a Director will be deemed not
to be independent where the Director:
•
is, or has been, employed in an executive capacity by the Company or any of its subsidiaries and there has not been a period
of at least three years between ceasing such employment and serving on the Board;
• receives performance-based remuneration (including options or performance rights) from, or participates in an employee
incentive scheme of, the Company;
•
is, or has been within the last three years, in a material business relationship (e.g. as a supplier, professional adviser,
consultant or customer) with the Company or any of its subsidiaries, or is an officer of, or otherwise associated with,
someone with such a relationship;
• is, represents, or is or has been within the last three years an officer or employee of, or professional adviser to,
a substantial holder;
• has close personal ties with any person who falls within any of the categories described above; or
• has been a Director of the Company for such a period that their independence from management and substantial holders
may have been compromised.
The Board assesses the materiality of an interest, position and relationship on a case-by-case basis, taking into account
the relevant Director’s specific circumstances.
The Board confirms that a majority of the Board is independent, with the Board’s assessment of the independence of each
Director in accordance with paragraph 11 of the Board Charter set out below. The Chair is an independent non-executive
Director and is not the same person as the Managing Director.
Independent Director Non-Executive Director
Executive Director
Keith Spence (Chair)
Tim Carstens (Managing Director)
Colin Bwye (Executive Director – Operations & Development)
Malcolm Macpherson
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 from management or any substantial shareholders, or otherwise
materially influenced 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.
BASE RESOURCES | CORPORATE GOVERNANCE | 57
Corporate governance (cont.)
Under the Board Charter, Directors must immediately declare to the Board any change in their interests, positions or
relationships that could potentially bear upon their independence.
Skills and experience
The Board is confident that, collectively, the Directors have the range of skills, knowledge, experience and competencies
necessary to effectively discharge the Board’s responsibilities and direct and oversee the Company. That said, through the
Remuneration & Nomination Committee, the Board regularly monitors the skills, knowledge, experience and competencies
of the Board, particularly as the Company’s business and the issues facing it evolve, to identify opportunities for training and
development and to identify gaps that may be addressed as part of Board succession.
A set of core competencies and criteria for assessing the extent of a Director’s proficiency in respect of those core
competencies have been established to assist the Remuneration & Nomination Committee 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 each Director’s particular skills and indicates the Directors on which the Board principally relies in
relation to each core competency, recognising that the skills and experience that each Director contributes to their role is far
broader and diverse than is indicated below.
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.
Specific experience in the mineral sands industry, including an in-depth knowledge
of exploration, operations, project development, markets, shipping, competitors and
relevant technology.
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.
Key Directors
C Bwye, T Carstens,
M Macpherson,
K Spence, M Stirzaker
C Bwye, T Carstens,
M Macpherson
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
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
Experience in the successful development and operation of reputable businesses in Africa.
Capital projects;
management
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
Sustainable
development
Senior management or equivalent experience in workplace health and safety, environmental
and social responsibility, community relations and organisational governance.
T Carstens, K Spence
Previous board
experience and
governance
Serving on boards of varying size and composition, in varying industries and for a range of
organisations. Implementing 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.
M Macpherson,
D Radley, K Spence,
M Stirzaker, S Willis
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
and superannuation) and the legislative and contractual framework governing remuneration.
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
58 | BASE RESOURCES | ANNUAL REPORT 2020
The diagram below further illustrates the Board’s depth of coverage across its core competencies, illustrating the extent
to which the Directors are proficient in those competencies.
Number of Directors proficient or greater
Expert
Skilled
Proficient
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 wide-ranging cultures. Director ages
range from 48-75 years, with currently one female on the Board of seven. Average time served on the Board is 8 years, with the
average tenure for non-executive Directors being 6.7 years.
Further details about 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 their duties, rights and responsibilities, anticipated time commitments and the Board’s expectations with
respect to committee work. Executive directors and all senior management enter employment agreements which govern their
terms of employment.
New appointees to the Board receive a tailored induction plan having regard to their existing skills, knowledge and experience.
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 senior management team and site visits 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”.
Directors are expected to maintain the skills necessary to effectively discharge their duties. The Company provides the Board
with regular information on industry-related matters, proposed or potential changes to applicable regulatory requirements, and
other new developments with the potential to affect the Company and its business. Regular “deep dives” on relevant topics are
also provided to the Board. The Company organises relevant professional development opportunities for Directors when a need
is identified, for example, from a Board performance review or through the Remuneration & Nomination Committee’s Board
education oversight role.
The Company also arranges an annual site visit for the Directors to the Company’s Kwale Operations in Kenya to further enhance
their knowledge and understanding of this operating project. The site visit to Kwale Operations for the current year, which was
scheduled to occur in March 2020, was cancelled as a result of COVID-19. In response to this cancellation, the specific insight
sessions that had been proposed for the site visit have since been conducted by way of videoconference as part of the regular
Board program. Directors also visited the Toliara Project in Madagascar during 2018, following the Company’s acquisition of that
project. This site visit allowed Directors to gain a deeper understanding of the Toliara Project and Madagascar more broadly.
BASE RESOURCES | CORPORATE GOVERNANCE | 59
Corporate governance (cont.)
Board succession
The Board manages succession planning with the assistance of the Remuneration & Nomination Committee. The Remuneration &
Nomination Committee reviews and makes recommendations to the Board about the appropriate size and composition of the Board.
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 checks as to character, experience, education, criminal records and bankruptcy before
nominating any candidate for appointment as a Director or for election by shareholders. The Company also provides
shareholders all material information in its possession relevant to whether a candidate should be elected in the explanatory
memorandum accompanying the relevant notice of meeting.
Board performance evaluation
It is Company policy that the Board reviews, critically evaluates and discusses the performance of the Board, the Board
Committees and individual Directors once a year. The Remuneration & Nomination Committee sets the method and
scope of the annual performance evaluation, 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 annual reviews of the Board,
its Committees and individual Directors.
One or more aspects of the performance evaluations may involve engagement of an independent third party Board advisor.
Given the last externally facilitated review was undertaken in 2019 for the reporting period ended 30 June 2019, and that the
composition of the Board has not changed since that time, the Remuneration & Nomination Committee did not consider it
necessary to engage an independent advisor to facilitate any aspects of the performance evaluation and review of the Board,
individual Directors or its Committee for the reporting period.
The performance evaluation of the Board, its Committees and individual Directors undertaken for the reporting period was
conducted initially by each Director completing a questionnaire 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 at subsequent Board and Committee meetings, as
applicable. The evaluation demonstrated 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 or re-election at each AGM. Any Director appointed to fill a casual vacancy since
the date of the previous AGM automatically 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 with all material information in its possession relevant to whether or not any Director standing for
re-election should be re-elected in the explanatory memorandum accompanying the relevant notice of meeting.
Senior management performance evaluation
Managers are required to have regular (typically quarterly) performance enhancement conversations with members of their team,
with judgement-based assessments of performance against the accountabilities, behaviours and indicators established in the
relevant individual’s role description being carried out annually. This process applies equally to senior managers but is also coupled
with an annual assessment of the relevant individual’s achievement of the accountabilities 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 2020.
60 | BASE RESOURCES | ANNUAL REPORT 2020
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 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, and at least annually, and are updated as required. Each of the charters were last
reviewed and updated in March 2020.
Details about the skills, experience, and expertise of each member of the respective Committees of the Board is set out on
pages 33 and 36 of the Annual Report. Details of the Committee meetings held during the year and attendances of
members at those meetings are set out on page 37 of the Annual Report.
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 associated legal and regulatory requirements and external audit function.
All members of the Audit Committee are required to be non-executive Directors, with a majority being required to be
independent. Members must also be financially literate and have an understanding of the industry in which the Company
operates. The Chair of the Audit Committee must not be the Chair of the Board and must be independent.
The Audit Committee members for the reporting period were Mr Macpherson, Ms Radley, Mr Spence and Mr Willis (as Chair).
All members were 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 method and scope of
performance evaluations of the Board, its Committees and individual Directors, 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
by the Board and subsequent consideration by shareholders.
All members of the Remuneration & Nomination Committee are required to be non-executive Directors, with a majority
required to be independent. The Chair of the Remuneration & Nomination Committee must be independent.
The Remuneration & Nomination Committee members for the reporting period were Mr Macpherson, Mr Spence (as Chair),
Mr Stirzaker and Mr Willis. All members were non-executive Directors, the majority of whom were 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 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 must comprise a majority of independent non-executive Directors and the Chair of the Risk Committee
must be independent.
Mr Macpherson (as Chair), Mr Spence, Ms Radley and Mr Willis (all independent non-executive Directors) were members
of the Risk Committee for the whole reporting period. Mr Bwye and Mr Carstens (both executive Directors) were each
appointed to the Risk Committee with effect from 21 November 2019.
BASE RESOURCES | CORPORATE GOVERNANCE | 61
Corporate governance (cont.)
Shareholder Communication
General
The Board recognises the importance of regular and proactive interaction with the market to ensure investors and key
stakeholders remain fully informed about the Company’s activities. This is reflected in the Company’s Continuous Disclosure
and Market Communications Standard, which 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 accurate, 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
• 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
• 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 preparation and content of the auditor’s report
Since 2018, the Company has also 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, even though the Company will only begin
reporting against the 4th Edition for the financial year ending 30 June 2021.
Company information
The Company’s website (www.baseresources.com.au) provides information about the Company generally for the benefit of its
shareholders, market participants and key stakeholders, with the website undergoing a full review, refresh and re-launch during
the reporting period. The Company promptly updates the website with material released to ASX 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:
• corporate Governance (accessible from the ‘Who we are’ dropdown menu): containing the Company’s Constitution,
the “Base Way”, relevant governance policies and standards, Board and Board Committee Charters and codes of conduct
for the Company’s personnel and its suppliers
• board and Leadership (accessible from the ‘Who we are’ dropdown menu): containing the names and brief biographical
information for each of the Directors and senior managers
• reports (accessible from the ‘Investors’ dropdown menu): containing copies of annual, half yearly and quarterly reports
• market Announcements (accessible from the ‘Investors’ dropdown menu): containing ASX announcements (including notices
of meeting and explanatory material and investor presentations).
Shareholders can also access further information about Kwale Operations from the website of the Company’s wholly owned
operating subsidiary, Base Titanium (www.basetitanium.com) and about the Toliara Project from the project’s website
(www.basetoliara.mg).
Investor relations
The Company has an investor relations program designed to facilitate effective two-way communication with shareholders.
The Company regularly attends broker-sponsored and industry conferences. In addition, during the reporting period, to ensure
investors and stakeholders were fully informed about the Company’s activities and the impacts of COVID-19, the Company
made available various pre-recorded investor updates.
62 | BASE RESOURCES | ANNUAL REPORT 2020
The Company hosts investor conference calls following the release of half year and full year results, and also on an ad hoc
basis following major corporate actions. The calls are hosted by the Managing Director and the Chief Financial Officer, with
other members of senior management as required.
The Company provides opportunities for shareholders to receive communications from the Company electronically and also
encourages shareholders to communicate electronically with the Company and its securities registry. Alternatively, telephone,
fax and email contact details are available on the Company’s 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
• All investors have equal opportunity to receive externally available information issued by the Company
• All disclosures are balanced and expressed in a clear and objective manner that allows investors to assess the impact
of the information when making investment decisions.
During the reporting period, the Company’s Continuous Disclosure and Market Communications Standard was updated to
establish a Disclosure Committee comprising the Managing Director, the Executive Director – Operations and Development,
the Chief Financial Officer and the Company Secretary, which is primarily responsible for, among other matters, 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 the Disclosure Committee with discharging its role, it is the responsibility of every Director and employee to report
to a member of the Disclosure Committee any potentially price sensitive information which they obtain.
To the full extent practical (having regard to the requirement for immediate disclosure in certain circumstances), all members
of the Disclosure Committee and the Board are given the opportunity to review and comment on material announcements
before their release. Otherwise, copies of all material market announcements are provided to the Board promptly after they
have been made.
The Company ensures that any briefing or presentation materials that are new and substantive are released on ASX
and uploaded to the Company’s website in advance of the relevant briefing or presentation.
Promoting Responsible and Ethical Behaviours
The “Base Way”
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 “Base Way” was included
on the Company’s website in June 2020 and, by doing so, the Company will be able to meet Recommendation 3.1 from the ASX
Recommendations 4th Edition when it begins reporting against that edition for the financial year ending 30 June 2021.
Codes of Conduct
The Company has a Code of Conduct for its directors and employees (Personnel Code) and, in June 2020, introduced a Code of
Conduct for its suppliers (Supplier Code).
The Personnel Code provides an overview of the framework for decision making and actions in relation to ethical conduct by
directors and employees of the Company and its subsidiaries. The Personnel Code 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 directors and 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 Personnel Code may lead to disciplinary action,
in accordance with the Company’s Unacceptable Performance and Misconduct System. In line with Recommendation 3.2(b) of
the ASX Recommendations 4th Edition, which the Company will begin reporting against for the financial year ending 30 June 2021,
all material breaches of the Personnel Code will be notified to the Board or the Risk Committee.
The Supplier Code sets out the Company’s core requirements and expectations for the Group’s suppliers. In line with the
Company’s own commitment, the Supplier Code is directed to ensuring that the Group’s suppliers act in a legal, honest and
ethical manner, and act with integrity, at all times. Like the Personnel Code, the Supplier Code also summarises aspects of
the Company’s Policies and Standards that equally apply to its suppliers, but also supplements those documents with further
requirements concerning, among other matters, employment practices.
BASE RESOURCES | CORPORATE GOVERNANCE | 63
Corporate governance (cont.)
Integrity 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.
The Integrity Standard, which was updated during the reporting period and disclosed on the Company’s website, 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, such as those employees
engaging with government or communities. To further embed the Integrity System and give effect to the principle set out in
the “Base Way” of “no bribes-ever”, during the reporting period, an annual Integrity Undertaking was introduced requiring all
Group personnel at supervisor level and above to provide a series of confirmations and undertakings relating to the Company’s
Integrity Policy and Integrity Standard, including the undertaking to always act in a legal, honest and ethical manner when
performing their role. The roles of supervisor level and above were considered as higher risk given the authority inherent with
those roles, however in time the Integrity Undertaking will be considered for roll out across the Group.
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. In line with Recommendation 3.4 of the ASX
Recommendations 4th Edition, which the Company will begin reporting against for the financial year ending 30 June 2021,
all material breaches of the Integrity Standard will be notified to the Risk Committee.
Whistleblower System
The Company’s Whistleblower System was substantially updated in December 2019 in light of the significant amendments to the
whistleblower provisions in the Corporations Act and which, among other things, required public companies to have a compliant
whistleblower policy by 1 January 2020. During the reporting period, training was provided to senior management and other
personnel on the Whistleblower System’s requirements and their responsibilities in the event they receive a report of inappropriate
conduct.
By providing a transparent and confidential mechanism for past and present employees and suppliers to report any instances of
inappropriate conduct by employees and for any such reports to be addressed, the Whistleblower System gives further effect to the
Company’s commitment to conducting its business in a legal, honest and ethical manner.
The Company’s Whistleblower Standard contains details about the individuals that can make reports of inappropriate conduct, how
reports of inappropriate conduct can be made, which options include to the Company’s independent whistleblower service provider,
how reports will be investigated and the measures that are put in place to ensure confidentiality and protect against detriment.
Extractive Industries Transparency Initiative
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 (www.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 (www.basetoliara.mg).
64 | BASE RESOURCES | ANNUAL REPORT 2020
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.
Consistent with applicable requirements, the Securities Trading Policy requires the Company Secretary to be notified of any
dealing in the Company’s securities by Directors so that ASX can be notified, and any dealing by Directors or other persons
discharging management responsibility so that any required notifications can be made to AIM and the United Kingdom’s
Financial Conduct Authority, in each case, within the prescribed time periods. 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 and
reduce threats, and in so doing provide it with a 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. The Board considers that a formal internal
audit process is not required or justifiable at this time, with the Board comfortable with the current and future planned
assurance programs with respect to the Company’s material business risks.
Focusing on the financial reporting controls for mitigating material financial reporting risks, in February 2019, external
consultant, EY, was engaged to undertake an independent assessment of the Group’s existing control environment.
EY’s engagement included a review of applicable documentation and on-site interviews with relevant personnel to gain
an understanding of existing processes, associated key risks and key controls, together with a comparison against market
standard practice. The output of EY’s engagement was a documented set of existing controls for financial reporting
risks, together with a limited set of recommendations for improvement. In response to the EY findings, the Company has
implemented additional controls. The Company has also established a system of biannual internal testing to assess and ensure
the ongoing efficacy of key controls.
During the reporting period, the Audit Committee’s Charter was updated to expand the Audit Committee’s responsibility in
monitoring the level of non-audit services provided by the Company’s external auditor and the fees received for those services
to ensure there is no actual or perceived adverse impact on auditor independence. Subsequent to this update, a non-audit
services standard was developed and approved by the Audit Committee. The Non-Audit Services Standard sets out the
authority limits for approving non-audit services provided by the Company’s external auditor.
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 most recent review of the Company’s Material Business Risk Register and Risk Management Framework occurred
in June 2020.
BASE RESOURCES | CORPORATE GOVERNANCE | 65
Corporate governance (cont.)
During the reporting period, the Risk Committee’s Charter was also reviewed and updated. Its 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 risk control system and reporting
to the Board on its efficiency and effectiveness
• Periodically reviewing the need for a formal internal audit function from a risk management perspective
• Reviewing the risk reports produced by management, the efficiency and effectiveness of that risk management and internal
control system and any material incidents notified to it and the learnings from those incidents
• 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
• Ensuring that management designs and implements a whistleblower system to encourage and promote the reporting
of any inappropriate conduct and 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.
Effective from 21 November 2019, Tim Carstens and Colin Bwye were appointed to the Risk Committee. Their appointment
is intended to enhance the effectiveness of the Risk Committee by ensuring ready access to the input and insights of senior
management, and reflects practice for EXCO to attend Risk Committee meetings.
Business risks and mitigations
The Company is exposed to a number of risks across its business, which it seeks to manage in a manner consistent with
its Risk Management Framework. The Company identifies each risk according to 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 material exposures to certain environmental and social sustainability risks associated with
Kwale Operations and its development of the Toliara Project.
The Company recognises that host communities for its Kwale Operations and Toliara Project play an integral role in the
success of those projects and, by extension, the Company’s overall success.
For the full mining life cycle, the Company adopts sustainable business practices to ensure the Company is a welcome
member of its communities. These practices are based on the understanding that achieving the Company’s long-term goals
is reliant on building beneficial relationships with the communities in which it operates and establishing a balanced flow of
mutual benefit.
The Company’s sustainability practices focus on the Company’s people, its communities and the environment. These focus
areas were developed taking into consideration international best practice and feedback from stakeholders, including
host communities and host nations. In each case, the Company’s sustainability practices are based on the “Base Way”,
applicable Company policies (including the Company’s Communities, Health and Safety and Environment Policies),
applicable legislation and regulation and international best practice, including the International Financial Corporation’s
66 | BASE RESOURCES | ANNUAL REPORT 2020
Performance Standards, the Equator Principles, the World Bank’s Environmental, Health and Safety Guidelines, International
Labour Organisation’s core labour standards, the Extractive Industries Transparency Initiative and the United Nations
Voluntary Principles on Security and Human Rights.
The Company’s environmental sustainability practices are also based on a comprehensive understanding of the environmental
impacts during design, construction, operations and ultimately closure of Kwale Operations and the Toliara Project. They are
further designed to ensure continuous improvement, with the Company recognising that environmental sustainability is an area
of increasing focus for governments, shareholders, other stakeholders and the broader public and that the Company will only
have increasing responsibility and be subject to increasing expectations. Whilst this increasing focus is partly driven by climate
change concerns, which the Company recognises creates both direct and indirect risks to its operations and business, the
Company acknowledges environmental sustainability is a broader issue.
Details about the Company’s sustainability practices in respect of its people, its communities and the environment are set out
on pages 16 to 21 of the Annual Report. In addition to those practices:
• the Company seeks to mitigate its social sustainability risk by ensuring the Company and its personnel act in a legal, honest and
ethical manner and with integrity at all times. The Company has taken multiple and wide-ranging steps designed to ensure the
highest standards of behaviours, which include putting in place the governance documents described elsewhere in this statement.
•
in line with the Company’s commitment to respecting human rights and ensuring all aspects of its employment practices
abide by applicable laws and regulations, during the reporting period, the Company took various steps to identify, assess
and mitigate the risk of modern slavery in its operations and supply chains. Those steps, together with the other information
prescribed by the Australian Modern Slavery Act 2018, will be set out in the Company’s modern slavery statement which will
be published in respect of the reporting period, but included establishing a dedicated Modern Slavery Working Group, carrying
out a high level risk assessment of its key suppliers and confirming that the controls in place to mitigate the risk of modern
slavery in the Company’s operations had been followed and undertaken in respect of a sample of employees.
• the Company regularly reviews all aspects of its environmental performance to achieve continuous improvement and works
in partnership with its host communities, conservation groups and environmental experts to not only meet applicable legal
and regulatory requirements, but its broader environmental objectives.
CEO and CFO assurance
The Board receives monthly reports on the group’s financial and operational results. Before the Board adopted the 31 December 2019
half-year and 30 June 2020 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,
and that 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 strives to provide a work environment in which everyone is
treated fairly, with respect and can realise their full potential. The Company seeks to achieve this by:
• employing staff based on job requirements and merit without discriminating on grounds which include 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”.
BASE RESOURCES | CORPORATE GOVERNANCE | 67
Corporate governance (cont.)
A key focus of the Company since before commencement of Kwale 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 2020, the Company is pleased to
report that it employed 98.0% Kenyan national employees at Kwale, which has been maintained from the prior reporting
period. This demonstrates the effectiveness of the systems designed by the Company to drive the structured transfer of
skills over time.
For the Toliara Project, there has been the same structured focus on maximising employment opportunities for local
communities against the backdrop of achieving the necessary high standards of operational and safety performance.
This requirement is documented in the project’s Labour Recruitment and Influx Management Plan and will continue as
the proposed development of the Toliara Project progresses. While that development is in the early stages, the Company
is pleased to report that, as at 30 June 2020, it employed 92.1% Malagasy national employees at the Toliara Project.
While the primary focus to date has been on maximising local participation, workforce establishment and performance
enhancement, the Board does set measurable objectives for achieving gender diversity, annually review those objectives
and annually assess progress in achieving those objectives.
The Board determined to maintain the measurable diversity objectives it set last financial year for the financial year ended
30 June 2020. These were:
• Increase the overall percentage of women employed by the Group
• Maintain female representation in the intake for graduate and apprentice programs 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 the current stable state of its Kwale Operations
(and consequent stability of the Company’s workforce in Kenya) which will naturally reduce the opportunities to increase
gender diversity as rapidly going forward. However, there should be greater opportunities for driving greater diversity as the
Company progresses the proposed development of the Toliara Project.
For the reporting period, the Group met its objective to maintain female representation in the intake for graduate and
apprentice programs at or above one third and maintained Board gender diversity with Ms Radley being elected by
shareholders at the 2018 annual general meeting. However, the group did not meet its objectives of achieving an increase
in the overall percentage of women employed or an increase in the percentage of women in executive roles, with there being
a slight reduction in both percentages compared to the last reporting period. However, in absolute terms, the number of
women employed did increase and the number of women in executive roles remained stable.
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. For the Toliara Project, the Company has undertaken several measures to encourage women
from local communities to apply for future training and job opportunities, and dispel the commonly held perception that
mining is an unsuitable career for women. Such measures included using female role models in advertising and holding
“women only” registration days when targeting registrations for capacity-building training programs to broaden the pool of
suitable applicants for roles during the construction and operation phases. Of the applicants registered for these programs,
approximately 33% were female.
68 | BASE RESOURCES | ANNUAL REPORT 2020
Shown below is the Company’s performance in achieving its set objectives during the year ended 30 June 2020, 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
FY20
167/944
17.7%
14/42
33.3%
6/36
16.7%
14.3%
FY19
163/892
18.3%
11/33
33.3%
6/31
19.4%
14.3%
FY18
139/829
16.8%
11/33
33.3%
4/28
14.3%
14.3%
Change FY19
to FY20(%)
(0.6)
No change
(2.7)
No change
The Board has determined to maintain the above existing measurable objectives for the coming financial year and, in addition,
has determined to set the following measurable objectives:
• Subject to vacancies, to increase the percentage of women in senior management (General Manager and above)
• Excluding short-term employees, maintain female turnover that is equal to or less than Group turnover.
The Board will report progress in achieving the set objectives in next year’s corporate governance statement.
Availability of Key Corporate Governance Documents
The following key corporate governance policies and procedures are available on the Company’s website:
• Constitution
• Board Governance Plan (including Board Committee Charters)
• Continuous Disclosure and Market Communications Standard
• Risk Management Policy
• Diversity Standard
• Integrity Standard
• Environment Policy
• Communities Policy
• Employment Policy
• Health and Safety Policy
• Whistleblower Standard
• Securities Trading Policy
• Company Values – The Base Way
• Code of Conduct (Company Personnel)
• Supplier Code of Conduct
BASE RESOURCES | CORPORATE GOVERNANCE | 69
Lead Auditor’s Independence Declaration
70 | BASE RESOURCES | ANNUAL REPORT 2020
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. 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 2020 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 22 August 2020 F
I
N
A
N
C
I
A
L
S
T
A
T
E
M
E
N
T
S
A
N
D
N
O
T
E
S
Consolidated statement of profit or loss
and other comprehensive income
FOR THE YEAR ENDED 30 JUNE 2020
Sales revenue
Cost of sales
Profit from operations
Corporate and external affairs
Community development costs
Selling and distribution costs
COVID-19 response costs
Other income
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
Earnings per share
Basic earnings per share (US cents per share)
Diluted earnings per share (US cents per share)
Note
3
4
5
7
6
6
The accompanying notes form part of these consolidated financial statements.
2020
US$000s
208,016
(139,333)
68,683
(10,465)
(3,559)
(2,388)
(1,082)
314
51,503
(5,873)
45,630
(6,042)
39,588
364
364
39,952
Cents
3.38
3.34
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
72 | BASE RESOURCES | ANNUAL REPORT 2020
Consolidated statement of financial position
AS AT 30 JUNE 2020
Note
30 June 2020
US$000s
30 June 2019
US$000s
Current assets
Cash and cash equivalents
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
Total non-current liabilities
Total liabilities
Net assets
Equity
Issued capital
Reserves
Retained earnings
Total equity
9
10
11
12
13
14
15
16
17
14
15
7
18
162,559
46,620
19,492
7,313
235,984
139,633
158,751
298,384
534,368
39,617
25,195
5,908
539
17,000
-
88,259
48,940
25,408
9,027
83,375
171,634
362,734
307,063
(17,227)
72,898
362,734
39,242
62,397
19,574
6,313
127,526
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
The accompanying notes form part of these consolidated financial statements.
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 73
Consolidated statement of changes in equity
FOR THE YEAR ENDED 30 JUNE 2020
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
Total
US$000s
Balance at 1 July 2018
305,277
(7,671)
5,806
(20,714)
(1,476)
281,222
Profit for the year
Other comprehensive income/(loss)
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
1,235
306,512
1,828
33,310
(2,407)
-
1,476
2,132
3,399
(22,629)
-
-
-
-
-
-
-
320,592
320,592
39,588
364
39,952
2,190
362,734
Balance at 1 July 2019
306,512
33,310
3,399
(22,629)
Profit for the year
Other comprehensive income/(loss)
Total comprehensive income for the year
-
-
-
39,588
-
39,588
-
-
-
-
364
364
Transactions with owners, recognised directly in equity
Share based payments
551
-
Balance at 30 June 2020
307,063
72,898
1,639
5,038
-
(22,265)
The accompanying notes form part of these consolidated financial statements.
74 | BASE RESOURCES | ANNUAL REPORT 2020
Consolidated statement of cash flows
FOR THE YEAR ENDED 30 JUNE 2020
Note
2020
US$000s
2019
US$000s
Cash flows from operating activities
Receipts from customers
Payments in the course of operations
Income taxes paid
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 borrowings
Repayment of borrowings
Receipts from restricted cash
Payments for debt service costs and re-scheduling fees
Net cash from/(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.
216,818
(83,750)
(27,543)
105,525
(10,377)
(23,212)
299
(33,290)
75,000
(20,000)
-
(2,512)
52,488
124,723
39,242
(1,406)
162,559
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
BASE RESOURCES | CONSOLIDATED FINANCIAL STATEMENTS | 75
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 2020,
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 2020:
• Are 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 22nd August 2020.
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.
76 | BASE RESOURCES | ANNUAL REPORT 2020
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 2020. 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 Group acquired the Toliara Project in Madagascar in 2018 and is currently progressing the project towards
development, with a definitive feasibility study completed in December 2019.
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
Corporate and external affairs
Community development costs
Selling and distribution costs
COVID-19 Response Costs
Other income/(expenses)
2020
2019
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
208,016
(139,333)
68,683
(3,340)
(3,559)
(2,388)
(1,082)
641
-
-
-
-
-
-
208,016
209,456
(139,333)
(131,791)
68,683
77,665
-
-
-
-
209,456
(131,791)
77,665
(271)
(6,854)
(10,465)
(4,024)
(249)
(6,042)
(10,315)
-
-
-
-
-
-
-
(3,559)
(3,607)
(2,388)
(2,501)
(1,082)
(327)
314
-
850
-
-
-
-
-
-
-
(649)
(3,607)
(2,501)
-
201
Profit before financing and tax
58,955
(271)
(7,181)
51,503
68,383
(249)
(6,691)
61,443
Financing costs
Profit before tax
(5,524)
-
(349)
(5,873)
(9,728)
-
(1,827)
(11,555)
53,431
(271)
(7,530)
45,630
58,655
(249)
(8,518)
49,888
Income tax expense
(6,042)
-
-
(6,042)
(10,735)
-
-
(10,735)
Reportable profit
47,389
(271)
(7,530)
39,588
47,920
(249)
(8,518)
39,153
Reportable segment
Capital expenditure
Total assets
Total liabilities
2020
2019
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
10,639
22,791
160
33,590
18,506
17,257
287
36,050
364,662
141,448
28,258
534,368
326,484
116,529
151,855
17,901
1,878
171,634
109,113
17,666
5,990
1,632
449,003
128,411
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 77
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 (chief operating decision makers) 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
2020
US$000s
206,473
1,543
208,016
2019
US$000s
203,226
6,230
209,456
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 global 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$1.3 million (2019: US$4.9 million) with
a further US$0.2 million (2019: US$1.3 million) in revenue recognised from rutile sales repriced to reflect the latest available
market data at 30 June 2020, 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$11.2 million remains subject to final market pricing at 30 June 2020 (2019: US$12.6 million).
Adjustments between the provisional and final price are accounted for under AASB 9 and are separately disclosed.
Recognition and measurement of revenue
The Group sells mineral sands under a range of International Commercial Terms (Incoterms). Revenue is recognised only when
all of the following have been satisfied: there is no continuing managerial involvement to the degree usually associated with
ownership or effective control over the goods sold; the amount of revenue and costs can be reliably measured; and the flow of
future economic benefits is probable.
The delivery of mineral sands products is the only performance obligation of the Group. The Group considers effective control
over the products sold to have passed at the point that physical control over the goods has transferred to the customer, which
is determined under the Incoterms of the particular sale. For most of the Group’s sales, this is when the goods are loaded onto
a shipping vessel, where the Incoterms are Free on Board (FOB). As such, this is the most common revenue recognition point
for sales. Different Incoterms arise depending on the customer and there are scenarios where control does not transfer until
the goods reach their point of destination at which stage the performance obligation is considered satisfied and the revenue
is recognised.
The Group measures its revenues from contracts with customers at a price established in the formal agreement with the
customer. For rutile sales, where final pricing is based on average market prices, a provisional pricing adjustment is recorded as
described above.
In all circumstances, revenue can reliably be measured based on quantities shipped and prices as described above. Costs
associated with the sale, most notably the cost of the inventory being shipped, are also known in full on the date of shipment.
After control has transferred to the customer, there are no continuing obligations such as customer right of return or warranties
that could impact the recognition of revenues. Once the Group’s sole performance obligation has been met, the Group has the
right to invoice the customer and it is therefore probable that future economic benefits will flow to the Group.
78 | BASE RESOURCES | ANNUAL REPORT 2020
Note 4: Cost of sales
Operating costs
Changes in inventories of concentrate and finished goods
Royalties expense
Depreciation and amortisation
Note 5: Financing costs
Interest expense, inclusive of withholding tax
Amortisation of capitalised borrowing costs
Unwinding of discount on provision for rehabilitation
Foreign exchange loss
Commitment fees
Other financing costs
2020
US$000s
68,553
(502)
14,557
56,725
2019
US$000s
63,234
2,075
14,597
51,885
139,333
131,791
2020
US$000s
2019
US$000s
1,820
447
359
2,214
587
446
5,873
4,042
4,045
621
1,377
478
992
11,555
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
2020
US$000s
39,588
2019
US$000s
39,153
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
Weighted average number of ordinary shares at 30 June
2020
1,166,623
3,406
1,170,029
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
2020
1,170,029
15,801
1,185,830
2019
1,127,575
28,885
1,156,460
2019
1,156,460
15,294
1,171,754
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 79
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
2020
US$000s
2019
US$000s
13,515
15,204
Origination and reversal of temporary differences
Income tax expense reported in comprehensive income
(7,473)
6,042
(4,469)
10,735
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% (2019: 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 12.5% (2019: 15%)
c. Net deferred tax liability recognised
Deferred tax asset recognised
Deferred tax liabilities recognised
Property, plant and equipment
d. Deferred tax assets unrecognised
Deductible temporary differences
Tax losses Australia
Tax losses other
45,630
13,689
2,525
364
2,098
636
(13,270)
6,042
49,888
14,966
2,374
272
1,737
1,193
(9,807)
10,735
1,447
1,156
(10,474)
(9,027)
(17,656)
(16,500)
308
8,310
591
9,209
292
8,468
231
8,991
80 | BASE RESOURCES | ANNUAL REPORT 2020
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 2020 and 2019 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 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 81
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
(Decrease) / increase in income tax payable
Decrease in deferred tax liability
Decrease / (increase) in receivables and other assets
Decrease in inventories
Increase in trade and other payables
Increase / (decrease) in provisions
Cash flow from operations
2020
US$000s
39,588
56,725
1,764
-
5,873
(625)
(13,924)
(7,473)
14,756
81
6,250
2,510
105,525
2019
US$000s
39,153
51,885
1,688
466
11,555
(833)
14,388
(4,469)
(24,213)
215
6,956
(148)
96,643
82 | BASE RESOURCES | ANNUAL REPORT 2020
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 2020
US$000s
30 June 2019
US$000s
26,965
19,576
79
46,620
37,305
25,003
89
62,397
Recoverability of construction period VAT receivable
The Group is owed US$17.9 million (2019: US$24.2 million) in VAT receivable by the Government of Kenya, of which US$16.2 million
(2019: 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 2020
US$000s
30 June 2019
US$000s
2,015
5,849
11,628
19,492
2,465
4,897
12,212
19,574
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 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 83
Notes to the consolidated financial statements - operating assets and liabilities (cont.)
Note 11: Capitalised exploration and evaluation
Toliara Project – Madagascar
Kenya
Closing carrying amount
Movement in carrying amount
Opening balance
Exploration written off during the year
Transfer from property, plant and equipment
Exploration and evaluation expenditure during the period
30 June 2020
US$000s
30 June 2019
US$000s
135,093
4,540
139,633
111,990
3,901
115,891
2020
US$000s
2019
US$000s
115,891
-
-
23,742
139,633
97,115
(466)
95
19,147
115,891
In November 2019, the Government of Madagascar required the Group to temporarily suspend on-the-ground activity on the
Toliara Project while discussions on fiscal terms applying to the project were progressed. Activity remains suspended as the
Group engages with the Government of Madagascar in relation to the fiscal terms applicable to the Toliara Project. Discussions
have been limited as the Government focuses on managing the COVID-19 pandemic. The suspension order does not affect the
validity of the Toliara Project’s mining permit.
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.
84 | BASE RESOURCES | ANNUAL REPORT 2020
Note 12: Property, plant and equipment
2020
At cost
Accumulated depreciation
Closing carrying amount
Plant &
equipment
US$000s
Mine
property and
development
US$000s
262,750
159,083
(168,500)
(100,848)
94,250
58,235
Buildings
US$000s
6,439
(3,688)
2,751
Right-of-
use assets
US$000s
Capital work
in progress
US$000s
Total
US$000s
315
(125)
190
3,325
431,912
-
(273,161)
3,325
158,751
Reconciliation of carrying amounts:
Balance at 1 July 2019
Recognition of right-of-use assets on initial
application of AASB 16
Additions
Transfers
Disposals
Increase in mine rehabilitation asset
117,959
83,061
-
-
1,822
9,851
(8)
-
4,447
(8,592)
-
793
Depreciation expense
(35,364)
(21,151)
Effects of movement in foreign exchange
(10)
(323)
3,263
-
148
-
-
-
(660)
-
Balance at 30 June 2020
94,250
58,235
2,751
-
315
1,303
205,586
-
315
-
-
-
-
(125)
-
190
3,281
(1,259)
-
-
-
-
9,698
-
(8)
793
(57,300)
(333)
3,325
158,751
US$000s
US$000s
US$000s
US$000s
US$000s
US$000s
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
251,140
163,161
(133,181)
(80,100)
117,959
83,061
144,735
2,297
4,215
(6)
(95)
90,981
14,322
(3,402)
-
-
Increase in mine rehabilitation asset
-
495
Depreciation expense
(33,170)
(18,178)
Effects of movement in foreign exchange
(17)
(1,157)
Balance at 30 June 2019
117,959
83,061
3,263
6,292
(3,029)
3,263
3,874
17
-
-
-
-
(628)
-
-
-
-
-
-
-
-
-
-
-
-
-
1,303
421,896
-
(216,310)
1,303
205,586
919
1,198
(813)
-
-
-
-
240,509
17,834
-
(6)
(95)
495
(51,976)
(1)
(1,175)
1,303
205,586
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.
In the reporting period, cash flow forecasts were updated for the expected impacts of COVID-19 with specific reference to
commodity price forecasts.
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 85
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.
Recognition and measurement of Right-of-Use-Assets
AASB 16 Leases eliminates the distinction between operating and finance leases and brings all leases (other than short term
and low value leases) onto the balance sheet. As a lessee, the Group recognises a right-of-use (ROU) asset representing its
right to use the underlying asset and a lease liability representing its obligation to make lease payments. ROU assets are
depreciated over the life of the lease.
The Group recognises a ROU asset and a lease liability at the lease commencement date. The ROU asset is initially measured
at cost (present value of the lease liability plus deemed cost of acquiring the asset), and subsequently at cost less accumulated
depreciation, impairment losses and adjusted for remeasurement of the lease liability. The lease liability is initially measured
at the present value of the lease payments expected to be paid over the lease term, discounted using the interest rate implicit
in the lease or, if the rate cannot be readily determined, the Group’s incremental borrowing rate. The lease liability is further
remeasured if the estimated future lease payments change as a result of index or rate changes, residual value guarantees or
likelihood of exercise of purchase, extension or termination options.
86 | BASE RESOURCES | ANNUAL REPORT 2020
The Group has applied AASB 16 using the modified retrospective approach, under which ROU assets and lease liabilities are
recognised at the equivalent of their present value of the remaining lease payments, with any differences recognised in retained
earnings at 1 July 2019. Accordingly, the prior year information presented for 2019 has not been restated – i.e. it is presented,
as previously reported under AASB 117 and related interpretations.
On transition to AASB 16, the Group elected to apply the practical expedient to grandfather the assessment of which contracts
are, or contain, leases. It applied AASB 16 only to contracts that were previously identified as leases. Contracts that were not
identified as leases under AASB 117 and Interpretation 4 were not reassessed. Therefore, the definition of a lease under AASB
16 has been applied only to contracts entered into or changed on or after 1 July 2019.
As a result of initially applying AASB 16, in relation to the leases previously classified as operating leases, the Group recognised
US$0.5 million of ROU assets and US$0.4 million of lease liabilities as at 1 July 2019. In addition, the Group has recognised
depreciation of US$0.1 million in relation to the leases reported under AASB 16. The application of the new standard did not
have a material effect on expense categories presented in the income statement.
Note 13: Trade and other payables
Trade payables and accruals
Provision for increase in Government of Kenya royalty (a)
30 June 2020
US$000s
30 June 2019
US$000s
12,984
26,633
39,617
11,713
21,425
33,138
a. Government of Kenya Royalty
The Group is in ongoing discussions with the Government of Kenya 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$16.2 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 Government of Kenya, whereas the royalty rate applicable under the terms of the special
mining lease, and currently being paid, is 2.5%.
Note 14: Borrowings
Current
Revolving Credit Facility (b)
Finance lease liabilities (a)
Total current borrowings
Non-current
Revolving Credit Facility (b)
Capitalised borrowing costs (b)
Amortisation of capitalised borrowing costs (b)
Total non-current borrowings
Total borrowings
30 June 2020
US$000s
30 June 2019
US$000s
25,000
195
25,195
50,000
(1,814)
754
48,940
74,135
-
19
19
20,000
(1,393)
306
18,913
18,932
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 87
Notes to the consolidated financial statements - operating assets and liabilities (cont.)
a. Lease Liabilities
The Group adopted AASB 16 Leases from 1 July 2019, which resulted in the initial recognition of lease liabilities. The lease
liability is initially measured at the present value of the lease payments expected to be paid over the lease term, discounted
using the interest rate implicit in the lease or, if the rate cannot be readily determined, the Group’s incremental borrowing rate
(refer note 12).
b. Revolving Credit Facility (RCF)
The RCF carries interest rates of LIBOR plus 463 basis points, inclusive of political risk insurance. The remaining tenor of the
loan is 1.5 years with a final maturity date of 31 December 2021. There are no scheduled repayments prior to maturity, however,
on 30 June 2021 there is a mandatory reduction in the size of the RCF to US$50 million.
The security package for the RCF is a fixed and floating charge over all the assets of Base Titanium Limited (BTL) and the shares
in BTL held by Base Titanium (Mauritius) Limited (BTML) and the Company and the shares held in BTML by the Company.
In January 2020, the Group repaid the outstanding balance of the 30 June 2019 RCF balance. In March 2020, the Group drew
down the full US$75.0 million available under the RCF to secure enhanced liquidity and provide flexibility as part of a prudent
risk management strategy for navigating the evolving uncertainty associated with the COVID-19 pandemic.
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.
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 2020
US$000s
30 June 2019
US$000s
4,066
1,842
5,908
25,352
56
25,408
2020
US$000s
26,368
4,527
(1,836)
359
29,418
2,040
1,358
3,398
24,328
27
24,355
2019
US$000s
22,773
3,103
(129)
621
26,368
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 3 year US Government bonds rate of 0.18% as at 30 June 2020 (2019: 1.76%) and an inflation factor of
1.79% (2019: 1.41%).
Although the ultimate amount to be incurred is uncertain, management has, at 30 June 2020, estimated the cost of mine closure
and rehabilitation activities using an expected remaining mine life of 3 years and a total undiscounted estimated cash flow
of US$29.9 million (2019: US$26.6 million). Management’s estimate of the underlying cost of mine closure and rehabilitation
activities is independently reviewed by an external consultant on a regular basis for completeness, with the last such review
completed in June 2018.
88 | BASE RESOURCES | ANNUAL REPORT 2020
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.
Note 16: Income tax payable
From the commencement of the Kwale operation, Base Titanium (the Group’s wholly owned subsidiary and owner of Kwale
Operations) benefited from an immediate upfront tax deduction for its initial capital investment in developing the project.
This tax deduction created a significant tax loss position which has been carried forward and subsequently applied against
profits generated by the operation. Following the depletion of its remaining carry forward losses, Kwale Operations reached a
tax payable position for the first time in the year ended 30 June 2019, resulting in income tax payable of US$14.5 million for the
2019 financial year. This income tax was subsequently paid to the Kenya Revenue Authority (KRA) during the reporting period.
Since becoming a taxpayer, Base Titanium has transitioned from paying corporate income tax annually in arrears to quarterly in
advance. As a result, during the reporting period, Base Titanium paid a further US$13.0 million to the KRA in the settlement of
its estimated corporate tax payable for the year.
Note 17: Deferred consideration
Deferred consideration – Toliara Project acquisition
30 June 2020
US$000s
30 June 2019
US$000s
17,000
17,000
17,000
17,000
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. In January 2020, in accordance with the terms of the share sale agreement
with World Titane Holdings Limited, the Group acquired the remaining minority interest in the Toliara Project. As a result, the
Group now owns 100% of the Toliara Project. A further US$17.0 million (deferred consideration) is payable on achievement of key
milestones, as the project advances to mine development. 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 | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 89
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 18: Issued capital
Ordinary share capital:
Issued and fully paid
Date
1 July 2018
Performance rights vested under the Company’s LTIP
30 June 2019
1 July 2019
Performance rights vested under the Company’s LTIP
30 June 2020
30 June 2020
US$000s
30 June 2019
US$000s
307,063
306,512
Number
1,127,575,014
39,048,026
1,166,623,040
1,166,623,040
4,986,734
1,171,609,774
US$000s
305,277
1,235
306,512
306,512
551
307,063
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 19: Share-based payments
Performance rights
Total expenses arising from share based payment transactions during the year as part of employee benefit expenses was
US$1.8 million (prior period: US$1.7 million).
Granted performance rights are as follows:
Performance cycle date
KMP
Other employees
Total
Fair value at grant date
1 October 2017
1 October 2018
1 October 2019
7,309,243
9,422,931
9,664,140
7,707,303
13,122,499
15,413,818
15,016,546
22,545,430
25,077,958
A$0.2150
A$0.1610
A$0.1280
All performance rights are granted for nil consideration.
90 | BASE RESOURCES | ANNUAL REPORT 2020
The fair value of the performance rights granted during the 2020 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 0.7%; no dividend yield; volatility
factor of the expected market price of the Company’s shares of 45%; and a remaining life of performance rights of 2.86 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 2019.
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
Forfeited – cycles commenced in previous reporting periods
Vested
Closing balance
2020
48,586,062
25,077,958
1,396,459
(906,204)
(11,514,341)
62,639,934
2019
71,952,345
21,943,713
438,435
-
(45,748,431)
48,586,062
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.
Note 20: 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.
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:
Financial assets
Cash and cash equivalents
Trade and other receivables
Financial liabilities
Trade and other payables
Revolving Credit Facility
Finance lease liabilities
Note
9
13
14
14
2020
US$000s
2019
US$000s
162,559
46,620
209,179
39,617
75,000
195
114,812
39,242
62,397
101,639
33,138
20,000
19
53,157
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 91
Notes to the consolidated financial statements - capital structure, financial instruments and risk management (cont.)
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 global 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$11.2 million remains subject to final market pricing at 30 June 2020 (2019: US$12.6 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 before
tax profit/loss would have increased/decreased by US$1.1 million (2019: US$1.3 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 2020 is 5.27%.
The Group holds its cash deposits in accounts with Nedbank Limited and National Australia Bank Limited (NAB) at variable
rates. A further US$60.0 million is held on deposit with NAB and ANZ Limited at fixed rates.
Fixed rate instruments
Financial assets
Financial liabilities
Variable rate instruments
Financial assets
Financial liabilities
Carrying amount
Realisable/payable within six months
2020
US$000s
2019
US$000s
2020
US$000s
2019
US$000s
60,000
(195)
59,805
102,559
(75,000)
27,559
-
(19)
(19)
39,242
(20,000)
19,242
60,000
-
60,000
102,559
-
102,559
-
-
-
39,242
-
39,242
92 | BASE RESOURCES | ANNUAL REPORT 2020
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
2020
US$000s
100bp increase
2020
US$000s
100bp decrease
2019
US$000s
100bp increase
2019
US$000s
100bp decrease
276
(276)
(276)
276
192
(192)
(192)
192
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 2020
In US$000s:
Cash and cash equivalents
Trade and other receivables
Other current assets
Trade and other payables
Net exposure
30 June 2019
In US$000s:
Cash and cash equivalents
Trade and other receivables
Other current assets
Trade and other payables
Net exposure
AUD
-
-
-
(43)
(43)
AUD
45
-
-
(83)
(38)
USD
69,690
-
-
(226)
69,464
USD
3,062
-
-
(165)
2,897
KES
919
17,883
365
(3,306)
15,861
KES
2,038
24,234
385
(1,925)
24,732
MGA
292
1,648
39
(335)
1,644
Other
Total USD
4
-
-
(338)
(334)
70,905
19,531
404
(4,248)
86,592
MGA
Other
Total USD
672
640
111
(411)
1,012
5
-
-
(131)
(126)
The following significant exchange rates applied during the year:
USD : AUD
USD : KES
USD : MGA
Average rate
30 June spot rate
2020
1.490
103.03
3701,70
2019
1.398
101.15
3,503.66
2020
1.454
106.52
3,855.38
5,822
24,874
496
(2,715)
28,477
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 before-tax profit/(loss) for the year to date would have been US$8.7 million lower/
higher (2019: US$2.8 million lower/higher).
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 93
Notes to the consolidated financial statements - capital structure, financial instruments and risk management (cont.)
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 2020 was US$208.0 million (2019: US$209.5 million). Base Resources had two major
customers who individually accounted for more than 10% of sales revenue, with one contributing $45.2 million (2019: $45.7 million)
and the other contributing $24.0 million (2019: $nil). These customers represent 0% (2019: 0%) of the trade receivables balance at
30 June 2020.
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$17.9 million in VAT receivable by the Government of Kenya (Note 9), of which US$16.2 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
Trade and other receivables
Total anticipated inflows
2020
US$000s
2019
US$000s
162,559
46,620
209,179
39,242
62,397
101,639
At 30 June 2020, 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
2020
US$000s
27,044
-
27,044
2019
US$000s
37,354
40
37,394
There were no impairment losses in relation to financial assets during the current or the prior financial year. The maximum
exposure to credit risk for financial assets at the reporting date by geographic region of the customer or financial institutions was:
2020
US$000s
2019
US$000s
66,816
21,535
8,265
12,008
88,125
12,430
26,103
28,177
26,462
7,700
5,832
7,365
209,179
101,639
United Kingdom
Kenya
China
USA
Australia
Other
Total
94 | BASE RESOURCES | ANNUAL REPORT 2020
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 2020
US$000s
US$000s
US$000s
US$000s
US$000s
US$000s
US$000s
Trade and other payables
Revolving Credit Facility
Finance lease liabilities
39,617
75,000
195
39,617
80,351
195
12,984
680
195
26,633
28,325
-
-
51,346
-
114,812
120,163
13,859
54,958
51,346
30 June 2019
Trade and other payables
Revolving Credit Facility
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
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.
-
-
-
-
-
-
-
-
-
-
-
-
-
Cash and cash equivalents
Trade and other receivables
Inventories
Other current assets
Trade and other payables
Borrowings
Provisions
Income tax payable
Other liabilities
Deferred consideration
Working capital position
2020
US$000s
162,559
46,620
19,492
7,313
(39,617)
(25,195)
(5,908)
(539)
-
(17,000)
147,725
2019
US$000s
39,242
62,397
19,574
6,313
(33,138)
(19)
(3,398)
(14,463)
(625)
(17,000)
58,883
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 95
Notes to the consolidated financial statements - capital structure, financial instruments and risk management (cont.)
Notes to the consolidated financial statements
GROUP STRUCTURE AND OTHER INFORMATION
Note 21: Parent entity disclosures
As at, and throughout the financial year ended 30 June 2020, 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
2020
US$000s
(9,627)
(9,627)
2020
US$000s
88,486
169,738
258,224
3,342
82,530
85,872
172,352
307,063
(43,769)
(90,942)
172,352
2019
US$000s
(9,212)
(9,212)
2019
US$000s
5,905
211,752
217,657
3,341
30,717
34,058
183,599
306,512
(45,291)
(77,622)
183,599
Principles of consolidation
The consolidated financial statements incorporate the assets, liabilities and results of entities controlled by Base Resources
Limited at the end of the reporting period. The Group controls an entity when it is exposed to, or has rights to, variable returns
from its involvement with the entity and has the ability to affect those returns through its power over the entity. The financial
statements of subsidiaries are included in the consolidated financial statements from the date on which control commences
until the date on which control ceases.
Where controlled entities have entered or left the Group during the year, the financial performance of those entities are included
only for the period of the year that they were controlled.
In preparing these financial statements, all inter-group balances and transactions between entities in the Group have been
eliminated on consolidation. Accounting policies of subsidiaries have been changed where necessary to ensure consistency
with those adopted by the parent entity.
Controlled entity
Country of Incorporation
2020
Ownership %
Base Titanium (Mauritius) Limited
Base Titanium Limited
BTS Holdings (Mauritius) Limited
Madagascar Mineral Fields Limited
Malagasy Sands No. 2 Limited
Base Toliara SARL
Madagascar Resources SARL
Mauritius
Kenya
Mauritius
Mauritius
Mauritius
Madagascar
Madagascar
100
100
100
100
100
100
100
2019
100
100
100
85
85
85
85
96 | BASE RESOURCES | ANNUAL REPORT 2020
Note 22: Related parties
KMP compensation:
Short-term employment benefits
Post-employment benefits
Share-based payments
Other long term
2020
US$
2019
US$
2,798,216
2,907,768
128,658
951,986
56,053
129,199
927,816
58,512
3,934,913
4,023,295
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 2020,
US$513,000 (2019: US$516,000) was paid or is payable to Pacific Road under this royalty arrangement. Mr Stirzaker, non-
executive director of the Group, was a partner of Pacific Road until September 2019.
Recognition and measurement of short term employee benefits
STIP obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is
recognised for the amount expected to be paid under the STIP where the Group has a present legal or constructive obligation
as a result of past services by the employee, and the obligation can be estimated reliably.
Recognition and measurement of defined contribution plans
Contributions are made by the Group to individual defined contribution superannuation plans for Australian directors
and employees and are expensed when incurred.
Note 23: Auditors’ remuneration
Audit services
KPMG Australia
Audit of financial report
Overseas KPMG firms
Audit services
Other services
KPMG Australia
Routine tax compliance and advisory services for reporting period
Other services
Overseas KPMG firms
Assistance with Kenyan Revenue Authority audits for prior periods for which KPMG was
the incumbent tax advisor
Kenyan VAT compliance and advisory services
Other tax compliance and advisory services for reporting period
2020
US$
2019
US$
104,624
108,199
114,562
219,186
111,217
219,416
15,133
7,151
49,769
7,330
55,384
56,023
39,266
30,243
147,177
51,600
110,560
275,282
BASE RESOURCES | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 97
Notes to the consolidated financial statements - group structure and other information (cont.)
Note 24: New accounting standards not yet adopted
New standards adopted in the period
During the period, the Group adopted the following accounting standards that are applicable to the Group’s financial report:
• IFRIC 23 Uncertainty over Tax Treatments. IFRIC 23 clarifies how the recognition and measurement requirements of IAS12
Income and Taxes are applied where there is uncertainty over income tax treatments. The adoption of this standard has had
no material impact on balances and transactions reported in either the current period or comparative period.
• AASB 16 Leases. The impact of adopting this standard and the accounting policies are described in Note 12. As
demonstrated in that note, the adoption of this standard has had no material impact on balances and transactions reported
in either the current or comparative period.
Accounting standards and interpretations not yet effective
There are a number of new standards effective for annual periods beginning on or after 1 July 2020. The Group has not
adopted these early.
• Definition of a Business (Amendments to AASB 3).
• Amendments to References to Conceptual Framework in IFRS Standards.
• Definition of Material (Amendments to AASB 101 and AASB 108).
The abovementioned standards and interpretations are not expected to have a significant impact on the Group’s consolidated
financial statements when adopted.
Note 25: Events after the reporting date
Since the end of the reporting period, on 21 August 2020, the Board has determined a maiden dividend of AUD 3.5 cents per
share, unfranked, with a record date of 21 September 2020 and payment date of 7 October 2020. The financial impact of the
dividend amounting to US$28.2 million has not been recognised in the Consolidated Financial Statements for the year-ended 30
June 2020.
There have been no other 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
98 | BASE RESOURCES | ANNUAL REPORT 2020
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 72 to 98 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 2020 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 2020.
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 22nd day of August 2020
BASE RESOURCES | DIRECTORS' DECLARATION | 99
Independent auditor’s report
100 | BASE RESOURCES | ANNUAL REPORT 2020
Liability limited by a scheme approved under Professional Standards Legislation. 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. 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 2020 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 2020 • 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. BASE RESOURCES | INDEPENDENT AUDITOR'S REPORT | 101
Value of property, plant and equipment (US$158,751,000) 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 27% 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 on-set of COVID-19 and the potential impact it may have on the ability of the Group to generate cash flows and support the valuation assessment of the property, plant and equipment. • The Group’s market capitalisation at 30 June 2020 being less than the net assets, resulting in the requirement of management to perform a valuation assessment of the property, plant and equipment. In performing the valuation assessment of the Group’s property, plant and equipment, management designs a fair value less cost of disposal model to determine the recoverable amount. In designing the model, management applies significant estimates and judgments, specifically in determining key inputs. These inputs include: • Forecast sales, production output, production costs, capital expenditure and expected commodity prices for mineral sands. The uncertainty and volatility described above increase the possibility of inaccurate forecasts. • Discount rates, the calculation of which is particularly complex where operations are overseas as country-specific risk must be estimated. • Life of mineral reserves. The Group engages an external expert to assist in producing the reserves and resources statement which underlies the forecast production output within the Group’s calculation. The existence of management’s significant estimate and judgments in determining the valuation of property, plant and equipment contributes to our conclusion that this is a key audit matter. In assessing this key audit matter, we involved senior team members and valuation specialists. Our procedures included, but were not limited to: • 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 performed mathematical integrity checks of the fair value less costs of disposal model. • We evaluated the sensitivity of the valuation of property, plant and equipment by considering reasonably possible changes to the key assumptions, including forecast commodity prices and the discount rate. • 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 management’s budgets presented to its Board of Directors. • 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 and comparing to past performance. • We compared expected commodity prices to the most recent published views of the market commentator on future trends. • We compared the life of mineral reserves and resources, and production output assumptions in the Group’s model to those in the reserves and resources statement commissioned by the Group for consistency. We also assessed the competency of management’s external experts used to determine reserves and resources estimates. • 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 impact of COVID 19 on the Kwale operations and the potential for impact on forecast cashflows. Independent auditor’s report (cont.)
102 | BASE RESOURCES | ANNUAL REPORT 2020
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. 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. BASE RESOURCES | INDEPENDENT AUDITOR'S REPORT | 103
Report on the Remuneration Report Opinion In our opinion, the Remuneration Report of Base Resources Limited for the year ended 30 June 2020, 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 2020. 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 22 August 2020 Additional shareholder information
The following additional information required by the ASX Listing Rules is current as at 31 July 2020.
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
138
208
175
441
178
1,140
Units
9,817
667,219
1,397,930
16,579,679
1,152,955,129
1,171,609,774
%
0.00
0.06
0.12
1.42
98.41
100.0
There were 197 holders of unmarketable parcels of shares ( LIMITED
2.
3.
4.
5.
6.
7.
PACIFIC ROAD CAPITAL II PTY LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
UBS NOMINEES PTY LTD
CS FOURTH NOMINEES PTY LIMITED
CS THIRD NOMINEES PTY LIMITED
8. WARBONT NOMINEES PTY LTD
9.
CPU SHARE PLANS PTY LTD
10. COMPUTERSHARE CLEARING PTY LTD
11. NERO RESOURCE FUND PTY LTD
12. NGE CAPITAL LIMITED
13. NEWECONOMY COM AU NOMINEES PTY LIMITED <900 ACCOUNT>
14. DEFENDER EQUITIES PTY LTD
15. MR TIMOTHY JAMES CARSTENS
16. BPM CAPITAL LIMITED
17. BRISPOT NOMINEES PTY LTD
18.
MR COLIN NEIL STEWART BWYE + MRS ANNETTE MARGARET BWYE
19. MR MICHAEL CHARLES BOWDEN
20. HARMANIS HOLDINGS PTY LTD
341,819,747
312,436,779
115,717,099
92,491,866
70,039,517
28,176,366
22,475,550
20,394,921
17,687,852
13,325,211
11,446,933
7,400,000
7,341,295
7,000,000
5,400,667
5,000,000
4,596,351
4,196,451
2,500,000
2,320,614
%
29.18
26.67
9.88
7.89
5.98
2.40
1.92
1.74
1.51
1.14
0.98
0.63
0.63
0.60
0.46
0.43
0.39
0.36
0.21
0.20
1,091,767,219
93.19
104 | BASE RESOURCES | ANNUAL REPORT 2020
Substantial shareholdings
The substantial shareholders of the Company, and the number of securities in which those shareholders and their associates
have a relevant interest, as disclosed in the substantial holding notices received by the Company are:
Name
Pacific Road Capital II Pty Ltd and Pacific Road Capital Management GP II Limited
Sustainable Capital Ltd
FIL Limited
Regal Funds Management Pty Limited
UBS Group AG
Number of shares
310,813,913
260,732,274
117,160,977
124,549,009
65,591,302
Performance rights
The following unlisted performance rights are on issue. Performance rights do not carry a right to vote. Voting rights will attach
to any ordinary shares issued upon vesting and exercise of performance rights in accordance with their terms of issue pursuant
to the Base Resources Long Term Incentive Plan.
Cycle
2016
2017
2018
2019
Date of Vesting/Expiry
Number of performance rights
Number of Holders
30 September 2019
30 September 2020
30 September 2021
30 September 2022
6,527,607*
15,016,546
22,545,430
25,077,958
9
27
37
37
* Performance rights have vested, but remain subject to valid exercise.
Other information
The Company has a primary listing on ASX and a secondary listing on the London Stock Exchange’s AIM.
There is no current on-market buy back taking place. During the reporting period, no shares were purchased on-market for the
purposes of an employee incentive scheme.
BASE RESOURCES | ADDITIONAL SHAREHOLDER INFORMATION | 105
Additional shareholder information (cont.)
Glossary
AASB
AGM
AIM
APES
ASIC
ASX
AUD
Base Resources
or the Company
DFS
EBITDA
EITI
EXCO
FY
FY18
FY19
FY20
FY21
Group
HM
HMC
IFRS
ILM
IUCN
JORC
KES
KMP
Australian Accounting Standards Board
Annual general meeting
Alternative Investment Market
Accounting Professional and Ethical Standards
Australian Securities and Investments
Commission
Australian Securities Exchange
Australian dollar
Base Resources Limited
Definitive feasibility study
Earnings before interest, taxes, depreciation
and amortisation
Extractive Industries Transparency Initiative
Managing Director and the Executive Director -
Operations & Development
Financial year
Financial year ended 30 June 2018
Financial year ended 30 June 2019
Financial year ended 30 June 2020
Financial year ending 30 June 2021
LTIFR
LTIP
MGA
MSP
Mt
NGOs
NPAT
NRV
OS
PPE
RCF
RUT
SL
SML
SPL
STIP
TFR
Ti02
tph
TRI
Lost time injury frequency rate
Long term incentive plan
Malagasy Ariary
Mineral separation plant
Million tonnes
Non-governmental organisations
Net profit after tax
Net realisable value
Oversize material
Property, plant and equipment
Revolving credit facility
Rutile
Slimes
Special mining lease
Special prospecting license
Short term incentive plan
Total fixed remuneration
Titanium dioxide
Tonnes per hour
Total recordable injury
Base Resources and its controlled entities
TRIFR
Total recordable injury frequency rate
Heavy mineral
Heavy mineral concentrate
International Financial Reporting Standards
Ilmenite
International Union for Conservation of Nature
Australasian Joint Ore Reserves Committee
Kenyan Shilling
Key management personnel
TRP
TSF
TSR
Total remuneration package
Tailings storage facility
Total shareholder return
USD or US$
United States dollar
VWAP
WCP
ZIR
Volume weighted average price
Wet concentrator plant
Zircon
Kwale
Operations
The Company’s mineral sands operations in
Kwale County, Kenya.
LEUC
LIBOR
LTI
Leucoxene
London Inter-bank Offered Rate
Lost time injury
106 | BASE RESOURCES | ANNUAL REPORT 2020
Corporate Directory
Directors
Mr Keith Spence
Non-Executive Chair
Mr Tim Carstens
Managing Director
Mr Colin Bwye
Executive Director
Mr Samuel Willis
Non-Executive Director
Mr Malcolm Macpherson
Non-Executive Director
Mr Michael Stirzaker
Non-Executive Director
Ms Diane Radley
Non-Executive Director
Solicitors
Herbert Smith Freehills
QV1 Building
250 St Georges Terrace
Perth WA 6000
Share registry
Company secretary
Mr Chadwick Poletti
Principal place of business and registered office
Level 1
50 Kings Park Road
West Perth WA 6005
Contact details
Website baseresources.com.au
Email
Phone
Fax
info@baseresources.com.au
+ 61 (8) 9413 7400
+ 61 (8) 9322 8912
Auditors
KPMG
235 St Georges Terrace
Perth WA 6000
ASX
Computershare Investor Services Pty Limited
Level 11, 172 St Georges Terrace
Perth WA 6000
Enquiries (within Australia):
1300 850 505
Website
(outside Australia): +61 (3) 9415 4000
computershare.com.au
AIM
Computershare Investor Services PLC
The Pavilions
Bridgwater Road
Bristol BS99 6ZZ
Enquiries +44 (0) 870 702 0003
Website
computershare.co.uk
Broker
Berenberg
60 Threadneedle Street
London EC2R 8HP
Nominated advisor
RFC Ambrian Limited
QV1 Building
250 St Georges Terrace
Perth WA 6000
Phone
Fax
+61 8 9480 2500
+61 8 9480 2511
BASE RESOURCES | CORPORATE DIRECTORY | 107
108 | BASE RESOURCES | ANNUAL REPORT 2020
BASE RESOURCES | | cix
Base Resources Limited
Annual Report 2020
50 Kings Park Rd
West Perth WA 6005
+61 8 9413 7400
baseresources.com.au
ABN 88 125 546 910
cx | BASE RESOURCES | ANNUAL REPORT 2020