Base Resources share price could fall on weak quarterly result

The Base Resources Ltd (ASX: BSE) share price could fall this morning after the company reported its June 2019 quarterly update to the ASX.

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The Base Resources Limited (ASX: BSE) share price could fall today after the company reported its June 2019 quarterly update to the ASX.

What did Base Resources announce this morning?

The Aussie miner reported that its Kenyan Kwale Mineral Sands Operations successfully relocated mining operations to the south dune orebody in June, following depletion of the Central Dune, with mining successfully recommencing after a 14-day transition shutdown.

During this period, the mineral separation plant (MSP) operated on stockpiled heavy mineral concentrate (HMC) to ensure uninterrupted production.

According to management, the company's Toliara mineral sands project (Toliara Project) in the south-west of Madagascar saw sound progress on all workstreams and remains on schedule for completion of the definitive feasibility study (DFS) in late 2019.

Base Resources reported that the last blocks of the central dune orebody were mined during the quarter before mining operations were halted in mid-June to commence the two-week transition to the south dune.

As a result of the transition, mining volume was lower than the prior quarter at 3.64Mt.

From the company's quarterly update, total operating costs were marginally lower than the previous quarter due to lower mining volumes which, when combined with higher production volumes, resulted in a lower unit operating cost of US$127 per tonne produced.

Unit operating costs were higher than the same period last year (June 2018 quarter: US$102 per tonne) due to lower MSP feed and therefore lower production volumes this quarter.

Base Resources management also said unit cost of goods sold is influenced by both the underlying operating costs and product sales mix.

Operating costs are allocated to each product based on revenue contribution, which sees the higher value rutile and zircon products attracting a higher cost per tonne than the lower value ilmenite.

Base Resources said the greater the sales volume of rutile and zircon relative to ilmenite in a quarter, the higher both unit revenue per tonne and unit cost of goods sold will be.

On the marketing front, Base Resources reported expected constraints on the global supply of sulphate ilmenite and high-grade chloride feedstocks (including rutile) which have continued to have an impact on the market and supported further positive price momentum.

At the time of writing, the Base Resources share price is trading at $0.27 per share – marginally higher than it started the year and with a market cap of $315 million.

Motley Fool contributor Kenneth Hall has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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