Base Resources Limited - Quarterly Activities Report - March 2024

African mineral sands producer, Base Resources Limited (ASX & AIM: BSE) (Base Resources or the Company) is pleased to provide an operational, development and corporate update for the quarter ended 31 March 2024.

Key Points

Corporate

• Post quarter-end, Base Resources reached agreement with Energy Fuels, a US-based uranium and critical minerals producer, for a proposed combination to create a global critical minerals business.
• Subject to satisfaction of several conditions, Energy Fuels will acquire 100% of the issued shares in Base Resources by way of scheme of arrangement in return for 0.0260 Energy Fuels common shares plus an unfranked special dividend of A$0.065 per Base Resources shares, representing a premium of 188% to Base Resources’ last pre-announcement closing price.

Kwale Operations

• Following depletion of South Dune ore reserves, mining operations were successfully relocated to the Bumamani deposit over a two-week period resulting in reduced tonnage in the quarter.
• Due to improvements in HMC quality, FY24 production guidance has been revised upwards.  Production guidance for FY25 (to the end of Kwale Operations’ mine life) also issued.
• After challenging conditions over the past few quarters, the market stabilised as demand improved and some downstream re-stocking supported flat pricing across all products. 

Toliara Project

• Engagement on Toliara Project fiscal terms and lifting of the project’s on-ground suspension was reinitiated after President Rajoelina formed his new government in January.
• Substantial progress was made towards agreeing the fiscal terms for the Toliara Project, with the Government indicating that finalising terms and launching the project is a priority.

PROPOSED COMBINATION WITH ENERGY FUELS

On 22 April 2024, the Company announced that it had entered a binding scheme implementation deed with Energy Fuels Inc. (NYSE American: UUUU, TSX: EFR) (Energy Fuels) pursuant to which Energy Fuels agreed to acquire 100% of the issued shares in Base Resources by way of scheme of arrangement (Transaction or Scheme).  The Transaction will establish a global leader in the critical minerals sector with a focus on rare earth elements, uranium and heavy mineral sands production with a clear strategic development pathway. 

Under the terms of the Transaction, Base Resources shareholders will be entitled to receive 0.0260 Energy Fuels common shares, plus A$0.065 in cash via an unfranked special dividend payable by Base Resources1 (together, the Transaction Consideration), for each Base Resources share held.  The Transaction Consideration implies an offer price of A$0.302 per share and represents a premium of 188% to Base Resources’ last closing price prior to announcement of the Transaction2.

Base Resources’ Board has unanimously recommended that shareholders vote in favour of the Scheme and each Director owning Base Resources shares intends to vote all those shares in favour of the Scheme3.  Voting intention statements were also received from each of Base Resources’ two major shareholders (owning 26.5% and 24.8% respectively of the shares on issue) confirming that they each intend to vote in favour of the Scheme3.

Energy Fuels is the largest producer of uranium in the United States, with its yellowcake sold to major nuclear utilities.  Energy Fuels’ White Mesa mill in Utah is the only operating conventional uranium and vanadium mill in the United States, and the only mill in North America with the capabilities to extract rare earth elements (REEs) from monazite feed to produce high-purity advanced REE products.  Since 2021, the White Mesa mill has successfully produced commercial quantities of REE products from monazite feedstock.

Potential benefits of the Transaction to Base Resources shareholders (in addition to the significant premium offered) include:

• A combined group with a strong platform for funding development of the Toliara Project, through the step-change in market capitalisation, trading liquidity, market profile and funding capacity, plus an enhanced opportunity to secure strategic, low-cost United States Government critical minerals funding support. 
• An opportunity to add significant value to the monazite produced at the Toliara Project by capturing a greater share of the REE value chain through processing at the White Mesa mill into separated rare earth oxides4.
• An opportunity to retain exposure to a unique diversified critical minerals business.

The independent expert, PwC, has commenced their work, as has the independent technical specialist, AMC Consultants.  Base Resources and Energy Fuels are progressing the key regulatory approvals required in Australia, Kenya and Madagascar, with preparation of the scheme booklet underway targeting despatch to shareholders in late June/early July 2024.

[Notes: (1): Payment of the special dividend is conditional on the Scheme becoming legally effective. (2): Implied offer price and premium based on (as applicable) Energy Fuels’ and Base Resources’ last closing price, prior to announcement of the Transaction, on 19 April 2024 of US$5.84 and A$0.105 per share, respectively, and a AUD:USD exchange rate of 0.6400. (3): In each case, in the absence of a superior proposal and subject to the independent expert concluding (and continuing to conclude) that the Scheme is in the best interests of shareholders. (4): Subject to Energy Fuels completing commissioning of Phase 1 of its REE separation facility at the White Mesa mill, and then arranging for and making a development decision on Phase 2 of this facility.]

KWALE OPERATIONS

Operational performance

South Dune ore reserves were fully depleted early in the quarter, following which, mining operations were successfully relocated to the Bumamani deposit.  This major logistical exercise was completed over a two-week period resulting in lower mined tonnage of 3.7 million tonnes (Mt) in the quarter (last quarter: 3.9Mt).  Mining at the North Dune continued uninterrupted throughout the quarter.

SUMMARY BY QUARTER	FY23		FY24
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