Half Year Accounts

BASE RESOURCES LIMITED ABN 88 125 546 910 Interim Financial Report For the six month period ended 31 December 2014 TABLE OF CONTENTS Corporate Directory 3 Directors' Report 4 Auditor's Independence Declaration 7 Consolidated Condensed Statement of Profit or Loss and Other 8 Comprehensive Income Consolidated Condensed Statement of Financial Position 9 Consolidated Condensed Statement of Changes in Equity 10 Consolidated Condensed Statement of Cash Flows 11 Notes to the Financial Statements 12 Directors' Declaration 20 Independent Auditor's Report 21 CORPORATE DIRECTORY DIRECTORS Mr Andrew King, Non-Executive Chairman Mr Tim Carstens, Managing Director Mr Colin Bwye, Executive Director Mr Samuel Willis, Non-Executive Director Mr Michael Anderson, Non-Executive Director Mr Malcolm Macpherson, Non-Executive Director Mr Trevor Schultz, Non-Executive Director - retired 19 November 2014 Mr Michael Stirzaker, Non-Executive Director - appointed 19 November 2014 Mr Keith Spence, Non-Executive Director - appointed 20 February 2015 COMPANY SECRETARY Mr Winton Willesee PRINCIPAL PLACE OF BUSINESS AND REGISTERED OFFICE Level 1 50 Kings Park Road WEST PERTH, WA 6005 CONTACT DETAILS Website: www.baseresources.com.au Email: info@baseresources.com.au Phone: + 61 (8) 9413 7400 Fax: + 61 (8) 9322 8912 SOLICITORS AUDITORS Ashurst Australia KPMG Level 32, Exchange Plaza 235 St Georges Terrace 2 The Esplanade PERTH WA 6000 PERTH WA 6000 SHARE REGISTRY AIM: ASX: Computershare Investor Services PLC Computershare Investor Services Pty Ltd The Pavilions Level 2, 45 St Georges Terrace Bridgwater Road PERTH WA 6000 Bristol BS99 6ZZ Enquiries: Enquiries: +44 (0) 870 702 0003 (within Australia): 1300 850 505 Website: www.computershare.co.uk (outside Australia): +61 (3) 9415 4000 Website: www.computershare.com.au NOMINATED ADVISOR BROKER RFC Ambrian Limited RFC Ambrian Limited QV1 Building Condor House 250 St Georges Terrace 10 St Paul's Churchyard PERTH WA 6000 LONDON EC4M 8AL DIRECTORS REPORT Your directors submit the interim financial report of the Group, being the Company, Base Resources Limited, and its controlled entities for the half-year ended 31 December 2014. Directors The names of the directors in office at any time during or since the end of the half-year are: Mr Andrew King Mr Tim Carstens Mr Colin Bwye Mr Samuel Willis Mr Michael Anderson Mr Malcolm Macpherson Mr Trevor Schultz - retired 19 November 2014 Mr Michael Stirzaker - appointed 19 November 2014 Mr Keith Spence - appointed 20 February 2015 Directors have been in office since the start of the financial year to the date of this report with the exception of Mr Michael Stirzaker who was appointed on 19 November 2014, Mr Keith Spence who was appointed on 20 February 2015 and Mr Trevor Schultz who retired on 19 November 2014. Mr Michael Stirzaker previously held the position as alternative for Mr Trevor Schultz. Company Secretary Mr Winton Willesee held the position of company secretary during the half-year. Principal Activities and Significant Changes in Nature of Activities The principal activity of the Group is the operation of the Kwale Mineral Sands Project in Kenya. Operating Results The loss for the Group for the half-year after providing for income tax amounted to $10,243,803 (2013: $5,522,393). Dividends Paid or Recommended There were no dividends paid or declared for payment during the period ended 31 December 2014. Review of Operations During the half-year to 31 December 2014, the Group has continued the ramp up the Kwale Mineral Sands Operations. With the consistent achievement of design availabilities and throughputs in both the wet concentrator plant ("WCP") and mineral separation plant ("MSP"), the focus has been firmly on continuing to drive product recoveries, with considerable success achieved. Ilmenite production has continued at a rate exceeding design expectations largely due to further improvement in recoveries. Rutile and zircon production is consistent with a planned twelve month ramp up to design capacity. Further plant modifications and optimisations are expected to increase rutile and zircon production over the balance of the 2015 financial year. The Group completed 9 bulk shipments of ilmenite totalling approximately 170,000 tonnes and 3 bulk shipments of rutile of approximately 30,000 tonnes during the six month period. An additional 16 shipments of containerised rutile totalling more than 6,000 tonnes and 38 shipments of containerised zircon totalling more than 8,000 tonnes were shipped during the period. The global titanium dioxide pigment industry softened towards the end of year as the northern hemisphere entered its usual seasonal slowdown, resulting in ilmenite prices coming under renewed pressure. Global inventories of ilmenite feedstocks are expected to remain at elevated levels until the pigment market picks up in the first half of the 2015 calendar year. Pricing of high grade titanium dioxide feedstock (including rutile) remained relatively stable through the six month period, but may come under some pressure in the early months of 2015. DIRECTORS REPORT Zircon trade activity remained firm throughout the six month period and prices remained stable and are expected to remain stable throughout the first quarter of 2015. There is potential for some zircon price growth in 2015 provided that major producers continue to manage their production output in line with market demand. Summary Physical Data Six months to Dec Twelve months to Jun 2014 2014 Ore mined (dmt) 4,520,201 4,532,154 Heavy mineral concentrate 338,838 296,750 produced (dmt) Production (dmt) Ilmenite 208,426 165,352 Rutile 35,284 24,216 Zircon 10,518 4,486 Sales (dmt) Ilmenite 169,923 138,829 Rutile 36,251 14,005 Zircon 8,484 2,704 Financial Position The Group's working capital, being current assets less current liabilities, has increased from $15 million at 30 June 2014 to $32 million at 31 December 2014, largely due to an increase in receivables. In order to take advantage of considerable savings in freight rates, the Group is increasingly shipping 50,000 tonne cargoes and the timing of these shipments can have a significant impact on the receivables balance. In November 2014, the Group completed the restructure of the US$215 million Kwale Project debt facility ("Project Debt Facility"). The rescheduling has the primary effect of realigning the Project Debt Facility repayment schedule to reflect the delay in commencement of sales from the Kwale Project to February 2014 from the original expectation of October 2013 when the facility was arranged in 2011. Under the terms of the restructure, all principal repayments and funding of the debt service reserve account have been deferred by six months with some re-profiling to suit future cash flows. The first principal repayment was deferred from December 2014 to June 2015 and the debt repayments during the 2015 financial year are reduced from US$45.9 million to US$11.0 million. In addition, Base will contribute US$15 million in additional liquidity by 30 June 2015 ("Liquidity Injection"). In December 2014, the Group executed a US$20 million unsecured debt facility with one of its major shareholders, Taurus Funds Management ("Taurus Facility"). The Taurus Facility provides a source of additional funding for the Kwale Project should it be needed, a means to satisfy the Liquidity Injection and US$5 million in corporate funding. In the Directors' opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. Rounding The Group is of a kind referred to in ASIC Class Order 90/100 dated 10 July 1998 and in accordance with that Class Order, amounts in the interim financial report and directors' report have been rounded to the nearest thousand dollars, unless otherwise stated. Auditor's Declaration The lead auditor's independence declaration under section 307C of the Corporations Act 2001 is set out on page 7 for the half-year ended 31 December 2014. This report is signed in accordance with a resolution of the Board of Directors. Andrew King Director Dated this 23rd day of February 2015 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 review for the half-year ended 31 December 2014 there have been: i. no contraventions of the auditor independence requirements as set out in the Corporations Act 2001 in relation to the review; and ii. no contraventions of any applicable code of professional conduct in relation to the review. KPMG Graham Hogg Partner Perth 23 February 2015 CONSOLIDATED CONDENSED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 6 months to 6 months to 31 December 31 December 2014 2013 Note $000s $000s Sales revenue 61,836 - Cost of sales (29,968) - Amortisation and depreciation (19,437) - Royalties (4,622) - Profit from operations 7,809 - Corporate and external affairs (4,702) (3,687) Community development costs (1,950) (492) Product marketing (421) (304) Other expenses (34) (1,493) Profit / (loss) before financing income 702 (5,976) and income tax Financing (costs) / income 2 (10,946) 508 Loss before income tax (10,244) (5,468) Income tax expense - (54) Net loss for the period (10,244) (5,522) Other comprehensive income Items that may be reclassified subsequently to profit or loss: Foreign currency translation differences - 18,654 4,173 foreign operations Total other comprehensive income / (loss) 18,654 4,173 for the period Total comprehensive income / (loss) for 8,410 (1,349) the period Net Loss per share Cents Cents Basic profit / (loss) per share (cents per (1.82) (0.98) share) Diluted profit / (loss) per share (cents (1.82) (0.98) per share) The accompanying notes form part of these condensed consolidated interim financial statements. CONSOLIDATED CONDENSED STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER 2014 31 December 30 June 2014 2014 Note $000s $000s Current assets Cash and cash equivalents 12,715 20,945 Trade and other receivables 3 49,267 33,265 Inventories 4 28,629 20,049 Other current assets 3,181 3,007 Total current assets 93,792 77,266 Non-current assets Capitalised exploration and evaluation 1,334 1,120 Property, plant and equipment 5 416,541 386,153 Inventories 4 - 1,106 Restricted cash 6,130 5,406 Total non-current assets 424,005 393,785 Total assets 517,797 471,051 Current liabilities Trade and other payables 12,443 11,322 Borrowings 6 44,618 49,887 Provisions 1,230 1,180 Deferred revenue 7 2,205 - Other liability 8 1,254 - Total current liabilities 61,750 62,389 Non-current liabilities Borrowings 6 210,530 177,667 Provisions 26,004 21,696 Deferred revenue 7 5,364 5,181 Other liability 8 - 1,106 Total non-current liabilities 241,898 205,650 Total liabilities 303,648 268,039 Net assets 214,149 203,012 Equity Issued capital 9 214,131 213,669 Reserves 36,542 16,085 Accumulated losses (36,524) (26,742) Total equity 214,149 203,012 The accompanying notes form part of these condensed consolidated interim financial statements. CONSOLIDATED CONDENSED STATEMENT OF CHANGES IN EQUITY FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 Issued Accumulated Share Foreign Total losses based currency capital payment reserve translation reserve $000s $000s $000s $000s $000s Balance at 1 July 2013 213,669 (12,672) 1,764 15,364 218,125 Loss for the period - (5,522) - - (5,522) Other comprehensive loss - - - 4,173 4,173 Total comprehensive profit - (5,522) - 4,173 (1,349) / (loss) for the period Transactions with owners, recognised directly in equity Shares issued during the - - - - - period, net of costs Share based payments - - 424 - 424 Balance at 31 December 2013 213,669 (18,194) 2,188 19,537 217,200 Balance at 1 July 2014 213,669 (26,742) 2,752 13,333 203,012 Loss for the period - (10,244) - - (10,244) Other comprehensive income - - - 18,654 18,654 Total comprehensive profit - (10,244) - 18,654 8,410 / (loss) for the period Transactions with owners, recognised directly in equity Share based payments 462 462 1,803 - 2,727 Balance at 31 December 2014 214,131 (36,524) 4,555 31,987 211,999 The accompanying notes form part of these condensed consolidated interim financial statements. CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS FOR THE SIX MONTHS ENDED 31 DECEMBER 2014 6 months to 6 months to 31 December 31 December 2013 2014 Note $000s $000s Cash flows from operating activities Receipts from customers 53,560 - Payments in the course of operations (49,243) (5,279) Other (69) (60) Net cash provided by / (used in) 13 4,248 (5,339) operating activities Cash flows from investing activities Interest receipts 44 270 Payments for exploration and evaluation (76) (156) Purchase of property, plant and equipment (4,729) (954) Proceeds on disposal of property, plant 3 - and equipment Payments for mine development - (88,637) Research and development incentive claim - 5,030 received Security deposits 20 (281) Net cash used in investing activities (4,738) (84,728) Cash flows from financing activities Proceeds from debt financing - 22,540 Debt finance facility fees (10,235) (247) Net cash (used in) / provided by (10,235) 22,293 financing activities Net decrease in cash held (10,725) (67,774) Cash at beginning of period 20,945 98,123 Effect of exchange fluctuations on cash 2,495 2,936 held Cash at end of period 12,715 33,285 The accompanying notes form part of these condensed consolidated interim financial statements. NOTES TO THE CONSOLIDATED INTERIM FINANCIAL STATEMENTS Note 1: BASIS OF PREPARATION Reporting entity Base Resources Limited is a company domiciled in Australia. The condensed consolidated interim financial statements of the Group for the six-months ended 31 December 2014 comprises the Company and its controlled entities (together referred to as the "Group"). The Group is a for-profit entity and primarily is involved in the operation of the Kwale Mineral Sands Project in Kenya. Statement of compliance The consolidated interim financial report is a general purpose financial report prepared in accordance with the requirements of the Corporations Act 2001 and International Accounting Standard IAS 34: Interim Financial Reporting. The consolidated interim financial report does not include all of the information required for a full annual financial report and should be read in conjunction with the consolidated annual financial report of the consolidated entity for the year ended 30 June 2014 and any public announcements made by Base Resources Limited during the interim financial reporting period in accordance with the continuous disclosure requirements of the Corporations Act 2001. The consolidated interim financial report was approved by the Board of Directors on 23 February 2015. Basis of measurement The financial report has 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. Financial position The consolidated interim financial statements have been prepared on a going concern basis, which contemplates the continuity of normal business activity and the realisation of assets and the settlement of liabilities in the normal course of business. The Group held cash on hand and on deposit as at 31 December 2014 of $12.7 million. As at 31 December 2014 the Group held net assets of $214.1 million and had a net working capital surplus of $32.0 million. Net cash outflows from operations and investing activities for the six-months ended 31 December 2014 was $0.5 million. The Directors consider the going concern basis of preparation to be appropriate based on forecast cash flows. The achievement of the cash flow forecast is dependent upon mineral sands prices, meeting production output and cost forecasts and the receipt of VAT receipts as expected. Under the terms of the Kwale Project Debt Facility, the Group is required to achieve "Project Completion" in order for surplus cash at the Kwale Project operating subsidiary level to be distributed up to the parent. Project Completion requires a number of physical, economic and regulatory tests to be met, including funding of the debt service reserve account. The Group expects to satisfy the requirements for Project Completion within the stipulated time constraints. In the event that Project Completion is not achieved by 30 September 2015, it would represent an event of default under the Kwale Project Debt Facility, giving the Lenders the right to call the debt immediately, unless the time limit on achieving Project Completion were extended or the requirement waived by the Lenders. The Directors have a reasonable expectation that such an extension or waiver would be granted should it be required. If an extension or waiver was not granted, the Group would have to seek alternative funding. Base Resources (the Parent) is dependent on access to funds from the Kwale Project operating subsidiary. If Project Completion was delayed and access to funds from the Kwale Project operating subsidiary were restricted, or if Project Completion was achieved but sufficient funds were unable to be transferred to the Parent, or if all employee options are not exercised, the Parent would be required to secure additional funding through debt or equity markets or a combination of the two in order to continue to be sufficiently funded at the Parent level. Functional and presentation currency These consolidated interim financial statements are presented in Australian dollars, which is the Company's functional currency and all values are rounded to the nearest thousand dollars ($000s) unless otherwise stated. The functional currency for the subsidiaries is United States dollars. Significant accounting policies The accounting policies applied by the consolidated entity in this consolidated interim financial report are consistent with those applied by the consolidated entity in its annual financial report for the year ended 30 June 2014. Critical accounting estimates and judgements The directors make estimates and judgements in the preparation of the financial report that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses based on historical knowledge and best available current information. Estimates assume a reasonable expectation of future events and are based on current trends and economic data, obtained both externally and within the Group. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and in any future periods affected. In preparing this consolidated interim financial report, the significant judgements made by management in applying the Group's accounting policies and the key sources of estimation uncertainty were consistent with those that applied to the consolidated financial statements for the year ended 30 June 2014. NOTE 2: FINANCING (COSTS) / INCOME 6 months to 6 months to 31 Dec 14 31 Dec 13 $000s $000s (Loss) / gain on foreign exchange translations (825) 235 Interest income 43 273 Interest expense, inclusive of withholding tax (7,576) - Political risk insurance (666) - Amortisation of capitalised borrowing costs (1,234) - Financing expenses (688) - (10,946) 508 NOTE 3: TRADE AND OTHER RECEIVABLES 31 Dec 14 30 Jun 14 $000s $000s Trade receivables 19,820 6,672 Other receivables 25 80 Value added tax claimable 29,422 26,513 49,267 33,265 NOTE 4: INVENTORIES 31 Dec 14 30 Jun 14 $000s $000s Current Heavy mineral concentrate and other 2,997 2,088 intermediate stockpiles - at cost Finished goods stockpiles - at cost 16,412 13,027 Stores and consumables - at cost 9,220 4,934 Total current inventories 28,629 20,049 Non-current Stores and consumables - 1,106 Total inventories 28,629 21,155 NOTE 5: PROPERTY, PLANT AND EQUIPMENT 31 Dec 14 30 Jun 14 $000s $000s Plant and equipment At cost 256,583 225,292 Accumulated depreciation (23,680) (9,917) 232,903 215,375 Mine property and development At cost 185,928 165,911 Accumulated depreciation (12,012) (3,484) 173,916 162,427 Buildings At cost 7,206 6,355 Accumulated depreciation (839) (499) 6,367 5,856 Capital work in progress At cost 3,355 2,495 Total Property, Plant and Equipment 416,541 386,153 NOTE 5: PROPERTY, PLANT AND EQUIPMENT (CONTINUED) Plant & Mine Buildings Capital Total equipment property work in and progress development $000s $000s $000s $000s $000s Balance at 1 July 2013 10,466 - 1,776 18 12,260 Additions 2,547 - - 171 2,718 Transfers from mine 6,440 - - - 6,440 development Transfers 18 - - (18) - Depreciation capitalised to (1,534) - (46) - (1,580) mine development Depreciation expense (74) - - - (74) Effects of movement in 292 - 52 - 344 foreign exchange Balance at 31 December 2013 18,155 - 1,782 171 20,108 Balance at 1 July 2014 215,375 162,427 5,856 2,495 386,153 Additions 292 4,741 - 1,451 6,484 Transfers 926 - - (926) - Depreciation expense (12,503) (8,218) (273) - (20,994) Effects of movement in 28,813 14,966 784 335 44,898 foreign exchange Balance at 31 December 2014 232,903 173,916 6,367 3,355 416,541 NOTE 6: BORROWINGS 31 Dec 14 30 Jun 14 $000s $000s Current Project Debt Facility (a) 44,262 49,589 Finance lease liabilities 356 298 Total current borrowings 44,618 49,887 Non-current Project Debt Facility (a) 219,349 182,869 Capitalised borrowing costs (a) (15,480) (10,548) Amortisation of finance facility fees (a) 5,520 4,179 Finance lease liabilities 1,141 1,167 Total non-current borrowings 210,530 177,667 Total borrowings 255,148 227,554 a. Project Debt Facility In November 2014 the Project Debt Facility was rescheduled in order to realign the repayment schedule to reflect the delay in commencement of sales from the Kwale Project to February 2014 from the original expectation of October 2013 when the facility was initially arranged. Under the terms of the restructure, all principal repayments were deferred six months with some re-profiling to suit future cash flows. The first principal repayment was deferred from December 2014 to June 2015. In addition, Base will contribute US$15 million in additional liquidity by 30 June 2015 ("Liquidity Injection"). The different tranches of the Project Debt Facility carry interest rates of LIBOR plus a margin range of between 495 - 820 basis points prior to achieving Project Completion, then 445 - 820 basis points subsequent to Project Completion pursuant to the relevant facility agreements. An additional margin of 60 basis points was applicable to the restructured Project Debt Facility prior to satisfying the Liquidity Injection, after which the additional margin reduced to 20 basis points. The debt facilities have a remaining tenor of between 3.5 and 5.5 years. The security for the above debt facilities 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 Base Resources Limited ("BRL") and the shares held in BTML by BRL. In addition, a shareholder support agreement is in place that requires BRL to do all things necessary to cause the project to achieve Project Completion by no later than 30 September 2015. The weighted average effective interest rate on the facilities at 31 December 2014 is 6.39% (30 June 2014: 5.92%). In accordance with International Financial Reporting Standards, all transaction costs directly attributable to securing the debt facilities 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. b. Taurus Facility In December 2014, the Group executed a US$20 million unsecured debt facility with one of its major shareholders, Taurus Funds Management ("Taurus Facility") in order to provide corporate working capital and a means to satisfy the Liquidity Injection. Interest is payable at 10% with a loan maturity of 31 December 2016. In addition, Taurus is entitled to 61,425,061 unlisted share options over unissued fully paid shares, for nil consideration and exercisable at $0.40, with half being issued at execution and half pro-rata on facility drawdown above US$5 million. In January 2015, an initial drawdown of US$3 million was made to provide funds for corporate working capital. No further drawdowns had been made at the date of this report. NOTE 7: DEFERRED REVENUE 31 Dec 14 30 Jun 14 $000s $000s Current: Advance payment on future sales (a) 2,205 - Non-current: Fee paid on execution of product sales agreement 6,130 5,406 Amortisation of deferred revenue (766) (225) 5,364 5,181 a. Advance payment on future sales During the six month period to 31 December 2014, the Group entered into an agency agreement for the sale of product. Under the terms of the agency agreement a portion of the estimated product revenue was payable in advance, after shipping of the product but prior to final sale. The advance payment received is recorded as deferred revenue until the final sale has occurred, after which it will be reclassified as sales revenue. NOTE 8: OTHER LIABILITY 31 Dec 14 30 Jun 14 $000s $000s Current: Other payables 1,254 - Non-current: Other payables - 1,106 BTL entered into an agreement with Mantrac Kenya Limited ("Mantrac") in 2013, for the supply of mining equipment whereby Mantrac agree to maintain a stock of critical spare parts for the equipment for a period of 24 months after equipment commissioning at no charge. At the end of the 24 months, BTL has agreed to purchase the critical spare parts. During the six months ended 31 December 2014, the liability has been reclassified as current to reflect the approaching maturity of the agreement. NOTE 9: ISSUED CAPITAL 31 Dec 14 30 Jun 14 $000s $000s Ordinary share capital: Issued and fully paid 214,131 213,669 Date Number $000s 1 July 2013 561,840,029 213,669 30 June 2014 561,840,029 213,669 1 July 2014 561,840,029 213,669 Performance rights vested under the Company's Long 2,062,742 462 Term Incentive Plan 31 December 2014 563,902,771 214,131 All issued shares are fully paid. The Company 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 Company. NOTE 10: SEGMENT REPORTING Identification of reportable segments The Group's primary activity is the operation of the Kwale Mineral Sands Project in Kenya. Other operations include the Group head office (which includes all corporate expenses that cannot be directly attributed to the operation of the Kwale Project) and exploration in Kenya. 6 months to December 2014 6 months to December 2013 Reportable Kwale Other Total Kwale Mine Other Total segment Mine operations operations $000s $000s $000s $000s $000s $000s Sales revenue 61,836 - 61,836 - - - Reportable(loss) (4,653) (5,591) (10,244) (2,187) (3,335) (5,522) / profit Capital 4,729 75 4,804 76,414 124 76,538 Expenditure As at 31 December 2014 As at 30 June 2014 Total assets 516,307 1,490 517,797 464,723 6,328 471,051 Total 302,918 730 303,648 266,147 1,852 267,999 liabilities Note 11: share based payments a. Share options In December 2014, the Group executed the US$20 million Taurus Facility (refer Note 6). Under the terms of the Taurus Facility, Taurus Funds Management is entitled up to 61,425,061 unlisted share options over unissued fully paid shares, for nil consideration and exercisable at $0.40. Half of the options were issued on execution of the Taurus Facility and the other half will be issued pro-rata on facility drawdown above US$5 million. The options expire on 31 December 2018 and have no vesting conditions. The fair value of options granted during the six month period to 31 December 2014 is $0.07. b. Performance rights On 1 October 2014, the Group granted 9,652,142 performance rights to key management personnel and other senior staff under the terms of the long term incentive plan ("LTIP). The LTIP operates on a series of annual 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 the commencement of the Cycle. The performance rights granted on 1 October 2014 have performance conditions consistent with those issued under previous cycles of the plan and vest on 30 September 2017. The fair value of performance rights granted during the six month period to 31 December 2014 is $0.14. Note 12: commitments and contingent liabilities The outstanding operating expenditure commitments of the Group relating to the Kwale Mine are $4.2 million at 31 December 2014. The Group is defending an action brought by an engineering contractor following the completion of construction of the Kwale Mineral Sands Project. The directors have not disclosed an estimation of the amount or timing of possible cash outflows related to the action as they do not want to prejudice the position of the Group in this dispute. Based on legal advice, the directors do not expect the outcome of the action to have a material effect on the Group's financial position. The Group is currently in discussions with the Kenyan Revenue Authority regarding the assessment of taxes incurred throughout the construction and operation of the Kwale Mineral Sands Project. The directors have not disclosed an estimation of the final position as discussions are currently ongoing, however this is not expected to have a material effect on the Group's financial position. NOTE 13: RECONCILIATION OF LOSS AFTER INCOME TAX TO CASH FLOW FROM OPERATIONS 6 months to 6 months to 31 Dec 2014 31 Dec 2013 $000s $000s Loss for the period (10,244) (5,522) Depreciation and amortisation 19,437 74 Share based payments 578 296 Financing costs classified as financing activity 10,946 (508) Exploration valuation write down - 1,034 Amortisation of deferred revenue (469) - Changes in assets and liabilities: Increase in receivables and other assets (16,080) - Increase in inventories (7,474) - Increase / (decrease) in trade and other payables 5,331 (740) Increase in employee provisions 87 22 Deferred revenue received 2,205 - Decrease / (increase) in provision for income tax (69) 5 expense Cash flow from operations 4,248 (5,339) NOTE 14: EVENTS SUBSEQUENT TO REPORTING DATE Other than the January 2015 drawdown against the Taurus Facility discussed in Note 6, there have been no subsequent events since the interim reporting date. DIRECTORS' DECLARATION The directors of the Company declare that: 1. The interim financial statements and notes, as set out on pages 8 to 19, are in accordance with the Corporations Act 2001 including: a. giving a true and fair view of the Group's financial position as at 31 December 2014 and of its performance for the six month period ended on that date; and b. complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001; and 2. In the directors' opinion, there are reasonable grounds to believe that the Group will be able to pay its debts as and when they become due and payable. This declaration is made in accordance with a resolution of the Board of Directors. Andrew King Director Dated this 23rd day of February 2015 Independent auditor's review report to the members of Base Resources Limited Report on the financial report We have reviewed the accompanying interim financial report of Base Resources Limited, which comprises the consolidated condensed statement of financial position as at 31 December 2014, consolidated condensed statement of profit and loss and other comprehensive income, consolidated condensed statement of changes in equity and consolidated condensed statement of cash flows for the half-year ended on that date, notes 1 to 14 comprising a summary of significant accounting policies and other explanatory information and the directors' declaration of the Group comprising the company and the entities it controlled at the half-year's end or from time to time during the half-year. Directors' responsibility for the interim financial report The directors of the company are responsible for the preparation of the interim financial report that gives a true and fair view in accordance with Australian Accounting Standards and the Corporations Act 2001 and for such internal control as the directors determine is necessary to enable the preparation of the interim financial report that is free from material misstatement, whether due to fraud or error. Auditor's responsibility Our responsibility is to express a conclusion on the interim financial report based on our review. We conducted our review in accordance with Auditing Standard on Review Engagements ASRE 2410 Review of a Financial Report Performed by the Independent Auditor of the Entity, in order to state whether, on the basis of the procedures described, we have become aware of any matter that makes us believe that the interim financial report is not in accordance with the Corporations Act 2001 including: giving a true and fair view of the Group's financial position as at 31 December 2014 and its performance for the half-year ended on that date; and complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. As auditor of Base Resources Limited, ASRE 2410 requires that we comply with the ethical requirements relevant to the audit of the annual financial report. A review of an interim financial report consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with Australian Auditing Standards and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion. Independence In conducting our review, we have complied with the independence requirements of the Corporations Act 2001. Conclusion Based on our review, which is not an audit, we have not become aware of any matter that makes us believe that the interim financial report of Base Resources Limited is not in accordance with the Corporations Act 2001, including: (a) giving a true and fair view of the Group's financial position as at 31 December 2014 and of its performance for the half-year ended on that date; and (b) complying with Australian Accounting Standard AASB 134 Interim Financial Reporting and the Corporations Regulations 2001. KPMG Graham Hogg Partner Perth 23 February 2015 A full PDF version of the notice is available from www.asx.com.au and the Company's website: www.baseresources.com.au. ENDS For further enquiries contact: Base Resources Limited Tim Carstens Managing Director Email: tcarstens@baseresources.com.au Phone: +61 (0)8 9413 7400 RFC Ambrian Limited (Nominated Adviser and Broker) As Nominated Adviser As Broker Andrew Thomson or Trinity McIntyre Jonathan Williams Phone: +61 (0)8 9480 2500 Phone: +44 20 3440 6800 Africapractice (East Africa) (Kenyan Media Relations) David Maingi/ James Njuguna/Joan Kimani Phone: +254 (0)20 239 6899 Email: jkimani@africapractice.com Tavistock Communications (UK Media Relations) Jos Simson / Emily Fenton / Nuala Gallagher Phone: +44 (0) 207 920 3150 Cannings Purple (Australian Media Relations) Annette Ellis / Warrick Hazeldine Email: aellis@canningspurple.com.au whazeldine@canningspurple.com.au Phone: +61 (0)8 6314 6300 Corporate Details: Board of Directors: Andrew King Non-Executive Chairman Tim Carstens Managing Director Colin Bwye Executive Director Sam Willis Non-Executive Director Michael Anderson Non-Executive Director Michael Stirzaker Non-Executive Director Malcolm Macpherson Non-Executive Director Keith Spence Non-Executive Director Winton Willesee Company Secretary Principal & Registered Office: Contacts: Level 1 Email: info@baseresources.com.au 50 Kings Park Road Phone: +61 (0)8 9413 7400 West Perth Fax: +61 (0)8 9322 8912 WA 6005

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