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BASE RESOURCES LIMITED: Quarterly Activities Report


ASX, AIM and Media Release 31 January 2013

QUARTERLY ACTIVITIES REPORT - December 2012

Highlights

* Kwale Project is 50% complete and on schedule for practical completion in


    Q3 2013.
      * Initial US$52 million drawdown on the Kwale Debt Finance Facility completed
    on 22nd November 2012.
      * Successful completion of A$40 million capital raising to complete funding
    package.
      * Kenyan Attorney General confirms that the Local Equity Participation
    Regulations cannot be applied to the Kwale Project.

Base Resources Limited (ASX:BSE AIM:BSE) ("Base") has made further significant progress in the development of the Kwale Project, achieving first utilisation of the debt facility and reaching the 50% complete milestone.

Kwale Project Implementation

The December quarter has seen a significant increase in construction activity. With the overall development 50% complete, the Kwale Project continues to be on schedule for practical completion in Q3 2013 and first shipment in Q4 2013.

Project elements

The development approach being adopted for the Kwale Project is for the project to be separated into six discrete contract packages, as well as a number of smaller owner's projects, with an integrated management team overseeing their execution and integration. This approach has been adopted to ensure that "best of breed" expertise is applied to what are technically diverse and effectively separate project elements and risk is more effectively minimized and managed. The six contract packages, each covered by an EPCM (or EPC for CP3) contract and their status are:

CP1 - Processing Plants (Ausenco)

* Overall progress is on target with 44% complete. Delivery of this


    construction package is on the overall project critical path and is on
    schedule for practical completion during Q3 2013.
      * Bulk earthworks were substantially completed during the quarter, civil
    works are ongoing and erection of the structural steel has commenced.
      * Construction progress is 19% complete.
    CP2 - Marine Facilities (WSP Group)

  * The overall progress to date is 51% and on target for delivery prior to the
    first planned bulk shipment in Q4 2013.
      * Onshore construction works are well advanced with the steel structures for
    the storage shed progressing well.
      * After a slow ramp up, good progress was made on the manufacture of the ship
    loader in the later part of the quarter.
      * Marine works are underway. Softer than expected ground conditions has
    resulted in some increased piling.
    CP3 - Power Line (CG Global)

  * Overall, the project is 82% complete and on schedule for completion in Q2
    2013.
      * All overhead power line towers have been erected and the stringing of high
    voltage cables completed.
      * Kwale substation control room is completed up to the roof level.
      * The transformers are now installed, steel gantries for the substations are
    on site and the switchgear is due to arrive in January.
    CP4 - Mukurumudzi Dam (Wave)

  * Overall delivery is 63% complete.
      * The concrete river diversion channel and intake tower were completed in
    December and the river is now diverted.
      * Stage 1 of the coffer wall has been completed.
      * The project is on target for early April delivery, ahead of the main wet
    season.
    CP- 5 - Tailings Storage Facility (Wave)

  * Construction works are behind schedule but a recovery plan is currently
    being agreed with the contractor.
      * Current forecast completion date (Q2 2013) is still well in advance of the
    required date for plant commissioning in Q3 2013.
      * Overall, the project is 43% complete.
    CP-6 - Access Road, Construction Camp and Shared Facilities (Howard Humphries)

  * The road construction is 88% complete with the planned completion by the
    end of January.
      * Phase One of the contractor accommodation units have been completed with
    Phase Two due for completion by the end of Q1 2013.
      * During the quarter the kitchen facilities were commissioned, staff trained
    in the use of all equipment and three meals a day are currently being
    served.
    Owners Projects

In addition, a suite of owner's projects are being managed directly by the Base
operations team. These include the procurement of the mobile fleet , the
installation of a supplementary borefield and the procurement of the dozer trap
mining unit. As part of our implementation approach, the key members of the
senior operations management team have already been recruited and are
integrated into the overall project team to ensure operability of design and
smooth transition to operations.

Safety Performance

With all project elements now in physical construction, total project hours
worked have reached 2,500,000. The rapid increase in site activity over the
quarter, with a third of total project hours worked during the quarter, has
seen an increase in the number of minor injuries. However, there has not been
an LTI since the projects only such injury in July 2012, reflecting the onsite
training, effort to increase hazard reporting and pro-active safety inspections
as well as increased awareness on hazard identification and control at
pre-start and safety/toolbox meetings.

Community and Environment

Base's Labour Recruitment System has placed almost 700 people from local
communities in employment with various contractors associated with mine
infrastructure. Control measures have been implemented to audit contractor
compliance with a view to maximise local employment.

Community infrastructure works continued with two schools completed in Kibwaga,
near the Mukurumudzi Dam, and Magaoni village, close to the mine access road.
These facilities will be handed over to the local community on completion of
the school committee training programme. Both schools have been furnished and
the secondary school in Magaoni provided with laboratory equipment.
Consultation with local communities to identify the location of the mine area
primary school has begun. The tender process for Magaoni Health Centre was
delayed until a new design can be provided by the Ministry of Health in
Nairobi. The plans submitted earlier by the Ministry of Public Works required
updating.

Three workshops were held with various communities on the implementation of
Base's Community Development Management Plan (CDMP). The CDMP describes the
process that will be undertaken to identify and prioritise community investment
in consultation with affected stakeholders. Discussions over the next few
months will culminate in an agreed program of community projects.

Community engagement continues with monthly meetings held with three district
based liaison committees and six community based committees dealing with direct
impacts related to construction of the various Project infrastructure
components. Community groups were engaged as part of Base's waste management
process to assist with recycling material from the mine site. Training and
implementation is expected in first quarter of 2013. Community groups were also
invited to participate in the vegetation clearance at site. Two women's groups
and a youth organisation are now processing charcoal from trees cleared in the
Tailings Storage Facility footprint. Specialised charcoal kilns were purchased
for the teams and they were provided with training and protective equipment.
The proceeds from the sale of charcoal will go towards funding community
projects in the area.

Continued monitoring is being undertaken as dust remains an ongoing issue
during construction with increased frequency of watering required during hot
and dry weather recently experienced. Lower year-on-year rainfall figures have
had an impact on the whole region and neighbouring communities have been given
access to perennial water points within the mine site in areas not affected by
construction. Additional measures were taken to assist surrounding communities
with deepening of local wells and repairs to broken down hand-pump boreholes.

Budget

The total approved project development budget is US$298 million, including
contingencies. To 31 December, US$143 million has been incurred and a further
US$135 million has been committed (ordered).

Financing

In early October, the Company completed a A$40 million share placement and
entitlement offer in order to meet the additional funding requirements from the
revised Kwale Project capital cost estimate of US$298 million.

On 22 November 2012, financial close was achieved on the US$170 million project
debt facilities and the first drawdown of US$52 million completed. This was a
critical milestone in the development of the Kwale Project as Base now has
access to the full funding required to complete the development of the Kwale
Project and bring it to positive cash flow.

Under the terms of the debt facility, subsequent drawdowns will be made on a
quarterly basis with the next scheduled for February 2013.

Marketing

The short term market for titanium dioxide feed stocks continued its softness
through the December quarter with pigment producers maintaining their efforts
to de-stock high inventory levels. Weaker than expected demand has resulted in
historically low levels of pigment plant utilisation through the second half of
2012. In this environment, the pigment industry has generally shown a
preference for lower grade, lower priced titanium dioxide feed stocks such as
ilmenite. Iluka Resources Ltd (Iluka) recently announced that several lead
indicators are pointing to an improved pigment demand environment in 2013.
Recent comments from TZMI indicate that there is general consensus for the
titanium feed stock and pigment sectors to see a recovery in demand and pricing
by the second half of 2013.

Market conditions for zircon remained weak through the December quarter.
Exacerbating the soft global economic environment has been the structural
impact of modernised processes and substitution on zircon demand - mostly in
the ceramics sector. Iluka's recent comments indicate that such structural
impacts have now largely worked through the industry and will have a diminished
effect on the market through 2013. While customer stocks of zircon are
considered to be low, producer stocks are reported to remain high. Some
producers, including Iluka, continue to adjust production to better manage
stock positions and align supply with demand. However, the response is not
uniform across all producers and the overall market conditions for zircon are
likely to remain soft well into 2013.

The long term outlook for all mineral sands products remains very positive. In
this light, Base continues to receive strong interest in all of its products
from the market. Discussions continue with a number of parties in relation to
the balance of Base's production not already secured by the previously reported
offtake agreements.

Kenyan Exploration Projects

As part of the Kwale acquisition, Base acquired an option to purchase three
further exploration projects, Kilifi, Mambrui and Vipingo. On 28 December 2012,
the Kenyan Minister of Environment & Mineral Resources published a gazette
notice purporting to cancel the three exploration licenses covering these
projects. The Company has not as yet received formal notification from the
Department of Mines & Geology or any explanation of the rationale for this
action. Base believes it is in full compliance with the terms of these licenses
and has submitted all required quarterly activity reports. Furthermore, the
Company successfully had these three licenses renewed in 2011 and 2012, as
such, Base can see no legal basis for the gazette notice purporting to now
cancel them. Consequently, the Company has taken the appropriate legal action
to protect the rights and has received a court order staying the cancellation
pending a hearing.

Following the confirmatory drilling program completed in the March quarter,
updated JORC-compliant resource estimates have been completed for the Kilifi
and Mambrui projects. Resource statements at a 1% THM cut-off are presented
below:

Project Classification Resource    HMC         Rutile        Zircon     
Ilmenite                     

Mt % Mt % Mt % Mt % Mt Kilifi Indicated 1,520 2.8% 43.0 0.13% 2.0 0.12% 1.8 1.80% 27.3

Inferred 593 2.4% 14.0 0.10% 0.6 0.10% 0.6 1.40% 8.3

Total 2,110 2.7% 57.0 0.12% 2.6 0.11% 2.4 1.69% 35.6

Project Classification Resource HMC Rutile Zircon Ilmenite

Mt % Mt % Mt % Mt % Mt Mambrui Indicated 490 4.1% 20.2 0.10% 0.5 0.10% 0.5 2.61% 12.8

Inferred 259 2.8% 7.2 0.08% 0.2 0.07% 0.2 1.54% 4.0

Total 750 3.7% 27.4 0.09% 0.7 0.09% 0.7 2.24% 16.8

The significant increase in tonnes and the reduction in average grade compared with previous estimates are a consequence of the inclusion of the deeper, lower grade zones tested by the new drilling. Tables showing resource estimates at varying cut off grades are included as an appendix.

Preliminary mineralogical and processing testwork has shown the titanium dioxide content of the ilmenite to be very low at around 32% to 35% for both the Kilifi and Mambrui projects. With these levels likely to preclude sale to traditional consumers, a range of niche marketing and downstream processing options are being explored as part of scoping studies to be undertaken over the course of 2013.

Kenyan Local Equity Participation Regulations

Base received formal notification that the Attorney General of Kenya has determined that the recently introduced 35% Local Equity Participation Regulation (Regulation) cannot be applied to the Special Mining Lease No. 23 covering the Company's 100% owned Kwale Mineral Sands Project.

The Attorney General's advice that the Regulation can only be applied to mining licenses issued after the Regulation came into force, being 12 October 2012, corroborates the legal advice previously received by Base in this respect.

Notwithstanding this determination, Base will continue to work constructively with the Government of Kenya to facilitate greater Kenyan equity participation over time in both Base and the mining industry in general.

Corporate

In summary, at 31 December 2012: * Cash and cash equivalents were $94.5 million. * Debt drawn of US$52.0 million. * 560,440,029 shares on issue. * 18,000,000 unlisted options.

A full PDF version of the announcement is available at the Company's website: www.baseresources.com.au.

ENDS

For further enquiries contact:

Contacts: Base Resources Limited Tim Carstens Managing Director Email: tcarstens@baseresources.com.au Phone: +61 (8) 9413 7400

RFC Ambrian Limited (Nominated Adviser and Broker) As Nominated Adviser As Broker Andrew Thomson or Trinity McIntyre Caspar Shand-Kydd Phone: +61 (8) 9480 2500 Phone: +44 20 3440 6800

Tavistock Communications (UK Media Relations) Jos Simson/ Jessica Fontaine / Emily Fenton Phone: +44 20 7920 3157

Cannings Purple (Australian Media Relations) Annette Ellis / Warrick Hazeldine Email: aellis@canningspurple.com.auwhazeldine@canningspurple.com.au Phone: +61 (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 Trevor Schultz Non-Executive Director Winton Willesee Non-Executive Director/ Company Secretary

Principal & Registered Office: Contacts: Level 1 Email: info@baseresources.com.au 50 Kings Park Road Phone: +61 (8) 9413 7400 West Perth Fax: +61 (8) 9322 8912 WA 6005

About Base Resources

Base Resources Limited (ASX:BSE AIM:BSE) is developing the world-class Kwale Mineral Sands Project in Kenya, East Africa. Kwale is an advanced and highly competitive project in a sector with a significant forecast supply shortfall widely expected to emerge in the medium term.

The Kwale Project represents an advanced development opportunity with all material project approvals, permits and licenses required for development secured, funding in place and construction of all project elements underway.

The Project enjoys a high level of support from the Government of Kenya as well as the local community and, located just 50km from Mombasa, Kenya's principal port facility, is well serviced by existing physical infrastructure.

Importantly, two pilot plant operations at Kwale provide confidence in processing behaviour and indicate a suite of readily marketable products. The Project's high value mineral assemblage and low stripping ratio result in a projected revenue to cash cost ratio that would place Kwale in the top quartile of world producers.

A realistic development time line should see the Kwale Project in production in the second half of 2013.

Competent Persons Statement

Information on this announcement that relates to Mineral Resources at the Kilifi and Mambrui Projects are based on information compiled by Scott Carruthers, who a full time employee of Base Titanium Limited (a wholly owned subsidiary of Base Resources Limited) and is a member of The Australasian Institute of Mining and Metallurgy. Mr Carruthers has sufficient experience (> 20 years) in exploration, assessment, resource estimation and mining of heavy mineral sand projects and qualifies as a Competent Person as defined in the 2004 Edition of the `Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves'. Mr Carruthers consents to the inclusion in this announcement of the information based on his work in the form and context in which it appears.

Appendix

Kilifi Resource Estimates at Various HM Cut-off Grades

Classification HM Resource HMC Rutile Zircon Ilmenite

Cut-off Mt % Mt % Mt % Mt % Mt

Indicated 1 1,520 2.8% 43.2 0.13% 1.99 0.12% 1.80 1.80% 27.3

2 1,020 3.5% 35.5 0.16% 1.59 0.14% 1.38 2.25% 23.0

3 585 4.2% 24.7 0.19% 1.07 0.15% 0.90 2.79% 16.3

4 249 5.3% 13.2 0.22% 0.56 0.19% 0.47 3.53% 8.8

5 114 6.3% 7.2 0.26% 0.30 0.22% 0.25 4.30% 4.9

Inferred 1 593 2.4% 14.0 0.10% 0.61 0.10% 0.59 1.40% 8.3

2 314 3.2% 10.1 0.14% 0.43 0.12% 0.39 2.10% 6.6

3 173 3.8% 6.6 0.16% 0.27 0.13% 0.23 2.60% 4.5

4 48 4.8% 2.3 0.19% 0.09 0.17% 0.08 3.33% 1.6

5 15 5.8% 0.9 0.27% 0.04 0.20% 0.03 4.00% 0.6

Total 1 2,110 2.7% 57.2 0.12% 2.59 0.11% 2.39 1.69% 35.6

2 1,330 3.4% 45.6 0.15% 2.02 0.14% 1.77 2.23% 29.7

3 757 4.1% 31.4 0.17% 1.34 0.15% 1.14 2.75% 20.8

4 297 5.2% 15.5 0.22% 0.65 0.19% 0.55 3.50% 10.4

5 129 6.2% 8.1 0.26% 0.33 0.21% 0.27 4.26% 5.5

Mambrui Resource Estimates at Various HM Cut-off Grades

Classification HM Resource HMC Rutile Zircon Ilmenite

Cut-off Mt % Mt % Mt % Mt % Mt

Indicated 1 490 4.1% 20.2 0.10% 0.55 0.10% 0.50 2.61% 12.8

2 390 4.8% 18.7 0.13% 0.49 0.13% 0.46 3.15% 12.3

3 310 5.4% 16.6 0.13% 0.42 0.13% 0.40 3.58% 11.1

4 224 6.1% 13.6 0.15% 0.34 0.14% 0.32 4.06% 9.1

5 135 7.1% 9.6 0.17% 0.23 0.16% 0.22 4.74% 6.4

Inferred 1 259 2.8% 7.2 0.08% 0.20 0.07% 0.18 1.54% 4.0

2 151 3.7% 5.6 0.10% 0.15 0.09% 0.14 2.32% 3.5

3 89 4.6% 4.1 0.12% 0.11 0.11% 0.10 3.03% 2.7

4 52 5.4% 2.8 0.13% 0.07 0.13% 0.07 3.65% 1.9

5 24 6.5% 1.6 0.17% 0.04 0.17% 0.04 4.17% 1.0

Total 1 750 3.7% 27.4 0.09% 0.75 0.09% 0.68 2.24% 16.8

2 550 4.5% 24.3 0.11% 0.64 0.11% 0.60 2.87% 15.8

3 399 5.2% 20.7 0.13% 0.53 0.13% 0.50 3.43% 13.7

4 276 5.9% 16.4 0.15% 0.41 0.14% 0.39 3.99% 11.0

5 159 7.0% 11.2 0.17% 0.27 0.16% 0.26 4.65% 7.4

END

-0- Jan/31/2013 07:13 GMT

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