euroz conservative valuation of 76 cents

Base Resources Ltd (BSE $0.40) Buy, Initiation of Coverage Kwale a company maker.

Base Resources Ltd (BSE) has a 100% interest in the Kwale mineral sands project in Kenya.4 Kwale is an advanced project with a completed BFS and project expenditure to date of US$70m.

Forecast annual production of ~80kt of rutile, ~40kt of zircon and ~ 300kt of ilmenite.

Current resource of 255mt @ 3.5% HM underpins proposed mine life of +10yrs.

Revised capital cost in the range of US$225-250m.

Potential revenue of US$160-180m p.a. generating EBITDA of $80-$100m once in full production.

Price outlook for key products is excellent.

Zircon market remains in deficit, current price of +US$1,000/t with expectations of +US$1,500/t over the next 2-3yrs.

Market conditions for high value rutile are tight and prices rises anticipated.

The Enhanced Feasibility Study is due in April11 with construction expected to start in the 2nd H CY11.4 Kwale is one of the few advanced projects worldwide capable of being in production within 2-3yrs.

Our valuation is $0.76/sh, risk adjusted to 70%. Longer term, we see potential for BSE to be a +$1.00/sh company as development hurdles are overcome and production commences.

We initiate coverage with a Buy and a $0.76/sh price target. Short term catalysts include:∙ completion of EFS∙ funding arrangements∙ start of construction∙ continued price rises for zircon and rutile