Mining firm losses deepen as demand plunges

The future of a mining company remains bleak as financial losses continue to chart out its path in the sector.

Base Resources made a loss after tax of $5.7 million for the half year period to December 2015 from $2.2 million incurred in 2014 on account of surging financing and distribution costs amid poor demand.

The Australian company is licensed to mine titanium in Kwale.

Performance on its global operations also fell to a net loss of $11.3 million from another loss after tax of $10.2 million posted during the same period in 2014.

Its finance costs for all operations rose from $11.7 million to $18.1 million while selling and distribution costs went up to $2.5 million from $421,000.

The firm faces poor global prices for ilmenite, one of the minerals produced from the titanium ore, signalling even tougher times ahead.

The announcement comes at a time when global commodity prices have fallen significantly due to oversupply and low demand, with the plunge expected to continue this year, according to a recent report by the World Bank.

“Base maintained solid sales for the period but experienced pressure on pricing for ilmenite in particular as competition for sales remained high,” the company said in a statement last week.

SLOW GROWTH

The drop in prices for the mineral has also seen major global producers in China and Russia scale down their output.

During the period, 4.4 million tonnes of mineral ore were produced compared to 4.5 million tonnes recorded for the six months period to December 2014.

Production and sales of all minerals derived from the titanium ore - ilmenite, zircon and rutile - increased in 2015 compared to the previous year.

Base Resources operates a warehouse in China as part of its strategy to secure market share in the Asian country by offering product for immediate delivery in small volumes.

This allows the company to tap into small scale customers who are unable to commit to purchase of large shipment volumes.