Bass Metals announces first-half operating profit of A$3.1 million on ore sales

Australian base metals producer Bass Metals (ASX: BSM) has announced the first-half result from its Que River base metals mine in Tasmania, contributing to an interim operating profit of $3.1 million.

The result however was impacted by holding costs associated with the Hellyer Mill and non-cash write-offs of exploration expenditure, which translated to a net loss after tax of $816,806 for the period.

The result for the half-year to 31 December 2009 (2008 NPAT: $4.5M profit) was based on ore sales from the Que River operation of $10.6 million.

Bass Metals’ Managing Director, Mike Rosenstreich, said the interim result was consistent with the Company’s expectations, with Que River continuing to perform strongly despite the fact the operation is currently mining a lower-grade portion of the resource.

“Que River is now in its 3rd year of operations, it has created a sound operating and financial platform for Bass’ broader expansion strategy to develop a portfolio of producing assets in North-West Tasmania,” Rosenstreich said.

“Mining activities over the reporting period were focused on a lower-grade portion of the resource with a higher strip ratio - which resulted in a reduction in ore sold; however this was entirely expected and consistent with the mine plan and previous forecasts."

"Bass is in transition, moving toward larger scale mine production and processing its own ore. To do this we incurred significant costs associated with the plant maintenance and environmental management – again consistent with our expectations, but adversely impacting our ultimate accounting bottom line,” he added.

These mining constraints at Que River led to a 24% drop in tonnes of ore sold to 29,032 tonnes compared with the previous corresponding period. However this was partly offset by stronger metal prices and higher grades.
 
Ore is sold to MMG’s nearby Rosebery processing facility under an Ore Sales Agreement which is expected to be completed in the September quarter, 2010.

During the period Bass initiated a $15.3 million capital raising, comprising a placement and rights issue, providing the Company with a robust cash position at the end of the reporting period of $16.7 million.
 
This financing was completed in January, 2010 coincident with mandating RMB Resources Ltd to arrange a $12 million loan facility and hedging facility.

This process is progressing well and on completion will ensure that the Company is sufficiently funded to undertake the development of the new Fossey Mine, the refurbishment of the Hellyer Mill and an increased exploration programme aimed at expanding the Company’s resource base in Tasmania in keeping with its aim of becoming a mid-tier base metals producer.

Payment of ongoing maintenance investment associated with the Hellyer Mill, which was acquired by Bass in March 2009, led to an increase in Other Expenses to $4.1 million (2008: $1.6 million).

Work to refurbish the Hellyer Mill commenced in February 2010, with an expectation that it will be operational from mid-2010, in line with the Company’s Hellyer Mine Project.

Bass’ core focus during the period was the completion of a Definitive Feasibility Study (DFS) for the highgrade Fossey Zone, part of the Company’s Hellyer Mine Project.

Following the completion of this DFS in October 2009, Bass’ Directors announced their intention to proceed with the Fossey mine development in January 2010, and Bass is on track to commence production from Fossey in the second half of the 2010 calendar year.

“This is an exciting time for Bass Metals, with development now well underway at Fossey. This is another robust, high grade project with projected low operating costs of US$0.33/lb of payable zinc (equivalent after credits) which puts it in the bottom third of the world cost curve."

"We are also looking at options to enhance that production profile such as tailings retreatment; so our team is very busy, highly motivated and enthusiastically moving this project forward,” Rosenstreich commented.

“This, together with our continued aggressive exploration program, and recent successes indicates that Bass could be building up momentumtoward another discovery which puts the company well on track to achieve our goal of becoming a significant mid tier diversified mining house.”