MZI Resources (ASX: MZI) has delivered very strong economic metrics in a Feasibility Study for the Keysbrook Mineral Sands Project in Western Australia, including an internal rate of return of 71% and a net present value of $133 million (post tax).
Keysbrook is characterised by its high leucoxene content and once in operation will be one of the world’s largest producers of the premium leucoxene 88, comprising 88% titanium dioxide, product.
Importantly, the study presents a compelling case for developing Keysbrook, putting the project on track for first product sales in the March quarter 2014.
Keysbrook will be a 4.5 million dry tonne per annum sand mining operation and have a mine life of 7.2 years with the potential to extend up to 11 years.
The Feasibility Study produced project capital costs of $53.6 million, total development costs of $64.3 million and operating costs of $34.1 million per annum.
A wet concentration plant located onsite will process the ore using gravity separation to produce, on average, about 110,000 tonnes (dry) of heavy mineral concentrate per year at 85% heavy minerals.
Heavy mineral concentrate will be transported by road to Picton, 120 kilometres south of the minesite, where it will be processed through a secondary mineral separation plant under toll treating arrangements with Doral Pty Ltd.
The toll treating process will produce three products – leucoxene 70 (L70) containing 70% titanium dioxide, Leucoxene 88 (L88) containing 88% titanium dioxide and a zircon concentrate, comprising 56% zircon, 3% L70 and 11% L88.
Under the toll treating arrangements with Doral, MZI will undertake capital upgrades to the mineral separation plant to ensure the plant is able to process the Keysbrook heavy mineral concentrate and produce the final products at the required specification.
The toll treatment agreement with Doral, which has been processing mineral sands in Western Australia for more than 10 years, is estimated to save MZI up to $20 million in capital costs.
Construction is scheduled to begin in the March quarter of 2013 with the first shipment targeted for the March quarter of 2014.
Mineral sands price outlook
The long term outlook for mineral sand commodities, including zircon and rutile, remains strong with the sector seeing significant appreciation in pricing since 2010.
Prices are forecast to remain at record highs for some time compared to the long-term historical price, with prices set to remain in a solid trading band rather than continuing to spike, as has been the case in the past couple of years.
Mineral Sands are predominantly used in household goods items, such as ceramics, paints, tiles, plastics and inks.
Demand for household goods continues to increase as developing countries continue to transform and the wealth of the individuals in those countries increases.
Strategic location
Keysbrook is located around 70 kilometres south of Perth in one of the world’s premier mineral sands producing regions.
It has ready access to a deep and established labour pool, supply chain and existing infrastructure which will considerably de-risk the project.
Mineral make-up
Keysbrook comprises heavy mineral sands contained in degraded dunes within the Bassendean Formation.
Resources stand at 49.1 million tonnes at 2.6% heavy minerals. Last week MZI delivered a maiden ore reserve of 670,000 tonnes of in-situ heavy minerals for the project which is included in the total resource.
The total combined resource and reserve is sufficient to underpin a potential 11 year mine life.
The orebody is at surface and averages 2.2 metres in thickness across a total mining area of around 12 square kilometres.
Approvals for mining have already been received, and all environmental approvals are in place.
Next steps
MZI is continuing detailed design and engineering on the project and intends to undertake optimisation studies on several aspects of the study.
The company is also progressing financing and working to finalise material contracts for offtake, land owners, logistics and toll treatment.
MZI has executed a leucoxene offtake negotiation with DuPont, and a zircon offtake agreement is being negotiated with Tricoastal.
