Document date: Tue 25 Jun 2002 Published: Tue 25 Jun 2002 10:57:01 Document No: 218403 Document part: A Market Flag: Y Classification: Progress Report MINERAL COMMODITIES LTD 2002-06-25 ASX-SIGNAL-G
HOMEX - Perth
+++++++++++++++++++++++++ Mineral Commodities Ltd (ASX: MRC) has received final approvals to secure a key investment by the South African Export Development Fund (SAEDF) which is expected to underpin the funding and development of the world class Xolobeni mineral sands project on South Africa's east coast.
The Australian-based resource group said today (Tuesday) that it would proceed with a pre-feasibility study on the strategically located Xolobeni Project, in the Eastern Cape some 200 kilometres south of the major east coast port of Durban, after finalising an agreement for an initial funding injection by SAEDF.
The wide-ranging agreement includes the option for SAEDF to acquire equity both directly in the Xolobeni Project and a stake in Mineral Commodities. It also gives the fund - which was established as a joint initiative between ABSA Bank Ltd and the South African Department of Trade and Industry - a 6-month mandate to present a funding proposal for the development of the Xolobeni Project, including a new smelting operation.
Mineral Commodities has completed all formal documentation, and received written confirmation that all conditions precedent have been fulfilled or otherwise dealt with, for the agreement, which comprises:
* an initial R18 million (A$2.9 million) investment by SAEDF in Mineral Commodities' wholly-owned subsidiary, the South African registered MRC Resources (Proprietary) Limited to acquire 10% of its issued capital. MRC Resources is currently increasing its interest in the holding company which owns the Xolobeni Project (Transworld Energy and Minerals Resources, TEM) from 49% to 80% by meeting certain funding commitments;
* the right for the SAEDF to convert this equity in MRC Resources into fully-paid shares in Mineral Commodities up until 31 December 2003 on the basis of converting the R18 million investment into 5.17 million shares at approximately 56 cents a share. On conversion, the SAEDF's equity in MRC Resources will be cancelled;
* the right for the SAEDF to acquire a direct 20% interest in the Xolobeni Project by subscribing for shares in TEM between 30 June 2003 and the completion of a Bankable Feasibility Study. The value of equity in TEM will be determined by an independent valuation to be commissioned at the time and will be discounted by the initial investment plus 10%;
* the award of an exclusive 6-month mandate to the SAEDF to present a funding proposal for the development of the Xolobeni Project, including a new smelting operation; and
* a first right of refusal for the SAEDF to provide funding for other projects in Africa held by MRC Resources.
Mineral Commodities' Managing Director, Mr Mark Caruso, said the transaction was based on an agreed value for the Xolobeni Project of approximately R225 million (approximately A$36 million).
"This agreement creates an association between Mineral Commodities and one of Africa's leading development funds that will underpin the development of the Xolobeni Project," Mr Caruso said.
"We are delighted to have attracted the support and backing of the SAEDF to develop this important project, which has the potential to generate significant benefits for the Transkei economy in the Eastern Cape including employment, new infrastructure and amenities and education & training," be added.
"There is significant support for the Xolobeni Project within the Eastern Cape and South Africa because of its potential contribution to black empowerment and upliftment in the currently depressed Eastern Cape region and its ability to generate a long-life royalty stream," Mr Caruso said.
He went on to say that the Project development would deliver enormous value to Mineral Commodities shareholders, giving the Company significant ownership of a top-10 titanium feedstock producer.
The Xolobeni deposit comprises a current resource of 196 million tonnes at 6.7% Total Heavy Minerals (THM) with a 15.2% slimes content. The ilmenite content is estimated at 3%, while the rutile and zircon contents are estimated at 0.2% each. The chrome content of the ilmenite is very low and it requires no pre-processing prior to smelting.
Independent assessments conducted by Mintek in South Africa have confirmed that the ilmenite is suitable for smelting to produce an enriched slag (86% TiO2) which is suitable for pigment production by the chlorination process.
Mineral Commodities today also announced the signing of a Memorandum of Understanding (MoU) with the East London Development Zone Corporation (ELDZC) to jointly undertake a pre-qualification study into the establishment of an ilmenite smelter at East London, on the South Africa's east coast south of Xolobeni.
The ELIDZ is one of several 'Industrial Development Zones' or IDZ's being gazetted by the South African Government to promote industrial development in parts of the country requiring new investment and economic upliftment, such as the depressed Eastern Cape region. Phase 1A of the ELIDZ comprises a 250-hectare site, due to become a duty-free area, and Phase 1B is earmarked for a 110-hectare industrial park.
Under the MoU, Mineral Commodities has been granted an exclusive option to enter into a 30-year lease with an option to renew for 20 years on 10 hectares of land within the proclaimed IDZ at East London.
The Xolobeni Project comprises a geographically strategic resource of heavy minerals which is slated conceptually for development as a 5 million tonne per annum start-up mining operation producing some 250,000 tonnes per annum of ilmenite concentrate to supply a new smelting operation.
At this production rate, the project would yield 146,000 tonnes per annum of 86% TiO2 slag and 76,000 tonnes per annum (tpa) of pig iron, placing it in the top 10 titanium dioxide feedstock producers in the world. The operation will also produce a minimum of 10,000 tpa each of rutile and zircon concentrate.
Based on this conceptual production rate, the integrated Xolobeni Project would generate an operating revenue of $150 million per annum over a long project life, currently estimated at in excess of 20 years.
"Having completed this funding agreement with the SAEDF, we will commence an extensive drilling program in July 2002 which we are confident will significantly increase this resource base and the current valuation of the project," Mr Caruso said.
"We will also commence work immediately, in conjunction with the ELDZC on the parameters of a possible ilmenite smelting operation at East London."
The Xolobeni deposit is ideally suitable for a large-scale conventional dry mining operation, followed by processing in a wet concentrate facility, secondary treatment and dry separation with the initial target of supplying one slag furnace offsite.
Mineral Commodities, through MRC Resources, currently owns 49% of the Xolobeni Project and has expended $420,000 of its $1 million expenditure commitment to earn an additional 26%.
MRC Price at posting:
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