Some posters have asked for a MRQ peer comparison and some...

Some posters have asked for a MRQ peer comparison and some context of what the new assays might mean for the economics of Koko Massava. A quick run down of some of my recent research and observations might be instructive, I must emphasise this is early days in both MRQ's results and my review, potential numbers in this post are for discussion purposes only and obviously subject to future company released data and studies. All numbers presented are simply an attempt to put into context MRQ Koko with other mineral sand mines and projects.

Mutamba Comp

I know there will be material differences between the two deposits and final designs but they have many similarities and Mutamba is a good analogue as MRQ has stated in a number of releases. For those not familiar, Mutamba is situated north up the coast a bit in the following geographical setting.



I have assumed a higher grade resource of 500Mt @ 5.75% THM will eventuate inside the blue outline, within a larger but lower grade resource as the first two assay sections are suggesting. Future assays and drilling may change expectations of this potential 500Mt mining resource but it should be noted the best two sections from logging seem to have been assayed first.



I must emphasise that I can see plenty of room for 500Mt, in fact 1Bt of sand resources to 15-20mRL without moving any towns, and I make no opinion in this post about the the towns. While I'm at it, this compilation of publicly available facts and my comments regards them is not deemed accurate, not to be relied upon, is not financial advice, and please DYOR.



The above comparison table speaks for itself. Take-away for me is that i cannot see why or where MRQ Koko will be lower cost to build or operate per ton than Mutamba at a 15Mt pa throughput. Throughout is likely cheaper for Mutamba because of the much lower slimes, this is simply an imuatble fact of mineral sands processing; lower slimes achieve higher throughput prodcution cheaper.. Further, Mutamba will truck the same sort of distance to a inlet protected jetty for barge-to-ship loading. I think it unlikely MRQ Koko would be economic or allowed to truck 250km by road to the port of Maputo. Maputo has an operating cots of US$5/t based on 2017 costs which would have risen with rising oil price and economic activity coming out of the 2016 economic slump. Scoping Studies have a reputation for being too optimistic and costs usually rise into the PFS and DFS studies.

Still, the study is a good point for high-level comparison for the competition MRQ are aiming at. The Chinese owned Corridor 1 deposit has not publicly released study results so it is not possible for a comparison there, except to say that Corrdior 1 will have comparable costs, but does have +650Mt of 9.5% THM. I have assumed this higher grade 650Mt will probably convert to a much larger mining resource of a lower 8% THM using overlying lower grade resource when mining from surface.

Below is a table with calculated 'Recoverable In Ground Value Per Tonne' figures for a range of MRQ Koko peers. Mutamba as you can see has over $2/t higher value in recoverable VHM product per tonne, but as discussed above similar capital and operating costs.



Why is 'Recoverable In Ground Value Per Tonne' so important in the mineral sands industry? I'll let Iluka explain from one of their presentations



Costs are much closer related between mines than in-ground-value or revenue per tonne. Bulk mining and processing similar amounts of sand from surface for example using the same dry mining techniques cost a similar amount unsurprisingly. Costs will change significantly with overburden and slimes as two material differences between deposits. Thunderbird has more overburden than the others, Kwale has higher slime, Moma and Mutamba have lower slime. Mutamba scoping study operational cash costs were US$5/t (excluding capex, sustaining capex, corporate costs, finance costs etc). At the pricing in my above spreadsheet for comparison purposes Mutamba has a reveune-to-cash cost ratio of 2:1, although scoping study ratio was 1.7:1. A 2022 industry weighted cost curve below shows an industry average of 1.79 which includes existing mines that have no debt and paid off their capital of course.



Only after a DFS has been complete can the R:C ratio be judged 'real' but it is a tight curve with thin margins as typical for most bulk mining commodities. One problem for developers that carry large debt to start-up is that some US$0.50/t debt interest is deducted from the revenue stream able to pay down debt after tax, sustaining capex, corp costs, etc. A project not in the top two quarties of this curve are too risky for going broke from a downward commodity price cycle and thus unlikely to be financed. Like a raft of lithium newbies in WA, start-up projects with high debt is a risky business when prices cycle down.

At $8/t revenue to $5/t cash cost like Mutamba, MRQ Koko has a cash revenue:cost ratio of 1.6 (assuming Mutamba recoveries and reported early assemblage data, 5.75% LOM avergae THM grade etc. These figures will certainly change up or down over time). 1.6 is a low ratio and lower than all the other peers in the above table for which cash cost from DFS or operations is available. Thus my emphasis on how important the current drilling is for THM grade, and future met work to confirm assemblage data. Notes on assemblage data copied from an earlier post FYI.

Mineral assemblage is absolutely so important, it makes THM almost irrelevant such is the wide disparity of mineral deposit assemblages and values those assemblages represent. MRQ announced that samples form the auger program have been collected and submitted for analysis to use in the March resource work. That top 10m will not be representative of the deeper strands, that met work has to be done separately.

Some work has been done on the assemblage at Corridor Central and South by earlier explorers but that is not sufficient to be relied upon obviously. MRQ reported historical assemblage work in the June 2019 acquisition presentation.

Further more, it would be very surprising if MRQ's deposits varied greatly from the well studied Corridor 1 deposit given the same style of deposition in the same area from material supplied by drainage from the same continental catchment basin. The THM that washed into the sea from Limpopo River and formed the Corridor 1 deposit is highly likely to be very similar to what washed in when MRQ's strand deposits were formed. Post-deposition alteration would also have been similar.

WMC/BHP contemplated a low temperature roast to remove chromite prior to kiln slagging the ilmenite, same as Mutamba and Moma north up the coast, and Richards Bay, Namakwa further south down the coast. I think you can lock in chromite contamination and LTR treatment to clean it up.

Mineral Sand Market Analysis

One really should consider the mineral sands market when considering a new mineral sands project. Taken from an Iluka presentation is a summary of the production of different TiO2 products globally (ignoring Zircon for which MRQ Koko has only a small credit).



MRQ Koko will almost certainly be selling a Chloride Slagging Ilmenite product post low temperature roasting to remove chromite contamination, as does Moma, Richards Bay, Namakwa, planned for Mutamba etc. Sulphate ilmenties are preferentially higher TiO2 grade and sourced from India, Sri lanka, Vietnam etc. Chloride TiO2 plants are the worlds growth sector which is a good thing in this case, because chloride plants are cheaper and less polluting. Rutile and synthetic rutile production looks to be in permanent long term decline, the obvious replacement is going to be chloride slagging feed for chloride slag smelters.

The chart below is taken from Base's Tolliara December 2019 DFS report. It shows the Base's forecast supply deficit of "Chloride TiO2 Feedstock" (which is what MRQ's roasted ilmentite will likely be) going out 10 years to 2030. The forecast is for a deficit of approx 750,000t of TiO2 units by 2030 after taking into account new greenfield and brownfield supply. In total the market is looking for 1.5Mt of extra TiO2 untis of Chloride smelter feedstock.


This sounds like a lot but to put this into context here is a list of the just the peers I have referenced above and their contributions should they get developed (Moma expansion announced after BSE DFS release, Corridor 1 expansion required to make sense of capex and resource size).


There are of course many other mineral sand exploration hopefuls and brownfield expansions like Kenmare's Moma just announced. History also shows that expected supply deficits are rarely as big as forecast because many mines tweak and increase production incrementally with efficiencies and profit motive, especially when a supply deficit and associated price rise is forecast. If the above developers and expansions alone go ahead there is considerable doubt that room for MRQ Koko would be available for development.

Anyway, it's many years and much work before MRQ is in the position to jostle for development. If all the above projects go ahead it may be many more years until the window of development opportunity opens? This is all just speculation at this stage, anything can happen. I would be keeping a close eye on MRQ Koko THM grades and assemblage work to see if they look like creeping up the all important revenue to cost curve.

DISCLAIMER
Apologies for the long winded and rambling post, which has not been proof read, I will look at further refining my research, observations and adding to the analysis at a later date. All the above is taken from publicly available information and is correct to the best of my knowledge. Assumptions, observations and comments around these facts and calculations throughout this post is my own opinion only and not to be relied upon in any way. The post is for discussion purposes only Verification is encouraged. Please DYOR and happy for any factual corrections on mistakes I have made.