Tiomin completes feasibility study on Kwale project
Tiomin Resources Inc TIO
Shares issued 41,133,942 May 5 close $0.65
Mon 8 May 2000 News Release
Mr. Jean-Charles Potvin reports
Tiomin Resources has released the results of a positive feasibility study
completed by LTA Process Engineering (Pty) Limited of South Africa and
Ausenco of Australia, on its Kwale titanium-bearing mineral sands deposit
in Kenya. The conclusions presented in the comprehensive study, recently
presented to the government of Kenya, highlighted the robust economics of
the Kwale deposit.
An environmental impact study completed to international standards, and
which will be the subject of extensive public review, defines the
environmental practices under which the project will operate.
The Kwale deposit located about 65 kilometres south of Mombasa, will become
an engine of substantial and sustainable economic growth for the coastal
region and will provide the foundation for the development of a vibrant
titanium minerals industry in Kenya.
Highlights of the feasibility study are:
Financial
The estimated project capital costs are $137-million (U.S.) including
contingency provisions. As stated in the study, the project shows robust
economics and, based on current commodity prices, is expected to yield an
internal rate of return over the project life in excess of 20 per cent and
achieve a capital payback within 3.5 years. The development of Kwale is
projected to yield a cumulative net after-tax cash flow of about
$254-million (Canadian) or $5.40 per share. It is expected that upon
completion of further test work and consideration of optimization value
engineering exercises, considerable savings can be achieved on the capital
and operating budgets.
Production
The substantial reserve base of high grades of rutile, ilmenite and zircon
in the Kwale deposit will support a mine life of at least 14 years. During
the first six years of production, Kwale will produce over 300,000 tonnes
of ilmenite, 75,000 tonnes of rutile and 37,000 tonnes of premium zircon
annually. Based on current commodity prices, Kwale is expected to generate
approximately $47-million (U.S.) ($70-million (Canadian)) in annual cash
flow.
Marketing
The titanium minerals ilmenite and rutile are used primarily in the
fabrication of pigments and titanium metal, while zircon is used in ceramic
glazes and foundry applications.
With a worldwide pigment market demand growing at an average compound rate
of 2.8 per cent, reaction to Tiomin's marketing activities with major
titanium and zircon consumers has been favourable. The chemical
specifications of the Kwale ilmenite make it suitable for either chloride
or sulphate-based pigment manufacturing technologies. The quality of both
its rutile and zircon products exceeds commercial standards significantly
enhancing the level of consumer interest.
There is general agreement in the industry that a substantial shortfall in
the titanium and zircon feedstock supply will arise as early as 2003,
unless new sources are brought into production. The production from Kwale
represents about 4 per cent of the current world consumption.
Environmental assessment
The environmental impact assessment (EIA) portion of the feasibility study
was completed by Coastal and Environmental Services of South Africa (CES).
Its study concluded that the ecological impacts of mineral sands mining at
Kwale are acceptable after mitigation.
CES also noted that the social benefits outweigh the costs, while the
economic benefits to the people of Kenya far exceed the costs. The study
concluded that mining in Kwale should proceed provided the recommendations
in the EIA are implemented.
Timing
By year-end 2000, Tiomin anticipates receiving the necessary mining and
environmental permits from the Kenyan government, to have secured the
remaining surface rights in the mine area, to have signed long-term sales
contracts and to have arranged project financing. Tiomin has already
initiated negotiations with financial groups in concert with its financial
adviser, London-based Barclays Capital. Construction is expected to
commence in early 2001, with production startup anticipated for late 2002.
J.C. Potvin, president and chief executive officer of Tiomin, said: "This
is an important milestone for Tiomin. The findings of the feasibility study
have confirmed our strong belief in Kwale as a robust project, which will
have substantial benefits for both the people of Kenya and the shareholders
of Tiomin."
He added, "Kenya is one of four Kenyan mineral sands projects owned by
Tiomin and its development will be the first step for Tiomin and Kenya to
emerge as a significant supplier of titanium and zircon mineral
concentrates to the global market."
Tiomin has identified four large titanium-bearing mineral sands deposits
located approximately eight to 12 kilometres inland from the Kenyan coast.
These exploration properties were acquired in 1996 through an agreement
with Pangea Goldfields Inc. whereby Pangea retains a 20-per-cent net profit
royalty from future mining operations on the properties. Tiomin's long-term
operating plan proposes the sequential development of its other Kenyan
deposits. Current plans envisage the development of the Kilifi or Mambrui
deposit following startup of production at Kwale.
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