MZI Resources progressing Keysbrook to development decision
Thursday, May 22, 2014 by Proactive Investors
proactiveinvestors.com.au
MZI Resources ( ASX:MZI) ongoing work has de-risked its Keysbrook mineral sands project in Western Australia since securing US$64 million (A$69 million) in project debt funding.
The company is fully funded for development and construction of the project with first production expected 52 weeks from a decision to proceed with the project.
It is progressing plans to convert further existing Resources into Ore Reserves and has carried out plan optimisation that has resulted in an improved product profile through the life of reserves.
Further drilling and metallurgical testwork programs have also underpinned operating and production assumptions used in the feasibility study.
“The Keysbrook Project has been progressing while the company has gone about completing the financing process,” chief executive officer Trevor Matthews said.
“We are now at a point where we can confidently proceed with the Keysbrook development with an improved construction contracting strategy, defined commercial arrangements with stronger local relationships and greater upside for shareholders once operations commence.”
Product Offtake
MZI has offtake agreements in place for all Leucoxene 70 and zircon concentrate products representing approximately 61% (by volume) and 46% (by revenue) of total production.
It is in advanced discussions with a number of parties with respect to the Leucoxene 88 product and expects to finalise these discussions ahead of a decision to proceed with the development.
Keysbrook Growth Potential
MZI is progressing to pursue the necessary approvals, access and conversion of Resources into Ore Reserves to achieve the potential +15 mine life from the current 5.5 years.
This and obtaining the necessary approvals and land access agreements to access further mining areas would increase project NPV up to $153 million - $166 million (base to high case pricing) from the current $57 million to $70 million.
Work has also increased expected Leucoxene 70 and Leucoxene 88 annual production by about 16% and 3% respectively compared to the Feasibility Study.
Development and Operating Costs
The company has also continued to refine and derisk the development cost for the project.
Besides selecting GR Engineering Services in October 2013 as preferred contractor on a lump sum, turnkey EPC contract, it has also obtained firm proposals from remaining key construction contract providers, including the Mining Feed Unit and establishment of power infrastructure.
Further input has been received from third party experts with respect to key development cost areas, including mining activities, power requirements and maintenance.
Total project capital costs are estimated at $61.9 million, of which $54.6 million is secured under the contract with GR Engineering.
With the inclusion of Owners and Other Costs of $11.3 million, total development costs are $73.2 million.
MZI is also finalising a competitive tender process for the provision of logistics services and has estimated annual operating costs at about $40.6 million, or $422 per tonne of product.
The company has also:
- Conducted further water recovery testwork to confirm water capture and recycling assumptions used in the feasibility study;
- Excavated a series of bulk sample pits to check the conditions of the pit floor and interface between Ore Reserves and the basement material;
- Undertaken further mine planning activities in order to further optimise the production profile; and
- Undertaken additional exploration programs in order to confirm assumptions used in the declaration of Mineral Resources, and to provide additional quality assurance / quality control on historical programs.
Keysbrook Mineral Sands Project
The Keysbrook Project located approximately 70 kilometres south of Perth, 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 product.
It will produce an average 91,000 tonnes per annum of mineral sands products from 110,000 tonnes of dry heavy mineral concentrate.
This will be trucked about 120 kilometres to Doral’s mineral separation plant, which is just 10 kilometres from the Bunbury Port, for toll treatment.
Analysis
MZI Resources continues to progress the Keysbrook Minerals Sands Project, which enjoys strong support from cornerstone investor RCF, towards a development decision.
Notably, there are a number of short term catalysts that can move the company's share price on execution. These include:
- Securing offtake agreements for the premium Leucoxene 88 product (May);
- Signing the final zircon agreement (May);
- Sign GR Engineering Services’ EPC Contract (May);
- Receiving shareholder approval for the RCF package (June);
- Execution of financing agreements (June);
- Development decision (June);
- Completion of construction (June 2015); and
- Start of production.
We continue to extol the virtues of Keysbrook and its compelling project economics. While the MZI share price has drifted back we see value upside in the short term based on these catalysts. |
