Hello Mark, in case you havent seen this report, it was compiled by Sprott Securities, and as I understand it, both
Topping and IR rep Bill C. are visiting the Kwale site this month.
A recent addition to Crown Jewel coverage Tiomin Resources has shown some staying strenght in the market thus far with a recent analyst report available thru Sprott Securities which underscores the current undervalutation in Tiomin Shares. Mr. Topping of Sprott Securities estimates NPV share price of 1.76C based on the Kwale project alone. Most Crown Jewel subscribers should now be in the stock in the .50C range or less and it looks like Tiomin is poised both technically and fundamentally to move into the 1.75C range contingent upon a successful bankabable feasibility study anticipated during March of 2000. The recent report dtd Dec 8 1999 is available thru Tiomin Resources, T.TIO by contacting Investor Relations Bill Cavalluzo. The following is clipped for subscribers benefit
Tiomin Resources Inc -
Sprott Securities says buy
Tiomin Resources Inc TIO
Shares issued 38,050,922 1999-12-30 close $0.6
Thursday Dec 30 1999
George Topping says why
Tiomin Resources is a Canadian junior mining company focused on titanium exploration. Tiomin's principal asset is its four titanium deposits on the coast of Kenya of which the Kwale deposit is the flagship. A feasibility study is due for release in March, 2000, which we anticipate will be positive. Tiomin has the potential to be a major producer of titanium and zircon within three years. Kenya, while far from perfect, is a stable country with a freely traded currency. Titanium is a quality of life product, used primarily as a pigment in paint and plastics. As growth continues in the populous countries, China, India and even Africa, demand for titanium will be strong.
Positive titanium markets
We anticipate a positive titanium market from early-2003 shortly after Kwale comes on stream in early-2002. The robust Asian and European economic recovery will push titanium prices higher.
Kwale feasibility study well advanced
The deposit is low cost, high grade, sandy, outcrops extensively, has been well drilled and the pilot plant tests suggests normal mineral recovery. A host of qualified consultants and specialists are responsible for the project feasibility study.
Tiomin is undervalued
The anticipated NPV, using a discount rate of 15 per cent, is $1.75 per share, the payback is two years, the market cap and capital required per tonne of Titanium2 is low and the project should be in the lower half of the producers cost curve.
Financing should be readily available
Barclays Bank, the IFC and other development banks, potential customers and source country financing for major capital items should allow Tiomin to debt lever the project.
Credible management
Tiomin is operated by the same competent, successful management team which operates Pangea Goldfields Inc. Management is significant common shareholders in Tiomin.
Background
Tiomin has been active in Kenya for four years and has outlined a major titanium region consisting of four distinct titanium bearing deposits. The titanium enriched sands represent the ancient shoreline (Tertiary period) which now lies several kilometres inland from the present coastline.
Tiomin also have interests in an iron/titanium deposit in Canada, the Cerro Colorado copper deposit in Panama, (presently under option by Aur Resources) and a titanium metallurgical process, the synthetic rutile process. We have not assigned any value to these assets in this report as the focus is the Kenyan titanium assets.
Management
Management is highly experienced and carry solid credibility within the mining and investment industry.
Jean-Charles Potvin -- president and chief executive officer
Has a BSc geology and an MBA. He was a co-founder of Tiomin in 1989 and is the CEO of Pangea Goldfields, Tiomin's sister company. Prior to 1994, he was a mining investment analyst and director of Burns Fry Inc. (now Nesbitt Burns Inc.).
Other senior management include Mathew Edler, vice-president corporate development, who has 10 years experience in project financing, and previously worked with Macquirie Bank, Australia. Ian MacNeily, vice-president finance, formerly treasury risk management with Kleinwort Benson. The board of directors is a strong mix of financial and engineering skills, notably a director of Stillwater Mining (Peter Steen) and a former vice-president of CIBC (Donald Worth).
Share structure
The share structure as at Sept. 30, 1999, is outlined below.
Issued
Common 38.2 million
Warrants 1.7 million
Options 3.9 million
------------
Fully diluted 43.8 million
The common share purchase warrants expire on June 22, 2000, and are convertible at a price of $2.50 per share. The options are issued to officers and employees of the company and have exercise prices between 18 cents and $2.12 per share with expiry dates up to July 9, 2004. The average exercise price is 39 cents per share.
Mr. Potvin, CEO, owns 10 per cent of the company as a common shareholder and thus has a vested interest in increasing shareholder value.
Balance sheet
Tiomin has cash of $500,000 and net current liabilities of $600,000. Long-term debt of $2-million (U.S.) is owed to Aur Resources and is secured solely against the Cerro Colorado deposit.
The Kenyan mineral sand deposits
Tiomin has four mineral sands deposits along the coast of Kenya. In mid-1996, Tiomin acquired the properties from its sister company Pangea Goldfields Inc., a highly successful gold exploration company, in return for a 20-per-cent net profits interest after Tiomin has recouped its capital investment. The Kwale deposit was subsequently discovered nearby and became the focus of Tiomin's efforts. The deposits are held through special licences, which grant exclusive prospecting rights for all non-precious metals to Tiomin.
Under the agreement, Tiomin must complete a bankable feasibility study by June, 2001, or lose 80 per cent of its stake in the deposit. The bankable feasibility study is scheduled to be complete in early-2000. The lease and exploration cost to Tiomin of all the Kenyan properties is around $200,000 (U.S.) annually.
ESTIMATED ORE RESOURCE
Mineral sand Ilmenite
(millions grade
of tonnes) (%)
Mambrui 700 2.0
Kilifi 1,700 1.1
Mombasa 500 1.0
Kwale 200 2.0
----- ---
Total 3,100 1.3
Rutile Zircon
grade grade
(%) (%)
Mambrui 0.1 0.1
Kilifi 0.1 0.1
Mombasa no assay no assay
Kwale 0.5 0.3
--- ---
Total 0.1 0.1
Source: Tiomin Resources Inc.
The Kwale deposit was chosen as the start-up project because of the relatively high rutile grade of the deposit which more than offsets the relatively low tonnage. In our opinion, the other deposits are not presently viable as stand-alone operations. However if we consider the infrastructure put in place for the Kwale deposit as a sunk cost, these projects may come into play following the depletion of the Kwale deposit. In addition, by the time this comes to pass, global supplies of rutile will have declined to such an extent that lower grade ilmenite deposits will have to be mined to satisfy demand. The potential to have a central processing facility is limited due to the high tonnage and low unit value of the ore. It is likely to be more cost efficient to design the plant for subsequent relocation to the other deposits.
Kwale ore resource
The Kwale deposit consists of three distinct dunes. The central dune, which contains 75 million tonnes of mineral sands, will be the main producing area.
The central dune has a surface area of 1.6 kilometres, an average thickness of 28.5 metres and is rich in rutile. The high-grade rutile is instrumental in achieving a rapid payback.
The south dune, approximately two kilometres south, holds another 78 million tonnes of lower grade but economic sand. The north dune is economic but has not been included in the current feasibility study because it would only be mined 15 years in the future.
Kwale deposit ore resource
Central (75 million tonnes)
grade tonnes
(%) (millions)
Ilmenite 3.0 2.3
Rutile 0.8 0.6
Zircon 0.4 0.3
South (78 million tonnes)
grade tonnes
(%) (millions)
Ilmenite 1.2 1.0
Rutile 0.4 0.3
Zircon 0.2 0.2
North (47 million tonnes)
grade tonnes
(%) (millions)
Ilmenite 1.5 0.7
Rutile 0.2 0.1
Zircon 0.1 0.1
Total (200 million tonnes)
tonnes
(millions)
Ilmenite 4.0
Rutile 1.0
Zircon 0.6
Source: Tiomin Resources Inc.
Metallurgy
Process
A two-stage (wet process stage and dry process stage) concentrator plant will be built on-site to produce a concentrate for shipping. The wet process stage consists of mobile banks of gravity separation spirals, down which the mined sand is transported with water. The spiral action deposits the heavy minerals at the centre of the spiral and the lighter waste sand towards the outer edge of the spiral to produce a raw concentrate.
In the dry process stage, ilmenite is recovered using a wet magnet, in which the plucked ilmenite is recovered from the magnet by a water spray. The rutile is recovered by electrostatic separation leaving a zircon concentrate behind. At Kwale, a consistent 95-per-cent recovery of heavy minerals is achievable.
Testwork
M.D. Mineral Technologies Ltd. (MDMT), Australian metallurgical consultants, performed metallurgical testwork on a 200-tonne bulk sample using a pilot wet plant. MDMT is an industrial minerals consultant that specializes in titanium minerals and has designed many of the plants now used throughout the world. The test work suggests mineral recoveries of 95 per cent for the rutile and ilmenite and 90 per cent for the zircon, which is good by international standards. A further pilot test of perhaps 500 tonnes may be conducted in 2000.
The pilot plant produced an ilmenite concentrate grading 49 per cent titanium. As ilmenite containing over 50 per cent titanium is more acceptable to the markets, Tiomin may choose to upgrade it prior to shipment. Roasting the ilmenite and extracting some of the freed iron using a powerful magnet is a low cost method of increasing the grade by a per cent or two. This ilmenite concentrate would then be shipped to either a pigment or slag manufacturer to be further refined through the sulphide/chloride process.
A high-grade rutile product grading a 97 per cent titanium was produced, comfortably exceeding market requirements. A standard-grade zircon was produced during testwork that can be upgraded to a premium grade zircon be washing the zircon in a hot acid leach (HAL).
Given the simplicity of the process, reproducing the pilot plant results under commercial conditions ought not to be difficult.
Tiomin has provided potential clients with samples of the product, who have been generally satisfied with the specifications. Long-term contracts will be negotiated next year once the project schedule is completed.
Feasibility
An in-house prefeasibility study, completed in 1997 by Tiomin, concluded that the project had sufficient promise to proceed to the bankable feasibility study stage. Tiomin commissioned LTA of South Africa, (a subsidiary of Anglo American) and Ausenco of Australia to prepare the bankable feasibility study. This study should be released in March, 2000. The environmental impact study is being carried out by Coastal Environmental Services of South Africa.
The feasibility study will determine whether the ilmenite should be mined at all, as a small, low-capital cost, high-grade rutile operation may be the optimal profitability route. Without a long-term contract, the ilmenite probably cannot be relied upon to produce consistent profits. However, while this may maximize the project IRR, it is not likely to be well received by the government mining engineer, who's job it is to maximize jobs and tax receipts. A compromise is likely with the government encouraging ilmenite exploitation through incentives.
SRK Mining Consultants (Cardiff Branch) have been retained by Barclays Bank to comment on the feasibility work. SRK reported in September, "The analysis has revealed a feasible project with no technical fatal flaws and with robust technical and economic characteristics." SRK also noted the ore resource is more than sufficiently defined for evaluation purposes.
TZMI, titanium market specialists, will conduct a comparative cost analysis as part of its report on the anticipated titanium markets.
Logistics
The Kwale deposit is located 35 kilometres south of the second largest Kenyan city, Mombassa, and 12 kilometres inland. Infrastructure, in the form of ports and roads, is good but the electric power supply will have to be diesel generated. Aquifer water is expected to be sufficient as recycling will be employed. A ship loader and bulk loading facilities may have to be installed in the port of Shimoni or Dongo Kundu, both located near the project.
The mining will be carried out by a bucket wheel excavator (a series of buckets attached to a revolving wheel). The spinning wheel scoops up the sand and discharges it sideways onto a conveyor belt to the process plant. This equipment is a high-output, low-operating-cost machine, ideal for sandy material.
There are 1,500 people resident on the mining area that must be relocated over a 10-year period. This need not present a problem as dunes are hardly prime real estate. On-site management will be expatriates as no local mineral sands mining skills are available. Tiomin has entered into a lease agreement with the Kenyan landowners regarding relocation.
Marketing
Being on the east coast of Africa would make the rapidly growing markets in Asia a logical destination for the feedstock. Kwale would be a major mine, producing 13 per cent of the global market for rutile and 4 per cent of the ilmenite and zircon market respectively. The knock-on effect would displace the lower quality, higher cost ilmenite feedstock from the pigment market. The ilmenite will be absorbed by market growth.
Financing the project
The method of financing the project is critical, shareholder dilution at the present low-share price must be avoided. Unless the share price increases dramatically, the optimum route would be debt financing. Barclays Bank, the financial advisers for the Kwale project, will probably be the main source of funds. It has appointed an independent consultant (SRK) to carry out due diligence of the project.
Other likely sources of debt financing are other investment banks, for example Standard Bank, the European Investment Bank and/or the IFC, both of whom have a history of financing projects in poor countries. In addition, countries such as Germany and South Africa from which major items of mine and processing equipment would be sourced, may offer soft loans to encourage Tiomin to source equipment from those countries. Further, early indications are that a potential U.K. customer may take up a stake as part of a marketing agreement as often happens in the base metal concentrates market.
To highlight the impact of debt or equity financing on the NPV per Tiomin share, we investigated three scenarios: (nearly) all debt; 20-per-cent equity/80-per-cent debt and all equity. We have assumed debt at LIBOR plus 4 per cent (approximately 10 per cent) and equity priced at 75 Canadian cents per share based on peak finance required of $100-million (U.S.).
Impact of financing activities
All Equity/debt All
debt (20%/80%) equity
NPV (15%) $2.88 $1.76 93 cents
Note: All equity issued at 75 Canadian cents per Tiomin share. All debt issued at 10-per-cent interest.
The above table shows the impact of dilution through the use of equity at low share prices while the all debt scenario highlights the benefits of leverage, borrowing money at 10 per cent to build a project returning 40 per cent p.a. To remain prudent, we have assumed a 20-per-cent equity financing component ($20-million (U.S.) at 75 Canadian cents per Tiomin share) as our base case.
With the completion of the bankable feasibility study and renewed interest in Tiomin, we expect the Tiomin share price to rise materially, thereby making any equity financing less dilutive. Investors can take comfort in the knowledge that senior management is substantial common shareholders in Tiomin and will wish to avoid excessive dilution.
Other recent projects financing examples are Agnico Eagle, $100-million (U.S.) with Deutche Bank, which would be 100 per cent of the project expansion if required; Meridian, 65-per-cent debt financing, St. Andrews Goldfields with 75-per-cent debt and Kasese Copper in Uganda reportedly 100-per-cent financed by Standard Bank of SA.
Country risk -- Kenya
While Kenya has the usual problems of most African nations, crime, corruption and poverty, it is still possible to conduct business. The U.S. State Department description of crime and corruption reminds me of South Africa, Zimbabwe, Mali and Ghana, all countries with successful mining industries
By African standards, Kenya is stable, disease free, poor but not starving, and democratic. The U.S. State Department notes Kenya has a major street crime problem and tourists are warned to avoid attracting attention to themselves. In addition, the country is in transition from a single-party democracy to a multiparty system and outbreaks of civil disorder occur from time to time but are normally localized in urban areas. The December, 1997, elections were generally peaceful and the next elections are scheduled for 2002.
The Kenyan mining industry is a relatively small part of the Kenyan economy accounting for only 0.4 per cent of gross domestic product (GDP) and 3 per cent of foreign exchange earnings. When Kwale is at full production it will boost Kenyan forex earnings by 4 per cent, a fact not lost on the desperately U.S.-dollar-short Kenyan government. The importance of Kwale to the Kenyan economy should assist in its timely development from a permitting and taxation viewpoint.
Country taxation
Mining tax laws are roughly comparable to Canada. Corporate tax is levied at 35 per cent after the redemption of capital expenditure. We have assumed 30 per cent to account for capital allowances and other tax credits. A mining royalty of 2.5 per cent is levied on revenue. The company has applied for an export processing zone which could mean no duties on imports and a 10-year tax holiday for the processing and export facilities. While this could be a potential major benefit, no account of it has been taken in this valuation.
Foreign exchange regulations
The Kenyan shilling is a free-floating currency.
Financial analysis
Production should commence by early- to mid-2002. The capital cost of the mine and plant with associated equipment and infrastructure (port facilities, roads, houses, offices and such) is expected to be around $110-million (U.S.). We believe this figure could prove conservatively high. The grade distribution of the deposit allows the high-grade, higher rutile content material to be mined in the early years, thereby improving the project economics. This mining strategy has been incorporated in the valuation.
Conceptual mining parameters
Sand processed (ktpa) 10,000
Saleable product (ktpa)
Rutile 68
Ilmenite 282
Zircon 35
Stripping ratio 1:1
Annual sales (in millions of
U.S. dollars) $53
Annual costs (in millions of
U.S. dollars) $15
Per tonne of sand of sand
(in U.S. dollars) $1.35
Annual cash flow (in millions of
U.S. dollars) $27
Life of mine (years) 15
Capex (in millions of
U.S. dollars) $110
Our broadbrush financial model is attached as Appendix 3. Assuming 20-per-cent equity and 80-per-cent debt financing, we anticipated a payback period of two years, an after-tax IRR of 41 per cent per year and an NPV 15 per cent of $1.76 (Canadian) per Tiomin share. As the project advances, an NPV 10 per cent would be appropriate resulting in a valuation of $2.25 (Canadian) per Tiomin share. A greater use of debt leverage, as envisaged by management, will enhance the project economics materially.
Pangea Goldfields has a 20-per-cent free carried net profit interest, which commences once Tiomin has fully redeemed its capital investment. The company may get relief, and has applied for such relief, from the full Kenyan corporate tax rate in order to encourage further capital investment in the other deposits.
In terms of revenue, rutile sales will account for around 53 per cent, ilmenite around 31 per cent and zircon about 16 per cent. Total costs are estimated at $1.35 (U.S.) per tonne of sand. The main cost centre will be in the processing plant and in the marketing of the product.
Total costs
(in U.S. dollars per tonne)
Mining 30 cents
Processing 55 cents
Administration 10 cents
Marketing 40 cents
Operating costs $1.35
The average annual free cash flow per year in the first five years should be around 30 Canadian cents per Tiomin share. Project cash flow (for example before interest and debt repayments) should peak in the second year of production at over $1.00 (U.S.) per share when profits are tax free and not subject to minority net profit interests.
Sensitivity analysis
We have tested the Kwale project's sensitivity. Even under the severe test of long-term metal prices 20 per cent below our forecast, the Kwale project is still a highly viable profitable proposition. In practice, a severe slump in mineral prices would be met by increased rutile and lower ilmenite production, in effect high-grading, to protect profit margins.
Below is a comparison of Tiomin with other titanium exploration companies. The tabulation was compiled by Tiomin staff but we have independently verified the accuracy of the information.
Comparable titanium companies
Southern Tiomin
Mining Kwale Only
Listed Johannesburg Toronto
Project
location Mozambique Kenya
Development
capex
(millions
of U.S.
dollars) $400 $110
Market cap
(millions
of U.S.
dollars) $90 $15
Resource
(millions
of tonnes)
Ilmenite 120 42
Rutile 2.2 3.4
Zircon 4.8 3.1
Estimated
contained
titanium Mt 62 24
Market cap/Mt
of titanium $1.45 62 cents
Capex/Mt
of titanium $6.44 $4.53
Comparable titanium companies
Altair Tiomin
International Kwale Only
Listed Nasdaq Toronto
Project
location Tennessee Kenya
Development
capex
(millions
of U.S.
dollars) $110 $110
Market cap
(millions
of U.S.
dollars) $66 $15
Resource
(millions
of tonnes)
Ilmenite 6.7 42
Rutile 0.6 3.4
Zircon 1.7 3.1
Estimated
contained
titanium Mt 3.9 24
Market Cap/Mt
of titanium $16.81 62 cents
Capex/Mt
of titanium $28.02 $4.53
Source: Tiomin Resources Inc.
As the tabulation shows, on a cost per tonne of titanium, Tiomin is undervalued both on a market capitalization and a capital cost measures relative to some other titanium projects. Comparative analysis is rough at the best of times but titanium producers are more difficult as many are part of major mining conglomerates who do not break out the individual titanium divisions.
Tiomin will be in the lower half of the producers mining cost curve. Preparing a product cost curve is near impossible due to the multitude of product types and grades.
Risk factors
Mineral prices
The principal risk in all mining projects is the forecast mineral prices assumed. As we must make assumptions for prices many years in the future, the accuracy is impossible to gauge. However, the mineral prices used in this valuation represent the best estimates given the current information and are supported by specialist commodity forecasters. Further, our sensitivity analysis tested and passed the Kwale project at mineral prices 20 per cent below the base case price assumptions.
Financing
If the use of equity at low share prices is unavoidable, the resultant dilution could materially lower the value of Tiomin. However, our worst case scenario of all equity at 75 cents per share still values Tiomin at 93 cents per share. We believe Tiomin will be able to debt lever the project as per our arguments listed under the financing section.
Country risk
While Kenya is currently stable, it carries the normal risks of a developing country. Equity involvement by the IFC and/or other development banks would reduce this risk.
Bankable feasibility
The bankable feasibility study is approximately 75 per cent complete and progress reports issued by the various consultants have been positive. Our own broadbrush assessment and Tiomin's prefeasibility study lends support to the high probability of a positive outcome from the bankable feasibility work.
Conclusion
By every important measure of evaluation, Tiomin is undervalued. The anticipated NPV 15 per cent is $1.76 per share, the payback is two years, the market cap per tonne of titanium is relatively low, the average annual cash flow multiple over the first five years will be 1.6 times and the project should be in the lower half of the producers' cost curve.
Appendix 3
Kwale project
2000 2001 2002 2003
Mineral
prices
(U.S. dollars
per tonne)
Rutile 1 525 525
Ilmenite 75 75
Zircon 320 320
Sand processed
(Ktonnes)
Kwale central 8,000 10,000
Kwale south
Kwale north
Grades (%)
Rutile 0.90 1.03
Ilmenite 3.22 3.83 4.40
Zircon 0.50 0.58
Plant recovery (%)
Rutile 88 88
Ilmenite 94 94
Zircon 86 86
Saleable product
(Ktonnes)
Rutile 63.4 90.6
Ilmenite 288.0 413.6
Zircon 34.4 49.9
Rev.
(in millions
of U.S.
dollars)
Rutile
(2002 -- 50%) 33.3 47.6
Ilmenite
(2002 -- 33%) 21.6 31.0
Zircon
(2002 -- 17%) 11.0 16.0
---- ----
Total 65.9 94.6
Costs
(in millions
of U.S.
dollars)
Operating costs 10.8 13.5
Royalty (at 2.5
per cent) 1.6 2.4
Depreciation 6.2 7.8
Interest paid 0.0 0.0 -8.5 -6.5
---- ---- ---- ----
Profit before
tax 0.0 0.0 38.7 64.4
Taxation
(30 per cent) 0.0 11.9
Profit
after tax 38.7 62.5
2004 2005 2006 2007
Mineral
prices
(U.S. per
tonne)
Rutile 525 525 525 525
Ilmenite 75 75 75 75
Zircon 320 320 320 320
Sand
processed
(Ktonnes)
Kwale
central 10,000 10,000 10,000 11,500
Kwale south
Kwale north
Grades (%)
Rutile 0.93 0.86 0.84 0.64
Ilmenite 4.11 3.93 3.54 2.40
Zircon 0.53 0.47 0.44 0.31
Plant
recovery
(%)
Rutile 88 88 88 88
Ilmenite 94 94 94 94
Zircon 86 86 86 86
Saleable
product
(Ktonnes)
Rutile 81.8 75.7 73.9 64.8
Ilmenite 386.3 369.4 332.8 259.4
Zircon 45.6 40.4 37.8 30.7
Rev.
(in millions
of U.S.
dollars)
Rutile
(2002 -- 50%) 43.0 39.7 38.8 34.0
Ilmenite
(2002 -- 33%) 29.0 27.7 25.0 19.5
Zircon
(2002 -- 17%) 14.6 12.9 12.1 9.8
---- ---- ---- ----
Total 86.5 80.4 75.9 63.3
Costs
(in millions
of U.S.
dollars)
Operating
costs 13.5 13.5 13.5 15.5
Royalty (at
2.5 per cent) 1.6 2.4 2.2 2.0
Depreciation 7.8 7.8 7.8 9.0
Interest paid -4.5 -2.5 -0.5 0.0
---- ---- ---- ----
Profit
before tax 58.6 54.6 52.2 37.2
Taxation (30
per cent) 19.6 18.4 17.7 13.5
Profit after
tax 38.9 36.1 34.5 23.7
2008 2009 2010 2011
Mineral
prices
(U.S. per
tonne)
Rutile 525 525 525 525
Ilmenite 75 75 75 75
Zircon 320 320 320 320
Sand
processed
(Ktonnes)
Kwale
central 11,500
Kwale south 8,000 11,500 11,500
Kwale north
Grades (%)
Rutile 0.52 0.40 0.38 0.35
Ilmenite 1.87 1.49 1.38 1.23
Zircon 0.24 0.22 0.20 0.18
Plant
recovery
(%)
Rutile 88 88 88 88
Ilmenite 94 94 94 94
Zircon 86 86 86 86
Saleable
product
(Ktonnes)
Rutile 52.6 28.2 38.5 35.4
Ilmenite 202.1 112.0 149.2 133.0
Zircon 23.7 15.1 19.8 17.8
Rev.
(in millions
of U.S.
dollars)
Rutile
(2002 -- 50%) 27.6 14.8 20.12 18.6
Ilmenite
(2002 -- 33%) 15.2 8.4 11.2 10.0
Zircon
(2002 -- 17%) 7.6 4.8 6.3 5.7
---- ---- ---- ----
Total 50.4 28.0 37.7 34.3
Costs
(in millions
of U.S.
dollars)
Operating
costs 15.5 10.8 15.5 15.5
Royalty (at
2.5 per cent) 1.3 0.7 0.9 0.9
Depreciation 9.0 6.2 9.0 9.0
Interest paid 0.0 0.0 0.0 0.0
---- ---- ---- ----
Profit
before tax 24.6 10.3 12.3 8.9
Taxation (30
per cent) 9.8 4.7 6.0 5.0
Profit after
tax 14.9 5.6 6.2 3.9
2012 2013 2014 2015
Mineral
prices
(U.S. per
tonne)
Rutile 525 525 525 525
Ilmenite 75 75 75 75
Zircon 320 320 320 320
Sand
processed
(Ktonnes)
Kwale
central
Kwale south 11,500 11,500 11,000 5,000
Kwale north
Grades (%)
Rutile 0.37 0.39 0.39 0.39
Ilmenite 1.31 1.34 1.34 1.34
Zircon 0.18 0.19 0.19 0.19
Plant
recovery
(%)
Rutile 88 88 88 88
Ilmenite 94 94 94 94
Zircon 86 86 86 86
Saleable
product
(Ktonnes)
Rutile 37.4 39.5 37.8 17.2
Ilmenite 141.6 144.9 138.6 63.0
Zircon 17.8 18.8 18.0 8.2
Rev.
(in millions
of U.S.
dollars)
Rutile
(2002 -- 50%) 19.7 20.7 19.82 9.0
Ilmenite
(2002 -- 33%) 10.6 10.9 10.4 4.7
Zircon
(2002 -- 17%) 5.7 6.0 5.8 2.6
---- ---- ---- ----
Total 36.0 37.6 36.0 16.3
Costs
(in millions
of U.S.
dollars)
Operating
costs 15.5 15.5 14.9 6.8
Royalty (at
2.5 per cent) 0.9 0.9 0.9 0.4
Depreciation 9.0 9.0 8.6 3.9
Interest paid 0.0 0.0 0.0 0.0
---- ---- ---- ----
Profit
before tax 10.6 12.2 11.6 5.3
Taxation (30
per cent) 5.5 6.0 5.8 2.8
Profit after
tax 5.0 6.1 5.9 2.5
Total
Sand processed (Ktonnes)
Kwale central 71,000
Kwale south 70,000
Kwale north 0
Grades (%)
Rutile 0.59
Ilmenite 2.36
Zircon 0.31
Saleable product (Ktonnes)
Rutile 736.7
Ilmenite 3,133.9
Zircon 378.0
Rev.
(in millions
of U.S.
dollars)
Rutile
(2002 -- 50%) 386.8
Ilmenite
(2002 -- 33%) 235.0
Zircon
(2002 -- 17%) 121.0
-----
Total 742.8
Costs
(in millions
of U.S.
dollars)
Operating
costs 190.4
Royalty (at
2.5 per cent) 18.6
Depreciation 110.0
Interest paid -22.5
-----
Profit
before tax 401.4
Taxation (30
per cent) 116.8
Profit after
tax 284.6
Kwale Project
Cash flow statement
2000 2001 2002 2003
---- ---- ---- ----
Add
depreciation 0.0 0.0 6.2 7.8
Capex 5.0 95.0 10.0 0.9
---- ---- ---- ----
Project
CF -5.0 -95.0 34.9 69.4
Project
IRR (%) 3
Princ.
debt repay 0.0 0.0 20.0 20.0
Pangea Int.
20% 0.0 0.0 0.0 0.9
Cash flow
Tiomin (80%) 0.0 0.0 14.9 48.5
Per share
(cents) 0.0 17 57
Net present value
5%
In millions
of U.S.
dollars $169.4
Canadian
dollars per
Tiomin share $2.97
10%
In millions
of U.S.
dollars $128.4
Canadian
dollars per
Tiomin share $2.25
15%
In millions
of U.S.
dollars $100.7
Canadian
dollars per
Tiomin share $1.76
Tiomin shares
issued 45.5 85.7 85.7 85.7
Note: year 2000 and 2001 financings assumed at 60 Canadian cents and 75 Canadian cents per Tiomin share respectively.
Financing
submodel
in
millions
of U.S.
dollars 2000 2001 2002
---- ---- ---- ----
Barclays
Bank $77 $2 $65 $10
IFC/EIB $10 $0 $10 $0
Investor
equity $23 $3 $20 $0
---- ---- ---- ----
Total $110 $5 $95 $10
2000 2001 2002 2003
Debt
brought
for ($) (2.0) (77.2) (84.9) (64.9)
Debt drawdown
($) (75.0) 0.0 0.0 0.0
Interest at
($) (0.2) (7.7) (8.5) (6.5)
Principal
repayments ($) 20.0 20.0
Debt carried (77.2) (84.9) (64.9) (44.9)
forward ($)
Taxation
submodel
Cumulative
capex 5.0 100.0 110.0 110.9
Cumulative
cash PBT 0.0 0.0 44.9 117.1
Taxation
(30%) 0.0 0.0 0.0 1.9
2004 2005 2006 2007
Add
depreciation 7.8 7.8 7.8 7.8
Capex 0.9 0.9 0.9 1.1
---- ---- ---- ----
Project
CF 45.8 43.0 41.3 31.6
Project
IRR (%) 22 31 37 39
Princ.
debt repay 20.0 20.0 4.9 0.0
Pangea Int.
20% 9.2 8.6 8.3 6.3
Cash flow
Tiomin (80%) 16.6 14.4 28.1 25.2
Per share
(cents) 19 17 33 29
Tiomin shares 85.7 85.7 85.7 85.7
issued
Debt brought
for ($) (44.9) (24.9) (4.9) 0.0
Debt drawdown
($) 0.0 0.0 |
