HomeEast AfricaBinding off-take agreement signed for Tanzania mineral sands project

Binding off-take agreement signed for Tanzania mineral sands project

Strandline Resources announced that it has taken a major step towards bringing its first mineral sands project into production, securing a binding off-take agreement for 100% of the zircon-monazite product which will be produced at its Fungoni mineral sands project in Tanzania (Fungoni).

The agreement is with China’s highly-respected, industry-leading zircon sand and rare earth consumer, Hainan Wensheng High-Tech Materials company (Wensheng).

Based on the pricing formulae contained in the agreement and otherwise using the assumptions contained in the Fungoni DFS, the zircon and monazite production is expected to generate over 62% of Fungoni’s total revenue.

The remaining project revenue is expected to be from chloride ilmenite (~28%) and rutile (~10%), for which off-take agreements are well advanced.

The Fungoni project’s high unit value ore body assemblage and low costs underpin outstanding financial returns for Strandline, with a fast payback period of 2.7 years from the start of construction and a first quartile revenue-to-cost ratio of 2.7.

“Establishing this strategic off-take relationship with Wensheng, the largest integrated mineral sands processor in China, is a significant milestone for Strandline Resources,” comments Strandline Resources managing director Luke Graham.

“The agreement provides a strong endorsement of the Fungoni project and the premium quality of the zircon and monazite which will be produced over the life of the mine.

“Importantly, it also paves the way for Strandline to finalise project funding, ensuring the company remains on track to unlock the substantial value of what is the first in its pipeline of exciting and prospective mineral sands assets,” he notes.

The Fungoni DFS completed in October 2017, confirms the Fungoni project will deliver strong financial returns, has a high unit value product suite, is capital-efficient, and demonstrates the strategic potential of the company’s portfolio of mineral sands assets in Tanzania.

Furthermore, the Fungoni project is positioned extremely well to benefit from an improving mineral sands commodity outlook and in particular, the emerging zircon structural supply gap forecasted for the market from 2018.

The zircon pricing formulae is leveraged to the improving market conditions.

Feature image credit: Wikimedia