Strandline Resources' updated Definitive Feasibility Study for its Fungoni mineral sands project results in significant increases in forecast project financial returns and reduced implementation risk.
East Africa - The Definitive Feasibility Study (DFS) has been updated to reflect the latest information on the project, including terms of binding offtake agreements and higher mineral sands commodities price forecasts.
Capital and operating cost estimates have also been revised in line with advancing execution contracts, such as the award of the fixed-price EPC contract with international contractor GR Engineering Services.
Other material assumptions underpinning the original Definitive Feasibility Study (DFS) remain unchanged.
The updates have resulted in an overall enhancement to the project financial metrics, including an outstanding Internal Rate of Return of 61% and first quartile revenue-to-operating cost ratio of 2.8.
The projected LOM revenue has increased to US$184 m from US$168 m and EBITDA to US$115 m from $98 m.
The increase is driven by the strengthening market outlook for Fungoni’s high-value product suite and favourable off-take terms compared to the assumptions made in the original DFS.
"Fungoni was set to continue benefiting from the forecast supply shortages in the global zircon and TiO2 market," comments Strandline Resources MD Luke Graham.
“With the ongoing tightening in the mineral sands market, Fungoni offers additional opportunities to grow reserves and mine life, resulting in increasing financial returns over time.
“The modular relocatable infrastructure planned for Fungoni can be re-used at Strandline Resources' other mineral sands assets.
“Importantly, Strandline Resources' two most advanced projects, Fungoni and Coburn, differentiate through their premium zircon-titanium product suite and relatively low capital intensity.
“The funding process for Fungoni is well underway and, importantly, the company continues its close collaboration with the Government of Tanzania and local communities.”
Summary of updated DFS
The Fungoni project is favourably located ~25 km from the Dar es Salaam port in Tanzania.
The updated DFS reaffirms the project will deliver strong financial returns, has a high unit-value product suite, is capital-efficient and strategically, paves the way for a succession of the company’s mineral sands developments along the coastline of Tanzania.
The original DFS was completed by a range of independent and highly reputable consultant/contractors with experience in mineral sands and African project development.
Since the original DFS, in addition to the improving market forecast conditions Strandline Resources has also progressed key execution readiness activities to further de-risk the implementation of the project.
This includes, but is not limited to, awarding a fixed price EPC contract for the engineering
procurement construction and commission of the processing facilities to international contractor GR Engineering Services and advancing tendering activities for
other major works packages including contract mining, bore field, logistics and power solutions.
The first production bore has recently been installed at Fungoni, confirming the DFS design parameters relating to hydrology and water supply.
Environmental and social re-baselining is also underway to prepare for final compensation and resettlement activities following FID.
The growth in capex of US$2 m can be mainly attributed to this package.
Strandline Resources has applied the new pricing assumptions to the Fungoni financial model.
Project economics are based on known current ore reserves for an initial 6.2 year LOM.
It is reasonable to expect that the increases in commodity pricing may also result in an increase to ore reserves, which may increase mine life and enhance financial returns from
Strandline Resources intends to evaluate these additional value improvements following the final development decision.
The discounted cash flow (DCF) analysis has been updated on the Fungoni project incorporating the estimated capital and operating expenditures and revenue assumptions based on the latest TZMI published forecast product prices.
The project pre-tax NPV has increased to US$48.7 m from original US42.9 m.
The NPV has been calculated using project related costs only and does not consider Strandline’s corporate costs.