Strandline Resources has taken another significant step towards bringing its first mineral sands project into production,
It has secured a binding offtake agreement for the rutile product to be produced at its Fungoni mineral sands project in Tanzania.
East Africa – The agreement is with Industrial Minerals and Metals (IMMCO), an experienced commodity trader and consumer of mineral sands based in Europe and Asia.
The Fungoni rutile is expected to achieve a premium specification making it suitable for high-end titanium applications.
Based on the pricing formulae contained in the agreement and the assumptions contained in the Fungoni Definitive Feasibility Study (DFS), the rutile production is expected to generate ~10% of Fungoni’s total revenue.
Importantly, this means that 100% of the forecast revenue is now secured under binding take-or-pay contracts for the entire life of the Fungoni mine.
The other project revenue is forecast to be from existing offtake agreements for zircon-monazite and ilmenite.
Fungoni’s high unit value orebody assemblage and low costs will underpin strong financial returns for Strandline Resources, with a fast payback period and a first quartile revenue-to-cost ratio of 2.7.
“Establishing this important offtake relationship with IMMCO achieves another key milestone for Strandline Resources, ensuring the company remains on track to commercialise what is the first in its pipeline of outstanding mineral sands assets in Tanzania,” comments Strandline Resources MD, Luke Graham.
“Having all products covered by binding contracts for the entire life of mine provides a strong endorsement of the Fungoni project and the high quality of zircon and titanium minerals to be produced.
“With the mining licence already received for the project, Strandline Resources is now advancing project funding and finalising negotiations for key contracts necessary to execute the project,” he continues.
The Fungoni project
The Fungoni project is favourably located ~25 km from the Dar es Salaam port in Tanzania.
The DFS , which was completed in October 2017 confirms the Fungoni project
will deliver strong financial returns, is capital-efficient and produces premium-quality titanium and zircon products, ideally positioned to capitalise from the growing mineral sands market.
Key highlights of the Fungoni project include:
- Low development capital cost of ~USD 30 million, including mine infrastructure, port facilities, working capital, land access, pre-production mining, owner’s costs and project contingencies of 10%;
- Outstanding Internal Rate of Return and first quartile revenue-to-operating cost ratio of 2.7;
- Binding offtake Agreements signed for 100% of products to be produced for the Life of Mine, based on “take-or-pay” arrangement;
- Key project approvals in place, including the Mining Licence and Environmental Certificate;
- Maiden ore reserve of 12.3 Mt @ 3.9% Total Heavy Mineral, with opportunities to grow reserves and mine life, further increasing financial returns;
- Project Pre-Tax NPV of USD 42.9 million (AUD 57.2 million at USD/AUD 0.75) based on a 10% discount rate and TZMI’s September-2017 commodity price forecast;
- Life of Mine (LOM) Revenue of USD 168 million (AUD 224 million) and LOM EBITDA of USD 98 million;
- Nominal 12-month design, construction and commissioning period and 2.7 year payback period from start of construction;
- Modular relocatable infrastructure with state-of-the-art processing technology which can be re-used at Strandline’s other mineral sands assets in Tanzania;
- “Low impact” mining philosophy with progressive backfill and rehabilitation of the mined area; returning the land to pre-mining state; and
- Fungoni will generate a host of key social and economic benefits including capital inflows to Tanzania, significant job creation, training and job diversity, transferable skills development as well as community engagement programmes