Bulk metals: Sheffield makes Thunderbird mineral sands project look 30pc better
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Sheffield Resources (ASX:SFX) has taken an axe to the startup cost as well as increased the projected production and revenue of its Thunderbird mineral sands project in Western Australia.
The company told investors today that an updated bankable feasibility study (BFS) estimated a “material reduction” in project cost and execution risk, increasing zircon production and project revenue by more than 30 per cent.
By making a few tweaks, such as dropping the planned ilmenite processing circuit, Sheffield figures it can increase zircon production by 39 per cent and slash the startup cost of stage one by $71m to $392m.
This means the company will need $101m less funding for the first stage, bringing the total funding requirement to $478m, and the equity funding component of that would be reduced by $108m to $143m.
Thunderbird is one of the world’s largest and highest-grade undeveloped zircon-rich mineral sands deposits.
The project is fully permitted and construction ready – Sheffield just needs the remaining cash to build it.
Sheffield had already locked in $240m of debt funding from Taurus Funds Management and a $95m loan from the federal government’s Northern Australia Infrastructure Facility (NAIF).
But with the slump in sentiment in the second half of last year, Sheffield had to rethink its plans for developing the project and is now looking at a simpler operation to get into production more quickly and easily.
This put a bit of a dent in the company’s share price, which tumbled from $1.21 last October to a low of 30c in mid-June.
Sheffield is, however, heading north again, with its share price more than doubling to 72.5c.
Thunderbird will produce zircon and titanium dioxide (TiO2) products from a conventional open pit mine.
Zircon will account for over 60 per cent of Sheffield’s revenue.
Zircon is a found in mineral sands — old beach sands that also contain ilmenite and other minerals. Its primary use is in the ceramics industry to make things like tiles and plates opaque.
But it also has a high melting point and is corrosion resistant, making it useful in the manufacturing process for foundry moulds, refractory bricks and molten metal moulds.
And it’s increasingly being used in new-age electronics, as well as engines and spacecraft.
With the modifications, Sheffield predicts Thunderbird will have a post-tax net present value (NPV) of $980m and an internal rate of return (IRR) of 24 per cent.
IRR and NPV are used to estimate the profitability of a potential operation – the higher they are above zero, the better they are.
Sheffield says Thunderbird will deliver it EBITDA (earnings before interest, tax, depreciation and amortisation) of $6.87 billion over the nearly 40-year life of the mine.
Australian Potash (ASX:APC) is on the cusp of delivering a resource upgrade and the first reserve for its Lake Wells potash project in Western Australia following the completion of over 60,000m of drilling. The junior explorer is also nearing the delivery of a definitive feasibility study with the conclusion of field programs.
Venture Minerals (ASX:VMS) has named Shaw Contracting as the mining contractor for its Riley iron ore mine in Tasmania. Shaw was the contractor on the mine before Venture mothballed it in August 2014 due to the declining iron ore price. The company is aiming to restart production in the final quarter of this year.