Sulphur Springs set to be a highly profitable copper and zinc project for Venturex
Special report: Base metals developer Venturex Resources is on the cusp of developing a new $146 million copper and zinc mine at its flagship “Sulphur Springs” project in the Pilbara following the release of an eagerly-awaited Definitive Feasibility Study (DFS) this morning.
In a statement to the ASX, the Northern Star Resources-backed company said it has appointed Burnvoir Corporate to assist it with arranging project finance and is confident it is on track to be “Australia’s next mid-tier copper-zinc producer”.
Venturex (ASX: VXR) says it has one of the few greenfields base metals projects currently slated for development anywhere in Australia, and believes it is ideally placed to capitalise on a strong outlook for copper and zinc prices over the next few years.
“What stands out from the vast amount of work completed as part of the DFS is that Sulphur Springs is a high-quality, long-life project that will generate robust margins and strong financial returns, even using relatively conservative long-term metal price assumptions,” said Venturex Managing Director, Ajanth “AJ” Saverimutto.
Mr Saverimutto, a well-credentialed mining engineer and graduate of the WA School of Mines, joined the Company earlier this year with a mandate to bring Sulphur Springs into production as quickly as possible and transform the company into Australia’s next mid-tier base metal miner.
The DFS outlines an initial open pit and longer-term underground mine development at Sulphur Springs, located 144km south-east of Port Hedland, which it says will produce 65,000tpa of copper concentrate and 75,000tpa of zinc concentrate annually over a plus 10-year mine life.
That equates to around 15,000 tonnes of payable copper metal and 35,000 tonnes of payable zinc metal annually, or life-of-mine production of 146,000 tonnes of copper and 348,000 tonnes of zinc on a payable basis.
This production forecast is based on updated and increased Ore Reserves of 8.5 million tonnes grading 1.4% copper and 3.6% zinc, giving it a mine life of 10.3 years (post-construction).
The project is forecast to generate life-of-mine revenues of over $2.6 billion and will deliver pre-tax life-of-mine free cash-flow of $818 million, generating a pre-tax net present value (using an 8 per cent discount rate) of $472 million and internal rate of return of 51 per cent.
That all represents a big improvement on the last economic study of the Sulphur Springs project, the so-called “Value Engineering Study” delivered in February 2017.
Plus, using consensus commodity prices, the pre-tax NPV increases by 31% to $617 million.
“This is a project which is well and truly ready to go,” Saverimutto said.
“It’s a straightforward development and mining proposition. It’s located in a Tier-1 mining district, close to major iron ore and lithium operations and first-rate infrastructure. Also, the permitting process for the reconfigured open pit and underground development is now in its final stages,” he added.
“With the DFS now complete, we are confident that we will be able to move rapidly to secure an appropriate project finance package supported by strategic off-take arrangements that will allow us to start development in the near term.
“Importantly, the commodity price assumptions used in the DFS are conservative compared to market fundamentals and below current spot prices.
“They are also quite conservative in comparison to the average price decks used by the major institutions.
“With this in mind, there is huge upside to this project from improving copper and zinc prices in the years ahead – a view which is increasingly held by many analysts – as well as from exploration success as we begin to unlock the potential of the 27km long Panorama VMS trend.”
As the Venturex story gathers momentum, it’s starting to win over a growing legion of admirers amongst brokers and institutions.
Respected Blue Ocean Equities analyst Steuart McIntyre said the Company was his top new pick from Diggers and Dealers this year, given its “compelling project metrics”, the permits essentially being in place, and its high calibre experienced management team.
“The new CEO AJ Saverimutto” was previously general manager of mining for Grasberg and has many years of operating experience,” he said.
Perth broker Hartleys initiated coverage last week with a 42cps price target and Speculative Buy recommendation.
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