Federal government chips in $95m for Sheffield’s Thunderbird mineral sands project
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Emerging mineral sands producer Sheffield Resources has secured itself a $95 million loan from the federal government’s “Northern Australia Infrastructure Facility” (NAIF) for its Thunderbird project.
The NAIF offers up to $5 billion over five years in concessional finance to encourage and complement private sector investment in infrastructure that benefits northern Australia.
This may include developments in airports, communications, energy, ports, rail and water.
The loan will enable Sheffield (ASX:SFX) to construct on-site liquified natural gas power generation and storage facilities at Thunderbird.
It will also fund the upgrading of mine site roads, in-sourcing of mine site accommodation, and facilitate the construction and revitalisation of ship loading and logistics assets within the Port of Derby in Western Australia.
“Whilst the NAIF facilities would not reduce total funding requirements, the proposed structure provides a pathway for Sheffield to own the asset infrastructure and provides for
lower operating costs when compared to the Thunderbird [bankable feasibility study],” boss Bruce McFadzean said.
The federal government has agreed to provide Sheffield with a $30 million project development facility and $65 million infrastructure facility.
This means Sheffield will no longer need a $US25 million ($34.6 million) loan from Taurus Mining Finance.
Sheffield’s feasibility study shows Thunderbird is a low risk, modest capex project that generates strong cash margins from production over a mine life of 42 years.
The resource stands at 3.2 billion tonnes at 6.9 per cent heavy minerals including 18.6 million tonnes of zircon, 5.9 million tonnes of high-titanium leucoxene, 6.5 million tonnes of leucoxene and 61.7 million tonnes of ilmenite.
Mineral sands are old beach sands that contain concentrations of minerals such as zircon and ilmenite.
Zircon is a very hard mineral resistant to corrosion and heat. It has a high melting point and is used in engines, electronics, spacecraft and the ceramics industry.
Ilmenite is the main source of titanium dioxide which is used in paints, fabrics, plastics, paper, sunscreen, food and cosmetics.
Supply falls as demand climbs
Global zircon supply is declining at a rate of about 4.7 per cent each year through to 2026.
At the same time demand is forecast to grow 2.8 per cent each year over the same period.
Sheffield is targeting initial production in 2019.
Zircon will account for over 60 per cent of Sheffield’s revenue.
Mr McFadzean told Stockhead at last month’s annual Diggers & Dealers mining conference in Kalgoorlie, WA that Sheffield has already locked in binding supply agreements for all of its zircon and is in the process of squaring away deals for its ilmenite.
“So 77 per cent of our gross revenue for the first five years is now locked away in binding contracts,” Mr McFadzean said.
“On top of that we’re now just finalising our ilmenite, or our titanium feedstock. So we anticipate being around that 90 per cent of gross revenue under binding take or pay contracts within a couple of months.”