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Special Report: Global markets are crying out for new sources of ilmenite — the main source of titanium dioxide — due to a rapid decline in supply from existing mines.

Titanium dioxide (or TiO2) is a white pigment used in paints, fabrics, plastics, paper, sunscreen, food and cosmetics.

A shortfall in supply is forecast to continue until at least 2022.

Prices for ilmenite reflect this – ASX-listed Base Resources reported that ilmenite prices jumped 28 per cent in the last financial year, helping deliver record profits.

Fellow mineral sands miner Iluka Resources enjoyed a 25 per cen increase in ilmenite prices in the first half of 2018, compared with the first half in 2017.

It’s the perfect time, then, for Metallica Minerals (ASX:MLM) to start production at the 160,000 tonnes per annum “Goondicum” ilmenite mine in Queensland.

Metallica's project locations
Metallica’s project locations

Metallica could be generating positive cash flow as early as the second quarter of next year after striking a merger deal with Canada-listed Melior Resources, which owns the Goondicum mine.

Metallica’s chairman, Peter Turnbull told investors it was a transformational deal.

“Melior’s Goondicum ilmenite project shares similar attributes to Urquhart bauxite in that it is fully funded and will be brought into production relatively quickly for a modest capital outlay and will provide a valuable source of near-term cash flow,” he said.

“We look forward to combining the respective skills of the two companies to successfully develop those projects and pursue further growth opportunities to build a significant, profitable, mining house generating excellent returns for shareholders.”

Goondicum is fully funded, has off-take (or sales) agreements already in place and is on track to begin production in November this year.

Melior Key Project: Goondicum Ilmenite Mine
Melior Key Project: Goondicum Ilmenite Mine

It is expected to be cash-flow positive in the second quarter of next year, generating $US92 million ($129.5 million) over its nine-year life – with $US51 million of that in the first three years of full operation.

Consultant TZMI is predicting long-term ilmenite prices of $US204 ($250) per tonne, and Goondicum will be producing at an average cash cost of $US124 per tonne.

There are also significant exploration opportunities surrounding Goondicum, which could nearly double the existing mine life.

“This is a great opportunity for Melior to keep moving forward and positioning itself for real shareholder wealth creation,” Melior managing director Mark McCauley said.

“The merger with Metallica is an attractive and low risk proposition providing a stronger platform for growth via an enhanced pipeline of development assets, a strengthened balance sheet and an ASX listing.

“Goondicum is on schedule to commence production in November and start generating cash by Q2 2019 and there are good prospects for realising value shortly thereafter from the Metallica asset portfolio.”

 

This special report is brought to you by Metallica Minerals.

This advice has been prepared without taking into account your objectives, financial situation or needs. You should, therefore, consider the appropriateness of the advice, in light of your own objectives, financial situation or needs, before acting on the advice.

If this advice relates to the acquisition, or possible acquisition, of a particular financial product, the recipient should obtain a disclosure document, a Product Disclosure Statement or an offer document (PDS) relating to the product and consider the PDS before making any decision about whether to acquire the product.