Dec. 23, 2014 - MZI Resources has achieved a major milestone in commencing the development of the Keysbrook Mineral Sands Project located 70 kilometres south of Perth in Western Australia.

 

First production is scheduled in December 2015.

 

MZI has now received US$37.5 million from Resource Capital Fund VI L.P. (RCF) placing the company in a strong corporate and financial position.

 

The funds will enable MZI to repay its short term debt of approximately $6.5 million and notify all Keysbrook constructors to commence works.

 

GR Engineering Services has commenced construction activities with a contract value of $54.6 million, initially focussed on completing detailed engineering and equipment procurement.

 

Site works will follow in February 2015.

 

Transmin Engineering Pty Ltd have commenced work on the mine feed unit construction with a contract value of $4.7 million and Western Power have also commenced grid power connection works to a value of $3.9 million.

 

MZI has recently settled the acquisition of a Keysbrook property securing the location of the wet concentrator, project access road, borefields, power infrastructure and initial mining activities.

 

Combined with two smaller properties previously acquired in the Keysbrook project area, this acquisition makes the company a significant landholder in the Keysbrook area.

 

Further funding drawdown

 

A further RCF funding drawdown will be made in the first quarter of 2015 as the Keysbrook development progresses.

 

RMB Australia Holdings Limited (RMB) senior debt facilities (approximately US$51 million) will be used to fund the completion of construction, commissioning and ramp up to full production.

 

The drawn and further available funding means the Keysbrook project is fully funded through to production with MZI's corporate costs also fully funded through to the completion of construction.

 

Heavy mineral concentrate will be trucked about 120 kilometres to Doral Mineral Sands' mineral separation plant, which is just 10 kilometres from the Bunbury Port, for toll treatment.

 

Keysbrook has a high value JORC ore reserve of 26 million tonnes with in-situ THM of 670,000 tonnes grading 27.8% L70 (70% titanium dioxide), 46.6% L88 (88% titanium dioxide), 14.6% Zircon, and 11% other minerals.

 

The project hosts a high margin, long life reserve that will employ a very low CAPEX and draw upon a very well developed local infrastructure that is very conversant with processing mineral sands and use of simple and low risk processing technology.

 

Ore mining rate is set at 4.5 million tonnes per year to an average depth of 2.2 metres and no strip ratio for very low cost open pit mining.

 

Annual EBITDA has a base case of $44 million per year that is derived from a low OPEX of $331 per product tonne. The project is funded with a development cost of $69.6 million and pre-operations cost of $6.2 million.

 

There is upside to the project with low impact exploration using auger methods extending Keysbrook mineralisation beyond the currently approved mining areas and Resource boundary.

 

Programs have been prepared to test these potential extensions.

 

Mineral sands market outlook

 

Demand for TiO2 feedstock is recovering due to the reduction in downstream pigment inventory, with the overall market moving back into balance.

 

Margin erosion from lower prices and rising costs is causing production closure at inefficient high cost operations.

 

The zircon price has stabilized over the year with premium grades currently selling for ~ $1,100 pmt, with supply/demand moving back into balance with major producers (Iluka, RTIT and Tronox) restricting supply.

 

Buying confidence has been restored now that market balance has been achieved.

 

Global consumption is currently assumed to be ~ 1.0 million tonnes per year (down from peak of ~1.4 million tonnes in 2011).

 

TZMI estimates that global demand is now growing at 4% per year.