Fungoni Mineral Sands Project, Tanzania
The zircon-rich Fungoni Project is the Company’s most advanced Tanzanian based development, with a full DFS recently completed, product offtakes secured and final project approvals progressing.
The updated Fungoni DFS confirms the project will deliver strong financial returns, has a high unit value product suite, is capital-efficient and demonstrates the strategic potential of the Company’s portfolio of mineral sands assets in Tanzania.
The project is favourably located ~25km from the Dar es Salaam port in a growing commercial/industrial district and will benefit from existing infrastructure in the region.
Fungoni is Strandline’s high-margin “starter” project in Tanzania, which will pave the way for a succession of mineral sands projects along the coastline of Tanzania.
Fungoni is ready for construction pending finalisation of project financing and several secondary-level government approvals.
In April 2020, Strandline and Nedbank signed a US$26m Project Finance Facility Agreement to part fund the project development of Fungoni.
Key highlights of the Project:
- An estimated capital cost of US$35 million (excluding financing costs), including mine infrastructure, port facilities, working capital, land access, pre-production mining, owner’s costs and project contingencies of 10%;
- Maiden ore reserve of 12.3 Mt @ 3.9% Total Heavy Mineral (THM), with opportunities to grow reserves and mine life, further increasing financial returns;
- Project pre-tax NPV10 of US$48.7m (A$64.9m at USD:AUD 0.75, up from US$42.9m)
- Project post-tax NPV8 of US$34.8m (A$46.4m) and NPV10 of US$30.8m (A$41.1m)
- Project pre-tax IRR of 61% (up from 56%) and project post-tax IRR of 42%
- Project-only cashflows would support a payback period from first production of 1.7 years
- Life-of-Mine (LOM) Revenue of US$184m (up from US$168m) - LOM EBITDA of US$115m (up from US$98m)
- Binding offtake agreements secured covering 100% of Fungoni production and revenue
- Fixed-price EPC contract awarded; equivalent development capital US$32m (up from US$30m) (excluding applicable taxes and levies)
- Key mining and environment licences already in place, strong government support and EPC contract executed
- Nominal 12 month design, construction and commissioning period and 2.7 year payback period from start of construction;
- Modular relocatable infrastructure with state-of-the-art processing technology which can be re-used at Strandline’s other mineral sands assets in Tanzania;
- “Low impact” mining philosophy with progressive backfill and rehabilitation of the mined area; returning the land to pre-mining state; and
- Fungoni will generate a host of key social and economic benefits including capital inflows to Tanzania, significant job creation, training and job diversity, transferable skills development as well as community engagement programmes.
Tajiri Mineral Sands Project, Tanzania
JORC-compliant Mineral Resource Estimate of 268Mt @ 3.3% Total Heavy Minerals (THM) declared, underpinning Strandline’s long-term production outlook in Tanzania.
Tajiri Resources are likely to grow further over time with Resources remaining open and analysis of assays from drilling at nearby Sakura produced strong results, with evaluation continuing.
Coburn Mineral Sands Project, Western Australia
Coburn is one of the largest and most capital-efficient mineral sands (zircon and titanium rich deposit) projects in the world, with an exceptional zircon-titanium product suite, low costs and ability to generate strong financial returns. It is situated in the well-established mining jurisdiction of Western Australia, close to key infrastructure and the dominant mineral sands market of Asia. The deposit is located 240km north of the major minerals port of Geraldton in Western Australia. The project has key project approvals already in place, including mining and environmental approvals and native title heritage agreements.
Project financing process is advancing with debt terms under negotiation with lenders, including the Northern Australian Infrastructure Facility (NAIF). NAIF has completed its Strategic Assessment of Strandline’s Coburn Mineral Sands Project in WA in October 2019 and has advanced into detailed due diligence for a senior debt facility. Funding from NAIF would significantly boost Coburn’s ability to attract the remaining project funding on competitive terms. SRK Consulting have been appointed as Independent Technical Expert on behalf of lenders.
Tenders called for major construction contracts with early indications that prices will be in line with DFS capital estimates.
Strandline has entered into an exclusive period with the Woodside-EDL Joint Venture (WEJV) as the preferred power provider for Coburn, based on the development of an innovative hybrid gas and renewable energy solution. Contract documentation and refinement of WEJV’s technical solution is well underway.
Macmahon has been appointed as the preferred mining contractor. They will provide and operate the large mining fleet associated with ore mining, overburden removal, pit backfill and land recontouring (see ASX release dated 30 April 2020).
The Company signed three binding product offtake agreements with some of the world’s leading consumers in their respective industries across Europe, America and China (see ASX releases dated 20 Apr-2020). Strandline now has ~66% of Coburn’s forecast revenue secured via sales contracts. The agreements cover 100% of ilmenite, 100% of zircon concentrate and the substantial portion of the premium finished zircon product to be produced at Coburn for the first five years.
The agreements have a forecast combined value of circa US$400m (A$615m at USD: AUD 0.65) over five years, based on the pricing structures contained in the agreements and TZMI’s commodity price forecast assumptions contained in the Coburn DFS. Offtake negotiations for Coburn’s remaining revenue streams are advancing well, including 24,000 tonnes per year of rutile and the rest of the premium finished zircon.
During the March quarter 2020, the Company also announced more metallurgical bulk test results which further strengthen the financial outlook, product offtake negotiations and funding strategy for the project.
The Coburn DFS shows the Project will generate strong financial returns over an initial 22.5 year life of mine (LOM), with a pre-tax NPV of A$551m (USD:AUD 0.72, 8% discount rate), an IRR of 32%, LOM revenue of A$3.9b and EBITDA of A$1.9b (average annual EBITDA of A$86 million).
Coburn’s JORC-compliant Ore Reserves underpin an initial 22.5-year mine life, with a further 15 years of potential production targets identified (titled “Mine Life Extension Case” with an expected total 38-year LOM). The Mine Life Extension Case financial metrics include pre-tax NPV of A$710m (USD: AUD 0.72, 8% discount rate), with revenue of A$6.98b and EBITDA of A$3.67b over 38 years.
Tanga South (Tajiri) Mineral Sands Project
The Tajiri deposits are situated in northern Tanzania near the Port City of Tanga, some 35km to the north. The 100%-owned tenements comprise a series of higher-grade mineral sand deposits along a 30km mineralised corridor, including the T1, T2, T3, T4, TC, Tajiri North and Vumbi deposits.
Mineralisation at Tajiri starts at surface, with no overburden and contains large coherent higher-grade domains comprising mostly high-value titanium-dominated mineral assemblage, with elevated zones of zircon and occasionally almandine garnet.
Tajiri hosts a world-scale JORC-compliant Mineral Resource Estimate of 268Mt @ 3.3% THM, with a contained Heavy Mineral (HM) content of 8.8Mt, including in-situ rutile (580,000t), zircon (335,000t), ilmenite (5,206,000t) and almandine garnet (1,477,000t).
Results received from Resource expansion drilling in 2019 continue to highlight strong potential for large increase in the JORC Resource of 147Mt at 3.1% Total Heavy Mineral (THM).
Several resource zones (Tajiri TC, T3 and Vumbi) remain open along or across strike providing significant opportunities to grow resources further over time. The mineralisation also shows strong geological and grade continuity along and across strike, which bodes well for future feasibility and development activities.
Tajiri has the geological critical mass, robustness and market appeal to advance project feasibility, and underpins Strandline’s outstanding long-term production outlook in Tanzania. For more information on the Tajiri project refer to ASX Announcement 9 July 2019.
A new discovery, September 2019 (Sakura Prospect) provides further evidence that Strandline’s 100%-owned Tajiri project is a world-class mineral sands deposit. The Sakura discovery comprises extensive mineralisation from surface along strike from Tajiri. Samples visually indicate higher-grade strands within a broad halo of mineral sands anomaly spanning ~5km x 0.5 to 1km. Sakura discovery has potential to add significant tonnes to the already-large Tajiri Resource.% Total Heavy Mineral (THM). Laboratory tests are currently being evaluated. Tajiri is Strandline’s second major mineral sands project in Tanzania behind the ‘developmentready’ Fungoni Project, where project financing is advancing.
Pipeline of Growth Projects, Tanzania
To complement Fungoni, Tajiri and Coburn projects, the Company has also made some significant mineral sands discoveries at the Bagamoyo and Sudi Projects in Tanzania, adding to the portfolio value.
The Sudi project is located some 30km by sealed road to Mtwara port and forms part of a JV with Rio Tinto, who are sole funding exploration in Southern Tanzania. Sample testwork confirms Sudi has a high unit value assemblage averaging 11.5% zircon, 4.7% rutile and 64.4% ilmenite; one composite contained 17.8% zircon. Next on the agenda is a resource drilling campaign to define to the extents of the mineralisation.
Strandline’s 100%-owned Bagamoyo tenements are located approximately 40km north of Dar es Salaam and close to the proposed Bagamoyo port development in Tanzania. In early 2017 the Company undertook a widespread soil sample program over prospective radiometric and topographic features which identified significant areas of higher grade mineralisation. The Company then followed up with a reconnaissance auger drill program designed to rapidly assess the potential thickness of sand across priority targets and also verify the high-grade results generated from the soil sampling program.
Laboratory THM analysis results from this auger program reaffirmed the highly prospective nature of the Bagamoyo region. The results show widespread heavy mineral sand enrichment over the various soil anomalies BG-2, BG-3, BG-4 and BG-5, with multiple holes showing higher grade THM at depth. Bagamoyo is emerging as a significant new Tanzanian mineral sands province and the Company will continue to perform exploration and evaluations to define the deposits.