Coburn Mineral Sands Project, Western Australia
Coburn is one of the largest and most capital-efficient new 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. 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.
On 1 October 2021, the Company reached Financial Close after satisfying over 100 Conditions Precedent items including updated independent due-diligence reports and certifications relating to the technical, financial, legal, marketing, project performance and environmental and social aspects of the project.
Funding of A$338m has been secured, meaning Coburn is fully-funded through to production and cashflow. Favourable finance structure comprises combination of long-tenor debt provided by NAIF (A$150m) and a US$60m Bond Issue, together with the Company’s strong cash position. Final Investment Decision (FID) has been made to proceed with full development of Coburn.
The Company signed binding product offtake agreements with some of the world’s leading consumers in their respective industries across Europe, America and China. Strandline now has 100% of Coburn’s forecast revenue secured under binding sales contracts, estimated to average ~US$140m pa (~A$200m, AUD: USD 0.70).
Construction highlights for the December 2021 quarter include:
- Strong construction progress ensures Strandline’s world-scale Coburn project remains on-budget and on-time for first production of heavy mineral concentrate (HMC) in the Dec-2022 quarter
- Coburn project construction reached 50% complete on 17 Jan-2022. Key milestones include:
- All major construction contracts awarded/committed representing ~96% of project scope (in terms of value)
- Processing Plant EPC ahead of schedule, with engineering design 95% complete, concrete installation 70% complete, steel fabrication well underway (first steel installation scheduled this month), all key mechanical and electrical equipment ordered with progressive site deliveries being received; commissioning planning progressing
- Significant bulk earthworks and road clearing, cut-to-fill, sub-base and base course works progressed as a priority to enable installation of above-ground infrastructure to proceed
- Site accommodation village, hybrid power station, dozer mining units, bore field, site offices and buildings and environmental monitoring works all advancing in accordance with the development plan
- Preparations for production is ramping-up with senior-team appointments and key mining services and product transport and logistics contracts executed in line with the operating cost assumptions contained in the DFS.
- Financial close and first drawdown of debt facilities achieved in accordance with the development plan
- Robust mineral sands market across all key sectors (ceramics, refractory, foundry and titanium dioxide pigment) with demand outpacing supply and spot pricing at least 25% higher than DFS assumptions
- DFS forecast average annual EBITDA of A$104 million over the estimated 22.5-year initial life-of-mine
Strandline has advanced a range of major contract packages in preparation for project development, including, but not limited to:
- Primero appointed to build the processing facilities for Coburn, see ASX release dated 29 April 2021.
- SRK Consulting have been appointed as Independent Technical Expert on behalf of lenders;
- Piacentini has been appointed as the major equipment supply contractor for Coburn development (see ASX release dated 14 September 2020);
- Signed Port access and services agreement with the Mid West Port Authority (MWPA) with the Mid West Ports Authority, which operates the Port of Geraldton in WA. The Agreement enables Strandline to export 100% of the mineral sands products produced at its Coburn project over an initial 10-year term. The Port of Geraldton is a well-established and reliable mineral export port and its proximity to Coburn provides an efficient and cost-effective port solution (see ASX announcement 13 Nov 2020);
- Appointed Contract Power Australia (Contract Power) as preferred contractor to build own and operate (BOO) the power generation facilities for the project. The purpose-designed power infrastructure is based on low-cost, low-emission solution integrating natural gas fuelled generation with state-of-the-art solar and battery storage technology. As preferred contractor, the parties are now working to compile final contract documentation to the satisfaction of Strandline and Coburn’s lenders (see ASX announcement 3 November 2020); and
- Appointed Woodside Energy (LNG Fuels and Power) Pty Ltd and EDL LNG Fuel to Power Pty Ltd in joint venture (WEJV) as preferred contractor to supply LNG to Coburn’s power generation facilities. LNG will be supplied via road train from Woodside’s Pluto LNG Truck Loading Facility near Karratha, WA over a 10-year term (see ASX 27 April 2021).
The proposed power generation facilities and LNG supply contract with Contract Power and WEJV respectively, enables Strandline to source power at less than forecast in the DFS published in June 2020.
During the December quarter 2020, the Company progressed a range of project early works activities including, but not limited to, in-fill production control drilling (for the first 2-year detailed mine production plan), detailed site geotechnical analysis, additional confirmatory metallurgical, ore pumping/rheology and slimes/thickener test work (to finalise equipment and vendor selections) and ongoing environmental monitoring and heritage surveys (in accordance with current environmental approvals).
Strandline also secured several key operational licences, including the water extraction licence (for the mining production demand) and statutory approvals to align with the optimised mine plan, including an updated Mining Proposal and Mine Closure Plan, Project Management Plan and updated mine disturbance area (under a new Section 45c approval).
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.
Updated DFS results in significant increases in forecast financial returns for Strandline’s flagship Coburn mineral sands project in WA - Project pre-tax NPV8 of A$705m (AUD: USD 0.70, 8% discount rate, up from A$551m) - Project pre-tax IRR rises to 37% (up from 32%) - EBITDA of A$2.3b over the first 22.5 years of Reserves - Average annual EBITDA of A$104m (up from A$86m) - Project payback period from first production is 2.1 years.
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).
Fungoni Mineral Sands Project, Tanzania
A Pivotal Framework Agreement has been executed between Strandline and the Government of Tanzania, which is designed to unlock the immense value of Strandline’s Tanzanian mineral sands high-growth portfolio.
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.
As part of finalising project financing for Fungoni, Strandline and the Government of Tanzania (GNT) have been working to implement the GNT’s equity interest in the proposed mine operation.
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.
Tanga South (Tajiri) Mineral Sands Project
The Tajiri deposits are situated in northern Tanzania near the Port City of Tanga, stretching along 30kms of coastline 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).
Engineering Scoping Study shows Tajiri will generate strong financial returns over 23-year life, with EBITDA of $US 0.9 billion (see ASX release dated 7 October 2020).
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, Sakura Prospect (see ASX release dated 25 September 2019) 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 ‘development ready’ 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. 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.
The Company has estimated a maiden Exploration Target at Bagamoyo comprising 78 to 156Mt at 3% to 4.5% THM (see ASX release dated 17 September 2018). Minor field activity was performed during the quarter and a further drill program is required to test the veracity of the Exploration Target.
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.