MZI Resources signs further offtake deal for Keysbrook mineral sands project
MZI Resources (ASX: MZI)
has signed a key sales agreement for all zircon concentrate to be
produced from its Keysbrook mineral sands project in Western Australia,
bringing to 60% its production covered by sales contracts.
In
addition, the project debt funding package is expected to be finalised
within weeks, allowing the company to start developing Keysbrook.
MZI
chief executive officer Trevor Matthews said the binding offtake terms
sheet with Tricoastal – part of China’s largest mineral sands processor
Hainan Wensheng High-Tech Materials Co. Ltd. – marked a continuation of
the strong relationship between the two companies and would see
Keysbrook zircon sold into the important Chinese ceramic market.
“With
negotiations on the remaining part of the debt package now in the final
stages and well over half of our forecast production covered by offtake
agreements, we are now on the cusp of developing this highly robust
project,” he added.
MZI is currently in discussions with a number
of parties on off-take agreements for Keysbrook’s high-grade L88
titanium dioxide product.
Zircon Offtake Details
Under
the binding agreement, Tricoastal will buy all the zircon concentrate
produced at Keysbrook for five years, with an option to extend the sales
agreement for a further five years.
MZI and Tricoastal will now proceed to document and execute a full zircon concentrate offtake sales agreement.
Tricoastal is a major shareholder in MZI with a 4.6% interest.
With
this agreement in place, the company now has sales agreements in place
covering 50% of the forecast annual revenue from Keysbrook and
approximately 60% of forecast annual production.
It also
represents another important step towards development of Keysbrook and
comes as MZI moves to finalise the project’s debt funding package.
Project Debt Funding
MZI already has 50% of the project funding covered by Nedbank Capital, which has already received credit approval.
Negotiations
with potential lenders in relation to their indicative term sheets for
the remaining half of the debt funding package is ongoing with
conditional credit-approved offers of funding expected to be received
within weeks.
It had in October 2013 secured a US$41.5 million
equity funding package from highly regarded resources private equity
fund Resource Capital Fund.
Keysbrook Mineral Sands Project
The
Keysbrook Project will produce an average 91,000 tonnes per annum of
mineral sands products from 110,000 tonnes of dry heavy mineral
concentrate. This comprises:
- 26,000 tonnes per annum (dry) of leucoxene 70% titanium dioxide;
- 36,200 tpa (dry) of leucoxene 88% titanium dioxide (L88); and
- 28,700 tpa (dry) of zircon concentrate.
Heavy
mineral concentrate will be trucked about 120 kilometres to Doral’s
mineral separation plant, which is just 10 kilometres from the Bunbury
Port, for toll treatment.
Keysbrook has total development costs
of A$64.3 million and is expected to have LOM average operating costs of
A$34.1 million per annum, or A$379 per tonne of product.
It has
total Proved and Probable Ore Reserves of 26 million tonnes grading 2.6%
for in situ total heavy minerals of 670,000 tonnes. This is sufficient
for a mine life of 5.5 years with potential for extension to more than
15 years.
Analysis
With 60% of its annual
production now covered by binding sales contracts and a project funding
package expected within weeks, development of MZI Resources’ Keysbrook Mineral Sands project could begin soon.
Looking ahead, key share price catalysts include:
- Securing the remaining debt financing;
- Proceeding with development of the Keysbrook project; and
- Signing further offtake agreements.
Proactive
Investors believes the agreement will place MZI firmly back on investor
radars. With MZI confident of finalising remaining debt financing
within weeks, we have upped our estimated valuation of MZI to $0.042 to
$0.055 in the next 6-9 months.
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