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.
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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