1 Jun 2015 07:00
Sierra Rutile Limited
Positive results of Sembehun Dry Mine scoping study
London, UK, 1 June 2015: Sierra Rutile Limited (AIM: SRX) ("Sierra Rutile") is pleased to announce the results of its study (the "Study") into dry mining the Sembehun deposit (the "Project" or "Sembehun Dry Mine").
The Study confirms the viability of dry mining Sembehun, in keeping with Sierra Rutile's previously announced strategy of focusing on low-risk, high capital-efficient production projects. The results of the Study also confirm that the Sembehun Dry Mine fits well into Sierra Rutile's previously announced long-term production plan and its ability to fund its growth plans while supporting meaningful and sustained distributions to shareholders.
Highlights
· Well-advanced project: A significant portion of the Study is to a high level of confidence, benefiting from previous work completed on the Sembehun group of deposits, the completed Lanti Dry Mine, and the Gangama Dry Mine, currently in construction.
· Low-risk execution: The Project consists of an open pit dry mining operation with two 500 tph concentrator units, which have a near identical configuration to the Gangama Dry Mine. As Sembehun Dry Mine is a long-term project, no decision on the commencement of the Project will be required until at least 2017.
· Long-term production scale: The Project represents the next stage in production after the Gangama Dry Mine, contributing on average 74,000 tonnes of rutile over a mine life of 19 years, scheduled to commence in 2019.
· Lower unit costs: The Project has an average total operating cash cost1 of $317/t and is expected to reduce Sierra Rutile's total operating cash costs to $481/t on average over the first five years of the Project.
· Low-capital intensity: Expected initial capital expenditures of $126 million, based on current contracted amounts from the Gangama Dry Mine project.
· Strong project economics: After-tax NPV10% of $207 million and IRR of 39%.
· Responsibly funded: It is currently anticipated that the capital expenditure for Sembehun Dry Mine will be funded from internally generated cash flow, in keeping with Sierra Rutile's stated plan of funding growth while paying a sustainable dividend. The situation will continue to be assessed as the Project is further developed, with no decision to proceed planned until 2017.
· Next steps: Sierra Rutile will release a pre-feasibility study for Sembehun Dry Mine in Q3 2015.
1 Total operating cash cost (includes direct operating costs, general administrative costs and corporate costs but excludes depreciation) less by-product revenue divided by tonnes of rutile produced.
Commenting on the Study, John Sisay, Sierra Rutile Chief Executive Officer, said:
"The study confirms Sembehun Dry Mine's position in Sierra Rutile's pipeline of low-risk, capital efficient production growth projects, and provides clarity over Sierra Rutile's long-term plans. Together with Lanti Dry Mine and Gangama Dry Mine, the Project demonstrates our committed transition to a dry mining focus company. While this is a long-term project, the Study confirms that the Sembehun Dry Mine fits well into our broader strategy of financially responsible production growth without compromising our targeted goal of delivering a sustainable, attractive dividend in the medium term."
Project Overview
The fully-permitted Sembehun group of deposits, located 45 km north-west of Sierra Rutile's existing operations, represent the largest resources within Sierra Rutile's existing endowment containing 3.6 Mt of rutile2. The deposits were previously envisioned to be developed as a dredge mining operation. The transition to dry mining reflects Sierra Rutile's commitment to low-risk, capital efficient growth projects and will enable Sierra Rutile greater production flexibility.
The Study details an open pit, dry mining operation at the Sembehun group of deposits. The Project would consist of constructing two 500 tph concentrator units, an owner-operated mining fleet, product haulage vehicles, and associated infrastructure.
Sembehun Dry Mine has been considerably de-risked and several elements of the Study are well advanced, leveraging previous pre-feasibility-level work completed and the Project's similarity to other Sierra Rutile operations:
· Earth moving vehicle capital expenditure based on recent third-party quotes for Gangama Dry Mine. Concentrator capital expenditure quotes based on the LSTK contract for Gangama Dry Mine.
· Infrastructure development and resource work completed for the previous Sembehun Dredge Mine Pre-Feasibility Study.
· Concentrate to be processed through the existing mineral separation plant with no capacity upgrade required.
· Incorporates construction and operating experience from Lanti Dry Mine and Gangama Dry Mine.
Sembehun Dry Mine would be constructed over an 18-month period, commencing production by January 2019, in keeping with Sierra Rutile's previously announced long-term production plan. The Project is expected to contribute an average of 74,000 tonnes of rutile per annum.
Total initial capital expenditures are expected to be $126 million, $58 million of which would be for the construction of the concentrator units. Assuming current consensus rutile pricing, it is projected that Sierra Rutile could fully fund Sembehun Dry Mine using internally generated cash flow.
Sembehun Dry Mine would also leverage Sierra Rutile's large fixed asset base, further lowering Sierra Rutile's total operating cash costs to $481/tonne in the Project's first five years. Production from Sembehun would be processed at the existing Mineral Separation Plant with no capacity upgrade required.
2 Based on resource statement dated 28 November 2014
Next Steps
A drill program to further advance mine planning is currently on going at the Sembehun group of deposits, the results of which will support a pre-feasibility study for Sembehun Dry Mine. Sierra Rutile will release the pre-feasibility study in Q3 2015. As Sembehun Dry Mine is a long-term project, no decision on the commencement of the Project will be required until at least 2017.
Sembehun Dry Mine Summary (1,000tph)1 | ||
Avg. annual ore production rate | 7.0 mtpa | |
Avg. annual rutile production | 74 ktpa | |
Avg. total operating cash cost (first five years) | $317/t | |
Avg. Sierra Rutile total operating cash cost (first five years) | $481/t | |
Project life | 19 years | |
Development capital | $126m | |
Construction period | 18 months | |
Project economics2 | ||
After-tax NPV10% | $207m | |
After-tax IRR | 39% | |
Payback period | 2.2 years | |
Sembehun Mineral Resources3 | ||
Contained | Rutile | 3,641 |
Ilmenite | 266 | |
Zircon | 93 | |
Grade | Rutile | 0.99% |
Ilmenite | 0.08% | |
Zircon | 0.03% | |
1 Metrics exclude contribution from Gangama Dry Mine, which will be relocated to the Sembehun group of deposits in 2021
2 Exclude fixed costs and capital expenditures related to overheads and the mineral separation plant
3 Based on resource statement dated 28 November 2014
An overview of the Project is available in Sierra Rutile's latest corporate presentation, which can be found on Sierra Rutile's homepage at www.sierra-rutile.com.
ENDS
The mineral resource information in this announcement has been reviewed and approved for release by Mr Mark Button, NHDip, MMRM, Pr.Sci.Nat. who has 24 years' experience in mineral commodities, of which 15 years is specific to mineral resource estimation, and is currently an independent contractor providing consulting services to Sierra Rutile Limited. Mr Button has sufficient experience in relation to the style of mineralisation and type of deposit under consideration to qualify as a Competent Person as defined in the 2012 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves". Mr Button has consented to inclusion of this mineral resource information in the form and context in which it appears.
A 'Mineral Resource' is a concentration or occurrence of solid material of economic interest in or on the Earth's crust in such form, grade (or quality), and quantity that there are reasonable prospects for eventual economic extraction. The location, quantity, grade (or quality), continuity and other geological characteristics of a Mineral Resource are known, estimated or interpreted from specific geological evidence and knowledge, including sampling. Mineral Resources are sub-divided, in order of increasing geological confidence, into Inferred, Indicated and Measured categories.
For Further Information:
Sierra Rutile Limited Yves Ilunga Chief Financial Officer
|
+44 (0)20 7074 1800 |
RBC Capital Markets Nominated Adviser and Joint Corporate Broker Jonny Hardy |
+44 (0)20 7653 4000 |
Investec Bank Joint Corporate Broker Chris Sim / George Price |
+44 (0)20 7597 4000 |
Kreab Marc Cohen / Christina Clark |
+44 (0)20 7074 1800 |
Notes to Editors
About Sierra Rutile Limited
Sierra Rutile produces titanium feedstock industrial minerals (primarily rutile, with some associated ilmenite), as well as smaller quantities of zircon. Sierra Rutile's mine, located in the south west of Sierra Leone, is one of the largest natural rutile deposits in the world, with a JORC-Compliant Mineral Resource for measured, indicated and inferred resources for the Sierra Rutile mine of over 895 million tonnes (as at 30 September 2014).
www.sierra-rutile.com