6 Aug 2013 07:00
Sierra Rutile Limited
Sierra Rutile reduces Gangama Dry Mining project capital cost by over 17%
Significant capex savings also identified for the Gbeni deposit
London, UK, 6 August 2013: Sierra Rutile Limited (AIM: SRX) ("Sierra Rutile") is pleased to announce a significant reduction in the Gangama Dry Mining project capital costs. In addition, given the experience in Lanti Dry Mining, Sierra Rutile will change its mining method for the Gbeni deposit from dredging to dry mining, resulting in significant capital savings.
Gangama Dry Mining capital cost
Sierra Rutile has recently completed a value-optimisation and re-costing exercise for the Gangama Dry Mining feasibility study, which has resulted in a decrease of over 17% in the capital cost to a total of US$85 million from the US$103 million anticipated in the pre-feasibility study. This re-costing exercise focused on integration of updated foreign exchange rates and steel prices into the contract, as well as optimising the work packages to leverage Sierra Rutile's existing power infrastructure.
Sierra Rutile is highly confident that this revised price is achievable due to its experience in building the Lanti Dry Mining project ahead of time and on budget and given that approximately 75% of the capital cost requirement, being made up of a lump-sum-turn-key ("LSTK") contract and mobile equipment procurement, is fixed.
Cost Area | Proportion of cost |
LSTK contract - Process plant & associated infrastructure | 52% |
Mobile equipment | 23% |
Earthworks & SRL infrastructure (e.g., power supply) | 14% |
Other (incl. owner's team, contingency, taxes, insurance) | 11% |
Sierra Rutile continues to refine the operating costs in light of actual performance data from the Lanti Dry Mining project and these will be incorporated into the final feasibility study report that will be reviewed by the Board during the third quarter of 2013. As previously announced, any decision by the Board of Sierra Rutile to proceed will be viewed in the context of the market.
Gbeni mining method
The historical mine plan for the Lanti Dredge had envisaged that, on completion of the Lanti deposit, the dredge would move to the Gbeni deposit, requiring a move of approximately 6.8 km. This move was expected to occur in 2018. Given the long lead times required to establish a deposit for dredging, preparations for this move would be required to start in 2014 to ensure that the dredge pond is established prior to the move in 2018. The preparations, totalling approximately US$23 million, would have involved creation of canals to float the dredge to the deposit, relocation of 152 households across two villages, clearing of all vegetation over the Gbeni deposit and creation of dams and a dredge pond.
Following the successful ramp-up of the Lanti Dry Mining project and having fully evaluated the risk and cost of the potential move, Sierra Rutile has concluded that the mining of the Gbeni deposit by dry mining methods and processing the ore through the existing Lanti Dry Mining processing plant, located approximately 2.5 km from the Gbeni deposit, is a superior solution to mining the Gbeni deposit with the Lanti Dredge. This change in mining method will result in a significantly lower capital profile over the next four-years, extend the useful life of the Lanti Dry Mining process plant, in its current location, from 5 to 15 years and allow Sierra Rutile to optimise its ore blend and better manage its dry mining haulage fleet to maximise its return from the Lanti Dry Mining processing plant. Additionally, this change in mining method will also result in significantly lower sustaining business capital requirements over the next five-years for the 35-year-old Lanti Dredge.
The Lanti Dredge, first commissioned in 1979, is expected to retire on conclusion of the Lanti deposit after which serviceable parts will be used, as appropriate, in other areas of the operation, such as Sembehun.
With the now-expanded dry mining resource, Sierra Rutile continues to review the potential for expanding the Lanti Dry Mining plant to greater than 500 tonnes per hour. Given the 12-month implementation of additional dry mining processing capacity, a decision will not need to be made until 2016 earliest.
Commenting on the revision to the Gangama capital costs and the capex savings on the Gbeni deposit, CEO John Sisay said: "With our continued focus on costs and disciplined investment, we are pleased by the outcome of both the Gangama value optimisation study and Gbeni mining method review. These reviews have resulted in the elimination of a significant amount of near-term capital requirements while at the same time maintaining our optionality around the growth of the business. This result provides the Board of Sierra Rutile with a number of options, including returning cash to shareholders."
ENDS
For Further Information:
Sierra Rutile Limited Yves Ilunga Chief Financial Officer
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+44 (0)20 7074 1800 |
RBC Capital Markets Nominated Adviser and Joint Corporate Broker Martin Eales / Jonny Hardy
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+44 (0)20 7653 4000 |
Mirabaud Securities Joint Corporate Broker Peter Krens
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+44 (0)20 7321 2508 |
Kreab Gavin Anderson 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 800 million tonnes (as at 31 August 2012).
www.sierra-rutile.com