19 Sep 2011 07:00
19 September 2011 SRX:AIM
Sierra Rutile Limited
Strategic Review Update
London, UK, 19 September 2011: Sierra Rutile Limited (AIM:SRX) ("SRL" or the "Company") is pleased to announce that it has received an initial report from the consortium of consultants headed by the Snowden Group, and including CPG Resources - Mineral Technologies and Titan Salvage (the "Consultants") detailing the key initial findings of the strategic review announced on 11 May 2011.
Rutile production expansion
The Consultants' study focused on the expansion of SRL to an annualised rutile production rate of 200,000 tonnes per annum, and a pro-rata increase in ilmenite production.
The study involved the development and costing of a number of possible expansion alternatives for increasing mined production. The primary mining options evaluated are outlined in the table below. All costs were estimated to a ±25% level of confidence, and whilst they include contingency and project management costs, do not include any allowance for additional working capital or start-up expenses. All costs are subject to review by the Company. These alternatives are in addition to the current operating 1,000tph dredge ("D1"), currently producing 65-70,000 tonnes of rutile per annum, with increased production anticipated from it next year.
Estimated capital cost (US$m) | Estimated operating cost (US$/t ROM)^ | Estimated rutile production (tpa)^^ | |
D2 (1,000tph) dredge rehabilitation1/ | 58 | 1.2 | 82,000 |
D2 (1,000tph) new build | 90 | 1.7 | 82,000 |
(500tph) dredge | 51 | 2.0 | 41,000 |
Dry mining (500tph)* | 36 | 5.6 | 41,000 |
Dry mining (1,000tph)* | 47 | 5.6 | 82,000 |
All costs converted at a rate of US$1.05/A$. ^To produce a heavy mineral concentrate suitable for mineral separation ^^ Grade dependent, assumes 1.8% rutile. *Dry mining costs assumes earth moving is outsourced,
1In 2008, the D2 dredge capsized. The capital cost assumes the dredge is re-floated and re-equipped back to its original configuration
An expansion to production levels of 200,000 tonnes per annum would also necessitate the completion of the partially-finished mineral separation plant ("MSP") expansion, which the Consultants estimated would cost US$13m.
Other production improvements
In addition to the rutile capacity expansion, the consultants evaluated the cost of constructing and operating an on-stream zircon plant to produce a zircon-rich concentrate or premium-grade zircon product. This plant is necessary to allow the Company to continue to produce a zircon product comensurate with the opportunity provided by the increased mining rate. The cost of the on-stream zircon plant is estimated at US$17m for a concentrator that would produce a similar product to the zircon-rich product the Company currently sells, or US$35m for a plant capable of producing a premium-grade zircon product. Annualised operating costs would be between US$1.5m and US$3.0m for production of 6-15,000 tonnes per annum of either the current zircon product or premium grade zircon. Such a plant would also be capable of producing a monazite-rich concentrate which could, if desired, be further refined at additional cost into a potential rare-earths oxide product.
The cost to mine and process the historic tailings, which, due to inefficiencies in processing techniques, still contain relatively high grades of rutile, are still being established.
Next steps
SRL will now commence the evaluation and optimisation of the options included in this draft report with the Consultants, with the aim of choosing the option which is likely to be the most value enhancing for shareholders. A further update will be provided once a decision has been made.
John Sisay, Chief Executive Officer of Sierra Rutile, commented:
"The results of this study, while only preliminary, confirm the viability of SRL meaningfully increasing production to approximately 200,000tpa, and at a cost that is well below that of green-field development projects. The large resource base and multiple expansion options position SRL well to take advantage of the positive outlook for titanium dioxide feedstock prices. I look forward to updating the market on our development plans once we have had the opportunity to fully evaluate these findings".
ENDS
For further information:
Sierra Rutile Limited
John Sisay, Chief Executive Officer
Telephone: +44 (0) 20 7321 0000
Collins Stewart Europe Limited
Nominated Adviser and Joint Broker
John Prior
Telephone: +44 (0) 20 7523 8350
Aura Financial
Andy Mills / Harry Cameron
Telephone: +44 (0) 20 7321 0000
Sierra Rutile Limited
Sierra Rutile Limited is a mining company with operations in the Republic of Sierra Leone. The Group is one of the country's largest private sector employer and produces rutile, zircon and ilmenite for use in industrial applications. The Group's operations have historically accounted for over 65 per cent of the exports of Sierra Leone. The Company changed its name to Sierra Rutile Limited on 24 February 2011.
About Snowden Group
Snowden is a premium provider of consulting services, technology solutions and technical training to the Mining and related sectors. During the last 24 years, it has built a proven track record in providing its clients with the information and solutions to optimise their investment in the resources sector. With a continued focus on delivering innovation and quality outcomes to clients worldwide, Snowden is placed at the forefront of the mining consulting industry.
www.snowdengroup.com
About CPG - Mineral Technologies
Mineral Technologies is a recognised leader in mineral processing solutions worldwide.
Throughout its 70-year history it has fulfilled its commitment to turn knowledge into value by delivering a comprehensive range of integrated equipment and services that cost-effectively transform ore bodies into high grade mineral products for customers.
Today, its commitment continues with the ongoing release of an expanding range of minerals testing, plant design and mineral separation equipment solutions across the mineral sands, iron ore, coal, industrial minerals, and metals market sectors.
www.mineraltechnologies.com.au
About Titan Salvage
TITAN, a wholly owned Crowley subsidiary, is a worldwide marine salvage and wreck removal company based in Pompano Beach, Fla., that has performed over 350 salvage and wreck removal projects since 1980, including some of the most technically demanding projects ever undertaken. The company also has offices and equipment depots in Newhaven, UK, Singapore, and Australia. TITAN responds to vessel emergencies around the world and is able to mobilize a worldwide network of expert salvage professionals and specialized, portable equipment within hours of activation.
www.titansalvage.com