THE INSIDE STORY: Sheffield Resources (ASX: SFX) expects to have preliminary approval in August/September for the company’s giant Thunderbird mineral sands project. By Ron Berryman
The Thunderbird project is located on the Dampier Peninsula about 60 kilometres west of the township of Derby in Western Australia.
As it approaches development of Thunderbird, the company is currently in what managing director Bruce McFadzean described as a funding phase.
“We’ve got engineering, procurement and construction (EPC) negotiations going on at the moment,” McFadzean told The Resources Roadhouse.
“We’re down to the last two contractors tendering and we’re doing all the offtake so there’s a million things going on in parallel right now.”
On the funding front, Sheffield has engaged Azure Capital to run two legs of the funding – these being the debt and joint venture sides respectively.
These are running in parallel, but quite separate to each other.
As the project has grown, so too has the company’s team, reflecting the amount of work Sheffield has already carried out and what it will be required to do going forward.
“We’re quite excited by the interest the project is generating amongst international financial and strategic investors,” McFadzean said.
“We haven’t been seeking any money at all because that’s not we’re doing right now other than engaging with overseas investors.
“It is going to require a funding solution that delivers at least $355 million in new capital via debt, equity and/or joint venture options.”
Much of the interest currently being shown in funding the Thunderbird project was generated courtesy of the recently completed pre-feasibility study.
Sheffield Resources has been kept busy having non-binding talks with European, Indian and Chinese off-takers, which have subsequently signed Memorandum of Understandings (MoU) for 70 percent of the project’s premium zircon.
“We are now negotiating the last bit of that,” McFadzean said.
“We’ve got 45 percent of our zircon concentrate going into China because China is the only one that takes the concentrates, and we’re just now completing the last 55 percent of that.
“We’ve done approximately 43 percent of our primary ilmenite and we’re now negotiating with other parties for the other 57 percent, so that’ll all be done.
“That just leaves our leucoxene which is four percent of our revenue and our titano-magnetite which is a by-product of ilmenite, and we’ve just talking to groups about the offtake of that.
“Clearly our focus is on zircon, which will be 62 percent of our revenue and ilmenite, which will be 30 percent.”
McFadzean explained that offtake discussions were currently non-binding because binding agreements had to be done in conjunction with the debt provider as they had to be tripartite agreements.
“The process of doing non-binding agreements is only on volume, we haven’t done anything on pricing, there are no discounts being discussed,” he said.
He pointed out that there were international consumers who wanted to secure long-term output from a stable jurisdiction.
“I think we’re one of the key players in this space,” McFadzean mused.
“The ilmenite market has already taken off; the zircon market has started taking off.
“We just want a steady market but already the ilmenite market is exceeding our bankable feasibility study (BFS) price and the zircon price is growing faster than our BFS – we’re already ahead of where we said we would be in 2019.”
The current timeline is for Sheffield to have its mine lease granted by the Department of Mines and Petroleum; finalise funding and offtake into the third or fourth quarter; commence pre-works – roads, camp, site preparation – in the second half of the third quarter; and finalise the engineering, procurement and construction (EPC) in the next month or two.
“From there we’ll move straight into commencing engineering and long lead purchases so we can start construction in the fourth quarter,” McFadzean explained.
“We want to be well set up and established before the start of the wet season, so we are currently concluding all of the environmental permitting.
“We’ve been through all of the public phases of that permitting and received overwhelming support from the local community for the project.
“It’s benign mining and they’re benign products.
“This project will have an enormous impact on the township of Derby and Broome including about 140 fulltime jobs and business opportunities with a focus on Aboriginal participation.”
In June this year, Sheffield received notification from the National Native Title Tribunal that the lease upon which the Thunderbird project is located has been granted.
This will enable the Department of Mines and Petroleum to finalise the grant of the company’s mining lease after the current appeal is finalised.
Construction is scheduled to continue until late 2018 or early 2019 with progressive commissioning of mining, processing and logistics plant in 2019 followed by a progressive ramp-up to full production.
Another factor in the attractiveness of the project is its proximity to the key Asian markets and the availability of port facilities.
It is proposed to truck mine products the 140km to Derby and Broome, 110km of it on a sealed highway.
The company has an access agreement in place for port storage, wharf and bulk handling at Derby with an option for packaged products through Broome.
The Thunderbird project is big by any standard and is the first major mineral sands deposit to be discovered in the Canning Basin and one of the largest mineral sands deposits to be discovered in the last 30 years.
The project feasibility study (BFS), delivered in March 2017, highlighted zircon as the key value driver of the project with the remainder of revenue generated from substantial amounts of high-grade sulphate ilmenite and lesser amounts of leucoxene.
Thunderbird has a mineral resource of 3.23 billion tonnes at 6.9 percent heavy minerals (measured, indicated and inferred at 3 percent heavy minerals cut-off), including 18.6 million tonnes of zircon, 5.9 million tonnes of high-titanium leucoxene, 6.5 million tonnes of leucoxene and 61.7 million tonnes of ilmenite.
The resource includes a coherent and mineable high grade zone (at 7.5 percent heavy minerals cut-off) of 1,050 million tonnes at 12.2 percent heavy minerals (measured, indicated and inferred) containing 9.7 million tonnes of zircon, 3 million tonnes of high-titanium leucoxene, 2.7 million tonnes of leucoxene and 35 million tonnes of ilmenite.
The high in-situ valuable heavy mineral (VHM) grades for this zone of 0.93 percent zircon, 0.28 percent high-titanium leucoxene, 0.26 percent leucoxene and 3.3 percent ilmenite place Thunderbird within the top tier of mineral sands deposits globally.
McFadzean emphasised that Thunderbird is a seriously large project.
“Thunderbird is a huge project,” he exclaimed.
“I joined Rio Tinto from BHP in 1985 to work on the Argyle diamond project.
“We were in production with first diamonds in 1986 and that project is forecast to shut down in 2020 making it a 34-year mine life.
“At Thunderbird, we have an estimated mine life of 42 years – and we could be bigger than 42 years, it’s still open at down dip and on the project economics we’ve actually cut it off to conclude the studies because you’ve got to stop somewhere.”
Sheffield Resources Limited (ASX: SFX)
…The Short Story
41-47 Colin Street
West Perth WA 6005
Ph: + 61 8 6424 8440
Will Burbury, Bruce McFadzean, Bruce McQuitty, David Archer