To the Connecting Industry WA: the Coburn HMS Project

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Heavy minerals, such as zircon, titanium dioxide minerals, garnet, sillimanite, kyanite, and staurolite, are eroded from their parent igneous or metamorphic rocks and are transported by water and/or wind action over long periods of geological time, often ending up in the same locations as placer deposits. When such deposits contain sufficient concentrations of valuable heavy minerals, principally zircon and titanium dioxide minerals, they are referred to as heavy mineral sand deposits.

Most of the commercially attractive mineral sand deposits occur along old coastlines, particularly where high energy wave action and strong winds have prevailed over long periods of time. Beach, offshore and sand dune deposits comprise the main varieties of mineral sand ore environments, the Coburn deposit being hosted in a fossil near-coastal sand dune system.

Project Details, History and Current Status

Coburn is situated in the low risk, mining focused jurisdiction of Western Australia, 240km north of the established mineral sands export port of Geraldton, with favourable access to global consumers.

Coburn is a world-scale mineral sands deposit, containing a rich zircon-titanium HM assemblage, with 20Mt of in-situ HM, low slimes, low oversize and strong geological continuity across and along strike.

The Project straddles the eastern boundary of the Shark Bay World Heritage Property but all exploration to date has been to the east of the Shark Bay Property.

Drilling since 2000 has outlined a major heavy mineral sand deposit known as the Amy Zone  which is over 35 kilometres long, up to 3 kilometres wide and between 10 and 50 metres thick.

Large Ore Reserve of 523Mt  1.11% Total Heavy Mineral (THM) underpins an initial mine life of 22.5 years at the planned mining rate of 23.4Mtpa of ore.

Coburn’s product suite and construction started means it is extremely well placed to capitalise on the forecast supply deficit, providing strong market fundamentals for development.

Updated Definitive Feasibility Study (DFS) released on 5 June 2020 confirms the strong outlook for the Coburn mineral sands project. High margins and strong, long-term cash flows are the result of low operating costs and an exceptional, high-value zircon and titanium product suite.

The DFS was completed by a range of independent and highly reputable consultant/contractor firms with experience in mineral sands and Australian project development.

Strandline has secured major binding offtake contracts covering 100% of Coburn’s forecast mineral sands production, estimated at ~US$140m per annum (A$200m at AUD: USD 0.70), based on the pricing structures contained in the agreements and commodity price forecast assumptions contained in the Coburn updated DFS (see ASX release dated 4 June 2020).

The offtake contracts are with some of the world’s largest titanium dioxide pigment producers and ceramic zircon consumers, with ~80% of production contracted to major American and European customers with the balance sold into Asia.

Widespread construction is underway at the Coburn Mineral Sands Project.

Manufacturing of key long lead processing equipment and dozer mining units are advancing; construction activity on the workers camp, bulk earthworks and roads, water and general site infrastructure progressing as planned.

Coburn is fully funded through to production, with first production of Heavy Mineral
Concentrate (HMC) scheduled for Q4-CY2022.

Coburn is set to benefit from strengthening mineral sands commodity prices and is forecast to generate robust operating margins over a multi-decade mine life.

Project Finance

The Coburn mineral sands project is fully funded to production cashflows via:

• A$122m fully underwritten equity raising plus existing Company cash;

• Up to A$150m loan facility from the Northern Australia Infrastructure Facility (NAIF); and

• US$60m (~A$80m at AUD: USD 0.75) senior secured Bond Issue.

The Northern Australia Infrastructure Facility (NAIF) made an investment decision to provide a loan facility for the development of Strandline’s Coburn mineral sands project, see ASX release dated 22 June 2020.

• NAIF’s facility is for up to A$150m in two tranches, based on a 15.5-year term:
  • First tranche of up to A$130m towards the construction of Coburn’s core mine infrastructure
  • Second tranche of up to A$20m to fund a potential future northern access road linking the project more directly to the Denham community in Shark Bay
• Coburn will generate significant socio-economic benefits, indigenous and enterprise opportunities over its long life.
  

  

   

Project Snapshot

The dashboard below summarises the financial metrics of the Coburn Project updated DFS.

Synopsis

Coburn’s development capital of A$338m is fully-funded through to production and cashflow and construction is underway following a successful Final Investment Decision (FID) in May 2021. First production of HMC is scheduled for the December quarter 2022.

Coburn is 100%-owned by Strandline. The updated Definitive Feasibility Study (DFS), released in mid-2020, confirmed robust economics over an initial 22.5-year life, with a pre-tax NPV of A$705m (AUD: USD 0.70, 8% discount rate) and high margin revenue-to-operating cost (C1) ratio of 2.4. Coburn’s projected revenue for the initial 22.5 years of Ore Reserves is A$4.4b, with an average annual EBITDA of A$104m.

The main conclusions of the Coburn DFS are as follows:

• The DFS defines a realistic pathway to commercial production; confirming the ability to produce highly marketable zircon-titanium mineral products with first ore to processing plant in a nominal 18 month period
• JORC compliant Mineral Resources of 1.6Bt @ 1.2% total heavy mineral (THM), classified 119Mt (or 7%) Measured, 607Mt (or 38%) Indicated, and 880Mt Inferred (or 55%) provides the geological foundation for the project – ASX announcement 14 November 2018
• JORC compliant Ore Reserve of 523Mt grading 1.11% THM for ~5.8Mt of contained heavy mineral, underpins an initial mine life of 22.5 years at a mining rate of 23.4Mtpa – ASX announcement 16 April 2019
• Potential to further increase project Reserves and mine life by ~15 years (to 37.5 years) through conversion of resources extending north and along strike of the current Ore Reserves (refer “Extension Case” assessment)
• Mining study confirms a conventional open pit dry mining operation where free-dig unconsolidated sand is mined using heavy mobile equipment reporting material to Dozer Mining Units (DMU). The DMU prepares the ore for processing and the ore is pumped in a slurry form to the processing plant
• Bulk metallurgical testwork of representative samples, using full scale or scalable processing equipment, confirms conventional processing capable of producing high-quality products with exceptional pit-to-product recovery rates achieved within both concentrate and final product streams
• DFS confirms an efficient and modern process design capable of producing a high-grade saleable 95% HMC product from the WCP and final products through further processing by the MSP.

• The WCP design utilises multiple stages of high-capacity gravity separation and classification to produce a HMC
• The HMC will then be processed in the MSP, using electrostatic separation, gravity and magnetic fractionation to produce four final products; comprising a premium zircon product (66% ZrO₂), zircon concentrate product (containing payable zircon, monazite and titanium minerals), rutile product (93% TiO₂) and a chloride-grade ilmenite product (62% TiO₂)

• Average annual production of 34kt premium zircon, 54kt of zircon concentrate, 110kt chloride  ilmenite and 24kt rutile; estimated to supply ~ 5% of global zircon market.
• Engagement with leading global mineral sands consumers during the DFS confirms the saleability and strong market demand for Coburn’s products in both concentrate and final product form.
• Binding offtake agreements have been secured with major global consumers for 100% of revenue for the first 5 years
• Sand tails (including the coarse sands and slimes) from the WCP will be pumped to moveable tails stackers where the sand is separated from the lower density water and slime. The sand is deposited in the pit and the water and slime are returned for thickening and subsequent co-disposal in the pit amongst the sand
• The sand tails and slime material are then profiled and covered with stockpiled subsoils and topsoils to re-create the planned soil profile and final landform ready for full rehabilitation

• Products produced will be temporarily stored on site before being trucked on a continuous basis from the mine site to a dedicated staging facility located close to the Geraldton port, some 240km south
• Product inventory will be shipped in bulk form from the existing port of Geraldton. Geraldton port is an established mineral sands export facility, with licences already in place to handle Coburn’s suite of minerals
• Water for operations will be supplied by a combination of sources including in-pit water if present, recycled sand tailings and slimes return water and raw water top-up from a local bore field
• Power for the operation will be supplied from a purpose-built site power station operating on LNG (with diesel backup) with approximately 25% solar and battery (renewable) penetration
• Project personnel will reside in a permanent village on site, catering for a drive-in-drive-out workforce. Additional temporary accommodation will be added to account for the peak construction periods
• Other non-process infrastructure comprises product storage facilities, water treatment plant, waste management facilities, fuel storage and dispensary, water services, main 45km access road, site roads, laboratory, workshop, buildings, offices, mining compound and communications facilities
• The project is a long life, multi decade operation and will generate a host of socio-economic benefits including capital inflows to regional Australia, significant job creation, indigenous engagement, training and job diversity as well local business opportunities and community partnership programs
• Key project development approvals are in place (environmental, native title, heritage and mining licences) and the project is considered development-ready pending finalisation of project financing
• The project overlays two pastoral leases, Coburn and Hamelin. The Coburn Pastoral lease is 100% owned by Strandline, which covers the first 20 years of Ore Reserves. The Hamelin Pastoral Lease, to the immediate north, is managed by others
• The updated DFS confirms a pre-tax (real) NPV⁸ of A$705 million and IRR% of 37%
• Total capital expenditure is estimated to be A$260 million with first ore delivered to process facilities ~78 weeks after project development commences.

Mine Life Extension Case – Scoping Study Findings

Potential exists to further increase project reserves, mine life and returns, through further economic evaluation of resources extending north and along strike of the DFS Ore Reserves. A Scoping Study assessment of Amy South Indicated and Inferred material, titled “Extension Case”, was undertaken concurrently with the DFS.

The purpose of the Scoping Study was to ascertain the financial benefits of a longer mine life by scheduling production targets from the JORC-compliant (2012) Indicated (7Mt @ 1.1% THM) and Inferred (702Mt @ 1.2% THM) Mineral Resources. The Mineral Resources lie north and directly adjacent to the current granted Mining and Retention Licences and are interpreted to represent the strike continuation of the same body of mineralisation currently defined by the DFS Ore Reserves.

Mining, processing costs, metallurgical recoveries, product pricing from the DFS Final Products Case have been applied to the Mineral Resources used as the basis for this Scoping Study. This is considered appropriate with the production targets forming an extension to the DFS Ore Reserves.

The production targets are scheduled from year 23 when the current DFS Ore Reserves are depleted and additional feed is required. The Extension Case adds 15 years of production to the mine life (total 37.5 LOM).

The Extension Case confirms the potential to generate an additional A$3.58b of project revenue, resulting in a total project revenue when added to the DFS Final Products Case of A$7.94b. Extension Case, when integrated with the DFS Final Products Case, shows a pre-tax NPV⁸ of A$825m and total project EBITDA of A$4.54b.

Key financial outcomes of the Extension Case Scoping Study include:

The Extension Case Scoping Study has lower level of geological confidence associated with Inferred Mineral Resources and there is no certainty that further exploration work will result the production target itself will be realised.

The stated production target is based on the Company’s current expectation of future results or events and should not be solely relied upon by Investors when making investment decisions. Further evaluation work and appropriate studies are required to establish sufficient confidence that this target will be met.

Click on the Information Memorandum link to view the full Updated Definitive Feasibility Study which was released on 10 June 2020.

Products

Zircon (60% of Revenue).  Forecast Annual Production 88,000 tonnes.

Final Products produced from January 2020 Coburn testwork include:

Premium Zircon Product:

• High grade premium ZrO₂ + HfO₂ of 66.4%;
• Low U + Th (nominally 348 ppm);
• Suitable for ceramics, foundry and chemical applications;
• Relatively coarse grain size in comparison with many competing products (with D50 125µm).

Zircon Concentrate Product:

• Contained zircon is relatively high and suitable for a range of applications, including ceramics, chemical and foundry uses;
• Zircon contained within the concentrate has relatively low U + Th, which may provide blending flexibility for the downstream purchaser to blend with other products that contain less favourable characteristics;
• Zircon concentrate also contains payable titanium minerals and monazite containing rare earths.

Zircon is a zirconium silicate, ZrSiO₄, which originates in nature as an early forming accessory mineral in igneous rocks, particularly sodium-rich granites. Its hardness, high diamond-like lustre and reflectivity, corrosion resistance, high melting point and ability to absorb radiation are properties utilised in the manufacture of a variety of products in the ceramic, chemical, refractory and foundry industries. The proportion of zircon consumed in each of these industries is shown in Figure 1.

The Coburn zircon product is suitable for use in all of the above industries, although its iron oxide and titanium dioxide levels are slightly higher than the premium grade zircon cut-off levels of 0.1% and 0.12% respectively. Nevertheless, ceramic industry customers in Europe and Asia have advised that Coburn zircon can be blended with premium grade material for glazing of tiles, the principal ceramic use.

The radiation hazard level of Coburn’s zircon, expressed by its uranium and thorium (U+Th) content of between 320-450 parts per million, is quite low and compares favourably with the accepted international limit of 500 parts per million. Radiation levels in the zircon chemicals industry are particularly critical, as uranium and thorium are concentrated in the tailings during the manufacturing process, making it difficult and expensive to achieve safety requirements.

Ilmenite (24% of Revenue) Forecast Annual Production 110,000 tonnes

Final Product produced from January 2020 Coburn testwork include:

Ilmenite Product:

• Chloride-grade ilmenite with 62% TiO₂ content, suitable for direct chloride pigment application or upgrading via Synthetic Rutile (SR) or slag routes into high grade chloride route pigment feedstock;
• Low U + Th (nominally 152 ppm);
• Minor elements of Cr2O3, CaO, MgO and MnO relatively low or in line with competing products;
• Relatively coarse grain size in comparison with many competing products (with D50 148µm).

Ilmenite is a naturally occurring mineral, with the chemical formula FeTiO3. It has a titanium dioxide (TiO2) content between 45% and 65% and generally pigment manufacturers pay feedstock suppliers on the basis of TiO2 content. Global mineral sands consultant TZMI classifies ilmenite feedstock with a TiO2 content between 58% and 65% as chloride ilmenite and ilmenite with a TiO2 content of 45% to 58% as sulphate ilmenite.

Rutile (16% of Revenue).  Forecast Annual Production 24,000 tonnes

Final Product produced from January 2020 Coburn testwork include:

Rutile Product (previously named HiTi90):

• High 93% TiO₂ content attractive for direct chloride pigment application or blending up of lower grade feedstocks for similar applications. Competes strongly with lower grade Leucoxene 88%;
• Low U + Th (nominally 75 ppm);
• Relatively coarse grain size in comparison with many competing products (with D50 121µm).

HiTi is an approximately equal mixture of Rutile (95% TiO₂) and Leucoxene (86% TiO₂). Leucoxene is an altered form of ilmenite, in which the iron (Fe) has been preferentially leached out by acid groundwater, increasing the TiO₂ content. The leucoxene from the Coburn Project is unusually altered and high in TiO₂and, for this reason, can command a higher price and is sold in a blend with rutile. It can be used as feedstock for pigment manufacture or in welding rods.

Product Recoveries based on Latest Confirmatory Testwork

Source: Strandline