Importantly, the seven year contract, which covers the export of both Leucoxene and Zircon, provides sufficient capacity to export all products that will be produced from its Keysbrook mineral sands project.
MZI plans to export Keysbrook's average annual production of approximately 91,000 tonnes of leucoxene and zircon concentrate products through the port to key Chinese and world markets.
Ticking off the milestones
The company has been progressing development of the Keysbrook project in recent months.
It had in April signed a crucial sales agreement with DuPont Titanium Technologies that covered all of the leucoxene 70% titanium dioxide production and had also reached a mineral sands toll treatment deal with Doral.
The agreement with DuPont Titanium Technologies is for an initial term of five years with options to extend the contract and represents almost 30% of the planned annual production by volume from the project.
Having world's largest titanium dioxide pigment producer and a blue-chip company as a customer also highlights the value of the Keysbrook Project and its products.
MZI's agreement with Doral covers the life of the Keysbrook Project and de-risks the secondary processing of its planned products.
Doral's mineral separation plant is ideally located just 10 kilometres from the Bunbury Port, from where MZI plans to export its final products.
More recent, the company revealed it is making "significant progress" towards completion of the debt funding arrangements for Keysbrook.
This ensures MZI remains on track to secure credit approved offers from its two mandated Joint Lead Arranging banks.
Keysbrook Minerals Sands Project
The Keysbrook Project will produce an average 91,000 tonnes per annum of mineral sands products, comprising:
- 26,000 tonnes per annum (dry) of leucoxene 70% titanium dioxide;
- 36,200 tpa (dry) of leucoxene 88% titanium dioxide (L88); and
- 28,700 tpa (dry) of zircon concentrate.
Heavy mineral concentrate will be trucked about 120 kilometres to the mineral separation plant.
Doral will process the concentrate through its plant on a campaign basis, with Keysbrook heavy mineral concentrate being processed on a month-on, month-off basis.
Toll treatment charges are expected to average around $65 per tonne of heavy mineral concentrate processed, comprising a fixed charge component and variable charge to cover consumables and maintenance.
Given the high leucoxene content of the Keysbrook heavy mineral concentrate, MZI will fund and manage additions and modifications to Doral's mineral separation plant as part of the project development.
Once in operation, the Keysbrook mine will be the single biggest producer of leucoxene in the world. There are no consistent prices for leucoxene due to its variable TiO2 content, however a high grade leucoxene product is generally valued at about 75% of the prevailing rutile price.
DuPont is already taking up production of the 70% TiO2 leucoxene as it represents an effective substitute for rutile in chloride pigment production at a very competitive price relative to its content of TiO2 content.
The Keysbrook Feasibility Study found the project would have a very high rate of return of 71% and payback period of less than 15 months.
Construction is expected to start in the current quarter with first production set for the March quarter of 2014.
With the Port Services Agreement with the Bunbury Port Authority now in place, MZI Resources is well placed to proceed with development of Keysbrook with just financing waiting to be finalised.
This is likely to be achieved soon as the company has already achieved several major milestones while the current slow down in construction activity in WA's resources sector could result in a more favourable development contract, which in turn will provide greater certainty in respect to development costs and schedules and more desirable security arrangements.
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