Minerals sands focused MZI Resources (ASX: MZI) has highlighted the potential to increase its flagship Keysbrook project life to more than 15 years with a 60% increase in Resources to 78.9 million tonnes at 2.5% total heavy minerals.
The Western Australia projcet currently has an estimated mine life of 7.2 years as set out in the Feasibility Study based on accessible Mineral Resources plus shire approvals.
The Resource increase is a result of the re-evaluation of permits, agreements and approvals, which have allowed this previously drilled mineralisation to be included in the Resource.
It comprises of an Indicated Resource of 26.3Mt at 2.2% THM and an Inferred Resource of 3.5Mt at 2.4% THM.
MZI noted that while this Resource is seen as being readily accessible; however, further negotiation with landholders, local government and regulators is required.
Potential exists for further increases in the Resource as the Keysbrook mineralisation envelope is open in all directions.
Keysbrook Mineral Sands Project
The Resource upgrade comes on the back of the company announcing that due diligence for project finance has been completed with investigations confirming there are no substantive issues affecting the development or financing of the Keysbrook project.
All approvals are in place for project development and credit approvals offers are targeted for this month followed by the start of construction, which is also scheduled for March.
This will in turn lead the way for the project to begin shipments and sales in the first half of 2014, in time to take advantage of a forecast recovery with increased pricing already being seen by major global pigment producers.
MSP Engineering is nearing the completion of the FEED component of the Keysbrook site and planned upgrades for the Doral MSP ahead of a final investment decision for project development by MZI.
As part of this work, MSP Engineering has now received formal tenders on a number of major equipment and fabrication packages which are currently being evaluated.
MZI is also progressing land access arrangements with just a few agreements still outstanding and has a binding term sheet in place with Doral Mineral Sands for toll treatment of heavy minerals at the latter's Picton mineral separation plant.
Late last year MZI mandated two leading banks, one Australian and the other South African, to provide the debt finance for the development of Keysbrook.
Located just 70 kilometres south of Perth, Keysbrook is the largest known leucoxene deposit in the world and requires just simple mining as it is a sand deposit with no overburden as well as low rock and clay content.
The increased Resources adds to the already attractive picture that Keysbrook Feasibility Study paints, which includes a project NPV of $133 million (post tax) and an Internal Rate of Return of 71%.
With development costs payback estimated at 15 months, a mine life of more than 15 years compared to the 7.2 years estimated represents a far longer period of returns for investor.
This could increase further with additional exploration to extend the envelope of the existing mineralisation, which is currently open in all directions.
The combination of the increased Resource and the reduction of market risk seen recently - including the keen interest shown in Keysbrook suite of products and a recovery in pricing - reinforces Proactive Investors' belief that there is upside from the current share price of $0.023.
Based on our calculations, we believe that a price of between $0.035 to $0.04 is more reflective of the stock's value.
Catalysts include the securing of financing, completing land access arrangements and a final investment decision.
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