MZI Resources (ASX: MZI) and Doral Mineral Sands have signed a processing agreement under which heavy mineral concentrate from the Keysbrook mineral sands project in Western Australia will be treated at Doral's mineral separation plant.
The mineral separation plant is ideally located just 10 kilometres from the Bunbury Port, from where MZI plans to export its final products.
Importantly, the processing agreement covers the life of the Keysbrook Project and Doral's experience de-risks secondary processing for MZI.
Trevor Matthews, chief executive officer of MZI Resources, said the Doral agreement marked another key point in the development of Keysbrook.
"This agreement is a major catalyst for Keysbrook and further de-risks the project.
"We have already secured other important agreements and we are now on the cusp of receiving binding offers of finance."
Keysbrook 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, producing:
- A leucoxene product grading 88% TiO2 (L88);
- A leucoxene product grading 70% TiO2 (L70); and
- A zircon concentrate grading about 56% zircon and 11% L88.
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.
MZI and its engineers have worked closely with Doral since the strategic alliance was formed in May 2012 to engineer these upgrades.
The Processing Agreement has an initial term of five years, with options to extend it to cover the life of the Keysbrook Project.
MZI has now achieved the following milestones:
- Executed the Doral Processing Agreement;
- Mandated two leading banks to provide debt funding for project development;
- Secured all necessary landowner agreements for the life of its Ore Reserves;
- Secured port access, subject only to formal documentation;
- Recruited staff to fill key roles for project development; and
- Significantly increased Resources at the project.
MZI is close to receiving credit-approved offers of finance and is pursuing offtake arrangements for products to be produced at Keysbrook.
Today's news is a major catalyst for MZI and the development of its Keysbrook mineral sands project as it provides certainty over the processing route, with the agreement covering the life of the project.
The Doral plant has a successful operating track record and its management and operations team are highly experienced in secondary processing of mineral sands.
This will help ensure the commissioning and operations phase for Keysbrook will be significantly de-risked.
This latest key agreement is one in a number of important agreements, including port access and landowner agreements, already secured for the project's development.
MZI is close to locking in financing with credit-approved offers expected soon and the company is advancing offtake agreements.
The next key catalyst will be the securing of financing for the project.
MZI had around A$5.6 million in cash at the end of the December quarter 2012.
With a market cap. of around $36 million and EV of $32 million, we believe the market is pricing MZI as an explorer, not as a near term producer that is substantially de-risking the Keysbrook project. We expect the re-rating of the stock to be not far away.
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