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MZI Resources Executes US$110M Financing For Keysbrook

MZI Resources (ASX:MZI) has executed finance agreements totalling US$110 million (A$126.3 million) for its Keysbrook Minerals Sands Project in Western Australia.

This follows the Foreign Investment Review Board for the debt and equity funding package and shareholder approval for the Resource Capital Fund VI funding last week.

Keysbrook is located 70 kilometres south of Perth, and is characterised by its high leucoxene content, and has the potential to be one of the world's largest producers of the premium Leucoxene 88 product.

Drawdown of the funding package is expected to commence shortly upon satisfaction of the remaining prerequisites, which include the execution of an offtake agreement and other conditions that are customary for facilities of this nature.

"The project funding package put in place by MZI provides the forecast cash required to complete the construction, commissioning and ramp up of the company's Keysbrook mineral sands project through to full production and positive cash flow," chief executive officer Trevor Matthews said.

"The package also ensures MZI will have sufficient funds to meet its corporate costs through the construction phase."

Project Funding

The project funding package totals approximately US$110 million and includes:

- US$40.5 million of senior debt and working capital facilities;
- A$11 million bank guarantee facility;
- A US$58 million funding package provided by RCF;
- Foreign exchange hedging facilities to protect the project from adverse US$:A$ exchange rate movements.

The senior debt, working capital and bank guarantee facilities are provided by RMB Australia Holdings Limited and arranged by RMB Resources.

Keysbrook Mineral Sands Project

The Keysbrook Project could produce an average 91,000 tonnes per annum of mineral sands products from 110,000 tonnes of dry heavy mineral concentrate.

This would be trucked about 120 kilometres to Doral's mineral separation plant, which is just 10 kilometres from the Bunbury Port, for toll treatment.

Offtake agreements are already in place for 50% of the forecast annual revenue from Keysbrook and approximately 60% of forecast annual production.

In addition, a long term offtake agreement for the 88% TiO2 is nearing completion, with remaining production to be also sold via long term sales agreements.

During the September 2014 quarter, engineering, procurement and construction contractor GR Engineering Services continued early stage engineering and design work during the quarter.

It provided initial drafts of the proposed project execution plans for each of the Keysbrook and Picton construction sites.

There has also been substantial work by the Company's Development Team, together with GR Engineering, preparing for the commencement of the construction program with major activities including:

- Updating both plant's Process Design Criteria;
- Confirmation and finalisation of the Basis of Design;
- Reviewing the Project Execution Plan; and
- Aligning the safety management and responsibilities for the construction activities at Keysbrook.

GR Engineering has now largely completed its early stage works in preparation for a final investment decision on the project.

MZI has also finalised the construction agreement with Transmin to provide the Mining Feed Unit for the Keysbrook site. Transmin has completed early engineering and design works in preparation of project commencement.

Mineral sands market

The mineral sands market has continued to show signs of recovery with supply and demand moving into a more balanced position.

The larger Tier 1 producers have helped maintain stability by restricting production that has in turn reduced the amount of inventory that has been overhanging the market.

This has resulted in stable prices and has helped to restore much needed confidence to buyers. The ongoing economic recovery in North America has improved the demand for TiO2 pigment which augurs well for the near future.

Although the slowing Chinese economy has been experiencing lower demand for construction-related materials such as ceramic tiles, it is in transition and with mineral sands at or near the bottom of the market cycle, there is a positive outlook for future prices.

Analysis

MZI Resources has chalked up another milestone with the execution of financing agreements for the Keysbrook Mineral Sands Project.

This adds to other milestones including EPA approvals, landowner agreements, construction contractors in place, infrastructure requirements in place, product logistics and 70% Zircon offtakes in place.

Share price kickers ahead include:

- A long term offtake agreement for 88% TiO2;
- Development of mine works;
- First shipments in late 2015.

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