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Strandline Resources Finds Big Cost Savings At Coburn Mineral Sands

Strandline Resources (ASX:STA) should receive a fillip after a cost review found significant operating and capital cost reductions for its Coburn Heavy Mineral Sands Project in Western Australia.

Coburn is a zircon‐rich deposit with a Definitive Feasibility Study completed, fully permitted and construction ready.

Total potential capital cost savings identified by the latest Review were approximately A$29 million, representing a ~14% reduction on the previously released February 2013 estimate of A$202 million.

Operating cost savings identified by the review were about A$4.6 million per year, or 4.8% lower than the February 2013 study.

The main contribution was a reduction in mining costs associated with improved equipment costs, labour rates and fuel pricing. No operating cost savings associated with flowsheet simplifications were included.

The cost review was prompted by bullish developments for Coburn, including a falling Australian dollar exchange rate as well as falling sector costs as well as interest from off‐take parties seeking near term pre-production assets despite cyclically low prices.

There are also depleting global sources of quality zircon and titanium products in low risk jurisdictions assisting Coburn's cause.

Key cost reductions and improved financial outcomes:

- Upfront CAPEX reduction of $29 million;
- OPEX reduction of $4.6 million per annum;
- Further cost reduction opportunities to be pursued;
- NPV: A$306 million, on base case TZMI pricing;
- IRR: 26% on base case TZMI pricing;
- Payback: 4.5 year payback on base case;
- Project economics strongly leveraged to improving mineral sands prices;
- NPV: A$539 million on TZMI base case pricing plus 20%;
- IRR 39%: on TZMI base case pricing plus 20%; and
- Payback: 3.1 year payback on TZMI base case pricing plus 20%.

Background on Coburn

Coburn has a JORC 2004 Resource estimate of 979 million tonnes at 1.26% HM and a proved and probable ore Reserve estimate of 308 million tonnes at 1.2% HM.

The projected mine life is just shy of 20 years and would be a relatively simple open pit operation with proven high quality final products as endorsed by previous offtake arrangements with major end users such as DuPont.

Coburn is located near the coast, 250 kilometres north of the major minerals port of Geraldton.

Analysis

Coburn is potentially one of few scalable zircon‐rich mineral sands project world‐wide that is development and production ready.

It is highly leveraged to a rise in mineral sands prices (particularly zircon). That there has been recent strong interest from potential off‐take parties and funding groups is a bullish sign for Strandline.