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MZI Resources Looks To Extend Life Of Keysbrook Project

MZI Resources' (ASX:MZI) exploration drilling has confirmed extensions to mineralisation at the Keysbrook Mineral Sands Project in Western Australia.

The project is currently on budget and on schedule to start production of minerals sands in December 2015.

Results from the drilling to date have extended mineralisation to the west and north of the existing resource and could extend the life of the project.

A new Resource statement is targeted for the middle of this year.

"These drilling results give us even greater confidence that the Keysbrook Project will be a long life producer of high value mineral sands products," managing director Trevor Matthews said.

"With construction at Keysbrook progressing well toward the scheduled commencement of production in December 2015, MZI is well on the way to establishing itself as an independent Australian based supplier of high value mineral products with a positive market outlook."

The Keysbrook Project, located approximately 70 kilometres south of Perth in Western Australia, is designed to produce in excess of 95,000 tonnes of leucoxene and zircon products annually.

Drilling Results

Drilling of 908 holes completed to 13 March 2015 has confirmed the Keysbrook orebody is significantly larger than the current project area.

This has intersected mineralisation extending over 5 square kilometres of lateral extent.

Intersections include:

- 3 metres at 2.8%THM (Total Heavy Mineral) from 0 metres in KE059;
- 5.5 metres at 1.8%THM from 0.5 metres in KE563;
- 8 metres at 2.3%THM from 3 metres in KE570;
- 11 metres at 1.5%THM from 0 metres in KE702;
- 10 metres at 2.5%THM from 1 metres in KE761; and
- 12 metres at 1.3%THM from 0 metres in KE783.

Importantly, the majority of intercepts are from near surface (i.e. minimal overburden), show low clay fines and minimal oversize - all features consistent with the existing Keysbrook Mineral Resource.

Assemblage analysis is yet to be completed on drill samples from the program.

However, previous analysis on samples collected in the area (composited from an earlier auger program) indicates the L88 component of the mineral assemblage in the extension area may be higher than in the currently reported Mineral Resource.

MZI will provide further updates to the mineral assemblage as they are received.

Preliminary evaluation of the results suggest that the western portion of the exploration area, located approximately 2 kilometres west of the existing Mineral Resource, may represent a new zone of mineralisation, however this will not be able to be confirmed until further assaying is completed during the June quarter.

Mineralisation remains open to the south-west and west based on these results and will provide a focus for further exploration into the future.

Approximately 500 drillholes are scheduled to be drilled to complete the program.

Planned Work

Given the success to date, the drilling program has been extended to include infill drilling in the newly discovered areas reported on above, as well as to undertake further exploration drilling to test for additional extensions to the mineralisation.

In parallel to this part of the program, MZI will undertake further assaying to determine mineral assemblage and resource estimation to enable a revised Resource to be released early in the third quarter of 2015.

Keysbrook Mineral Sands Project

The Keysbrook Mineral Sands Project is forecast to produce on average, 96,000 tonnes per annum of mineral sands products comprising:

- 28,800 tpa (dry) of L70;
- 38,400 tpa (dry) of L88; and
- 29,000 tpa (dry) of zircon concentrate.

Heavy mineral concentrate will be trucked about 120 kilometres to Doral Mineral Sands' mineral separation plant, which is just 10 kilometres from the Bunbury Port, for toll treatment.

Keysbrook has a high value JORC ore reserve of 26 million tonnes with in-situ THM of 670,000 tonnes grading 27.8% L70 (70% titanium dioxide), 46.6% L88 (88% titanium dioxide), 14.6% Zircon, and 11% other minerals.

The project hosts a high margin, long life reserve that will employ a very low CAPEX and draw upon a very well developed local infrastructure that is very conversant with processing mineral sands and use of simple and low risk processing technology.

Ore mining rate is set at 4.5 million tonnes per year to an average depth of 2.2 metres and no strip ratio for very low cost open pit mining.

Annual EBITDA has a base case of $44 million per year that is derived from a low OPEX of $331 per product tonne. The project is funded with a development cost of $69.6 million and pre-operations cost of $6.2 million.

About 85% of the project's annual production by volume has been sold under long term contracts.

Analysis

MZI Resources' exploration drilling has clearly demonstrated the potential for material mine life extensions at its Keysbrook Project.

As such, the company has extended the program to include infill drilling and will undertake further assaying to enable a revised Resource to be released early in the third quarter of 2015.

Keysbrook remains on track to start mineral sands production in December 2015. Cashflows will follow soon with first year EBITDA forecast at $52 million.

Keysbrook is funded with a development cost of $69.6 million and pre-operations cost of $6.2 million.

Share Price Kickers

- Securing a long term contract for the remaining 15% of forecast production;
- Further drilling results;
- Updated Resources in 3Q2015; and
- Start of production in December 2015.

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