22nd Mar 2016 11:54
LONDON (Alliance News) - Sierra Rutile Ltd Tuesday said the pre-feasibility study covering the Sembehun dry mine in Sierra Leone has shown the project is expected to cost less and provide better economic returns than previously expected, adding the value has risen by USD72.0 million.
The study for the dry mine is intended to extend the life and scope of operations at the company's fully-permitted Sembehun group of deposits in the country, and the results are considerably better than those released in the scoping study released in June last year, the company said.
The study supports the economic dry mining of a resource base comprised of 3.6 million tonnes of contained rutile at an average grade of 0.98%, and the operation will have the flexibility to run at a throughput rate of either 500 tonnes per hour or 1,000 tonnes per hour.
At a rate of 1,000 tonnes per hour, the operation would contribute an average of 71,000 tonnes of rutile per year over a 21 year mine life. Importantly, the operation will consist of two separate 500-tonne per hour concentrator plants.
To get the first concentrator plant up and running, capital of USD72.0 million will be needed. To get both plants operational the company would need capital of around USD99.0 million, which is 22% less than the USD126.0 million estimate provided in the scoping study last year.
The reduction in expected capital for the project is a result of value-engineering, outsourcing of non-core activities, a reduction in the size of the proposed earth moving fleet, lower costs envisaged for the process plant and lower infrastructure costs.
"The operation retains flexibility to accelerate ramp-up by constructing two 500 tonne per hour units concurrently, gaining further capital efficiencies," said Sierra Rutile.
Another positive outcome of the study is the improved economics of the operation, yielding an after-tax internal rate of return of 66% and an after-tax net present value of USD224.0 million based on a 1,000 tonne per hour operation.
That is considerably better than the previous results from the scoping study which yielded an after-tax IRR of only 33% and a net present value of USD152.0 million.
Sierra Rutile said the the Sembehun dry mine will have "almost identical" design and configuration to the company's Gangama and Lanti dry mining operations, and said the average mining cost of around USD343 per tonne is also comparable to its other existing operations.
If commissioned, the Sembehun dry mine would be the third dry mining operation to join Sierra Rutile's portfolio.
"Sierra Rutile does not have a requirement to commence construction of the Sembehun dry mine to maintain its current production profile over the next five years, but retains the optionality to quickly ramp-up production as market demand develops," the company said.
Sierra Rutile will now focus on further detailed value engineering, specifically focused on operational flexibility, capital cost reductions and operating cost optimisations, it said.
"The staged approach to development allows us to continually evaluate and optimise the project. As we continue to execute our strategic plan, we will continue to prioritise sensible growth without compromising our balance sheet and sustainable shareholder returns," said Chief Executive John Sisay.
The project is expected to take around 15 months to develop, with production starting after 12 months.
Sierra Rutile shares were trading down 1.6% to 18.70 pence per share on Tuesday.
By Joshua Warner; [email protected]; @JoshAlliance
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