Capital Metals plc Announces Results of Development Study and Project Economics
Capital Metals plc announced the results of an independent Development Study and Preliminary Economic Assessment. The Study demonstrates exceptional economics resulting in a high margin operation, enabling a short payback period. Whilst the Study provides a highly compelling investment, the long-term price assumptions used are below current prices suggesting even more attractive economics are feasible. Moreover, the Study does not take into account any potential resource extensions, which would enable the expansion of mine life and throughput, providing even further upside. The Study was undertaken by IHC Mining, a leading independent global mining services group with specialist expertise in developing mineral sands projects. The results of the Study are expected to have a positive impact in finalising the ongoing discussions with offtakers, debt providers and other strategic funding parties. The Study assesses three development options and modelled 18 different scenarios. Given the Project will be the first fully integrated mineral sands mining operation in Sri Lanka, the Company has elected to take the most conservative development option as it: provides the lowest funding profile; simplifies the social licence to operate; offers the greatest flexibility for any mineral resource upgrades; and provides the lowest technical exposure for the Company. The Study is based on a mining rate capacity of 1.65 million tonnes per annum, with an average mining rate of 1.43Mtpa and average annual Valuable Heavy Minerals production of 163kt (114ktpa ilmenite, 10ktpa zircon, 8ktpa rutile and 31ktpa garnet). Stage 1 - initial 0.55Mtpa mining and processing operation to produce saleable Heavy Mineral Concentrate as part of the early revenue model; Stage 2 - addition of magnetic separation plant to produce ilmenite, garnet and non-magnetic concentrate (containing zircon and rutile) which will have installed capacity to process a 1.1Mtpa mining rate; Stage 3 - increase mining rate to 1.1Mtpa and increase operational hours of existing magnetic separation plant; Stage 4 - increase mining rate to 1.65Mtpa, expand the magnetic separation plant, and install a non-magnetic separation plant to separate the non-magnetic concentrate into zircon, rutile and zircon in concentrate products The total funding requirement to cash flow positive is $37.3m, which includes working capital, a 20% contingency, existing infrastructure upgrades, and owners' costs, whilst using best-in-class equipment. Life of mine capex is $81m, the majority of which can be funded from cashflow due to the staged development plan. Based on the start-up funding requirement of only $37.3m, the NPV8 to capex funding ratio is 4.2, whilst the LOM revenue to cost ratio is 2.5. The ratios place the Project in the first quartile for undeveloped mineral sands projects globally, highlighting the extremely attractive capital and operating cost parameters of this Project. At the Stage 1 production rate of 0.55Mtpa, the Study forecasts revenues per annum of US$9m and an EBITDA per annum of US$5m from the sale of a HMC. At the targeted Stage 4 production rate of 1.65Mtpa and following the installation of the mineral separation plant, the Study forecasts average revenues per annum of US$74m and an average annual EBITDA of USD 45m. The Study is based only on an initial JORC Compliant Resource of 17.2Mt with an average grade of 17.6% Total Heavy Minerals. Less than 10% of the Project area has been drilled to date and the current JORC Resource is from surface to a depth of 3m. Exploration work has shown mineralisation continues beyond 3m depth and also identified potential new high-grade resource areas with numerous results in excess of 25% THM. The Company expects to be able to upgrade the size, and potentially grade, of the resource following a drill programme scheduled for H2 2022, which would be expected to further enhance project economics, expanding both mine life and potential throughput. The modular nature of the development would mean the Company should be able to expand beyond the 1.65Mtpa should the resource be significantly expanded.