Strandline Resources Limited (Strandline or the Company) is pleased to provide its Quarterly Activities Report for the period ending 31 December 2020.
The Company is approaching development decisions on two zircontitanium rich deposits in WA and Tanzania, and is also progressing exploration and evaluation activities across a series of mineral sands assets in Tanzania, including the large scale Tajiri Project.
Coburn Mineral Sands Project - Western Australia
During the Quarter, Strandline continued to work towards finalising the debt funding for the development of Coburn and undertake early works in preparation for ramp-up of construction. As part of this process, the Company is progressing detailed discussions with several shortlisted lenders including investment banks, specialist mining credit funds and senior secured bond issuers from which it could secure the commercial debt tranche of the overall project finance.
The commercial debt tranche is expected to be up to A$100m for a nominal 5 to 7 year tenor and will stand alongside the already-approved 15-year A$150 million loan facility from the Commonwealth Government's Northern Australia Infrastructure Facility (NAIF).
The NAIF Facility was approved in June-2020 and will be drawn down in two stages, A$130m allocated towards the construction of Coburn's core mine infrastructure and A$20m to fund a potential future northern access road linking the project more directly to the Denham community in Shark Bay (refer ASX Announcement 22 June 2020).
The commercial debt options under discussion are subject to finalisation of the definitive finance documents, due diligence reviews and final approvals by the parties (including NAIF). Strandline intends to negotiate and close out these remaining finance options as soon as practical with a view to selecting the most attractive commercial terms. The NAIF facility and the proposed commercial debt tranche will account for the majority of Coburn's total estimated development capital cost of A$260 million, excluding financing costs (refer ASX announcement dated 4 June 2020).
During the quarter Strandline advanced a range of major contract packages in preparation for project development, including, but not limited to: Signed Port access and services agreement with the Mid West Port Authority (MWPA) with the Mid West Ports Authority, which operates the Port of Geraldton in WA. The Agreement enables Strandline to export 100% of the mineral sands products produced at its Coburn project over an initial 10-year term. The Port of Geraldton is a well-established and reliable mineral export port and its proximity to Coburn provides an efficient and cost-effective port solution; Appointed Contract Power Australia (Contract Power) as preferred contractor to build own and operate (BOO) the power generation facilities for the project. The purpose-designed power infrastructure is based on low-cost, low-emission solution integrating natural gas fuelled generation with state-of-the-art solar and battery storage technology. As preferred contractor, the parties are now working to compile final contract documentation to the satisfaction of Strandline and Coburn's lenders; Appointed Woodside Energy (LNG Fuels and Power) Pty Ltd and EDL LNG Fuel to Power Pty Ltd in joint venture (WEJV) as preferred contractor to supply LNG to Coburn's power generation facilities. LNG will be supplied via road train from Woodside's Pluto LNG Truck Loading Facility near Karratha, WA over a 10-year term and Appointed Primero Group (Primero), operating in strategic partnership with Mineral Technologies, as preferred contractor to build the processing facilities for Coburn. The scope includes the detailed engineering, procurement, construction and commissioning of the processing plants, including Wet Concentration Plant and Mineral Separation Plant. The parties progressed early contractor involvement (ECI) and Front End Engineering Design (FEED) activities during the quarter aimed are further optimising delivery strategies and designs in readiness for construction.
The proposed power generation facilities and LNG supply contract with Contract Power and WEJV respectively, enables Strandline to source power at less than forecast in the DFS published in June 2020.
Also, during the quarter, the Company progressed a range of project early works activities including, but not limited to, in-fill production control drilling (for the first 2-year detailed mine production plan), detailed site geotechnical analysis, additional confirmatory metallurgical, ore pumping/rheology and slimes/thickener test work (to finalise equipment and vendor selections) and ongoing environmental monitoring and heritage surveys (in accordance with current environmental approvals).
Strandline also secured several key operational licences, including the water extraction licence (for the mining production demand) and statutory approvals to align with the optimised mine plan, including an updated Mining Proposal and Mine Closure Plan, Project Management Plan and updated mine disturbance area (under a new Section 45c approval). The Coburn project has all key development approvals in place for the commencement of construction.
The Coburn Definitive Feasibility Study (DFS), released mid-2020, confirmed robust economics over an initial 22.5 year life, with a pre-tax NPV of A$705 million (AUD: USD 0.70, 8% discount rate), pre-tax IRR of 37% and first quartile revenue-to-operating cost (C1) ratio of 2.4. The projected revenue for the initial 22.5 years of ore reserves is A$4.4b, with an average annual EBITDA of A$104m (refer ASX Announcement 4 June 2020).
Coburn's estimated capital expenditure is A$260m, excluding financing and corporate costs. Financing costs are expected to include interest during construction, financing establishment and commitment fees, a cost overrun facility, project working capital and additional project contingency. Strong potential exists to further increase Coburn's ore reserves and returns, through further economic evaluation of resources extending north and along strike of the DFS Ore Reserves. A Scoping Study 'Extension Case' assessment of Amy South Indicated and Inferred material was undertaken concurrently with the DFS.
The Extension Case confirms the potential to add 15 years of Production Targets to the mine life (total 37.5 life of mine) and generate an additional A$3.58b of project revenue. The Extension Case, when integrated with the DFS Final Products Case, shows a pre-tax NPV8 of A$825m and total project EBITDA of A$4.54b.
The Company has executed four major sales contracts have been signed covering 72% of Coburn's forecast revenue for the first five years of production. The agreements cover 100% of ilmenite, 100% of zircon concentrate and the substantial portion of the premium finished zircon product and are with some of the leading consumers across Europe, America and China (Refer Announcement 20 April 2020 and 02 July 2020 for binding offtake contracts). The Coburn Project is most sensitive to movements in foreign exchange (AUD:USD) and commodity prices, particularly zircon, as 55% of revenue is expected to be generated from contained zircon.
During the next quarter, Strandline will progress the debt funding and early works development activities for Coburn, including the commercial debt facility and associated finance documentation, award remaining construction contracts and continue to review its strategic partner options. For more information on the Coburn mineral sands project, refer to the ASX Announcement dated 10 June 2020 for details of the material assumptions underpinning the production target and financial results for the Coburn Project DFS, Ore Reserve and Mine Life Extension Case Scoping Study.
The Company confirms that all material assumptions and technical parameters underpinning Resource Estimates, Production Targets and Project Feasibility Studies, continue to apply and have not materially changed.
Contact:
Luke Graham
Tel: +61 8 9226 3130
Email: enquiries@strandline.com.au
ABOUT STRANDLINE
Strandline Resources Limited (ASX: STA) is an emerging heavy mineral sands developer with a portfolio of 100%- owned development assets located in Western Australia and within the world's major zircon and titanium producing corridor in East Africa. Strandline's strategy is to develop and operate high margin, expandable mining assets with market differentiation and global relevance. Strandline's project portfolio contains high quality assets which offer a range of development options and timelines, geographic diversity and scalability. They include two zircon-titanium rich, 'development ready' projects, being the large Coburn Project in Western Australia and the Fungoni Project in central Tanzania, as well as a series of titanium dominated exploration projects spread along the highly prospective Tanzanian coastline, including the advanced and large scale Tajiri Project in northern Tanzania.
STRANDLINE RESOURCES LIMITED 
