AMN - SIERRA LEONE: Study shows Sembehun has a future

Sierra Rutile has received the results of its Prefeasibility Study for the Sembehun Dry Mine which is intended to extend the life and scope of operations at its fully-permitted Sembehun group of deposits. The operation would have the flexibility to operate at either a 500 tonnes/hour or at a 1000 tonnes/hour throughput.

The Prefeasibility Study provides further certainty that the Sembehun Dry Mine is value-enhancing and capital efficient.

Compared to the previously released Scoping Study announced last June, the current Prefeasibility Study supports reduced levels of capital expenditure, a shortened lead-time and improved economic returns.

Furthermore, the Prefeasibility Study is in-line with the continued transition of Sierra Rutile “to a market-led business model with the flexibility to align production to long-term demand hence focusing the business model on maximising sales profitability.”

Highlights:

-          Large resource base: The Prefeasibility Study supports economic dry mining of a significant resource base totalling 3.6 million tonnes of contained rutile at an average in-situ rutile grade of 0.98%

-          Meaningful, flexible production growth: Sembehun Dry Mine represents another sequential stage in Sierra Rutile’s dry mining operations. The 1000 tonnes/hour operation contributes on average 71,000 tonnes/year of rutile over a 21 year mine life. The mine will consists of two, separate 500 tonnes/hour concentrator plants

-          Lower capital intensity: Upfront estimate of $72 million for the first 500 tonnes/hour unit. Total capital for a 1000 tonnes/hour operation of $99 million has reduced by approximately 22% in comparison to the previous scoping study. The operation retains flexibility to accelerate ramp-up by constructing two 500 tonnes/hour units concurrently, gaining further capital efficiencies

-          Improved economics: The Prefeasibility Study supports robust economics at consensus pricing with an after-tax IRR of 66% and an after-tax NPV10% of $224 million for a 1000 tonnes/hour operation. This is an improvement over the previous study, which generated an after-tax IRR of 33% and an NPV10% of $152 million

-          Low cost of production: Sembehun Dry Mine as a 1000 tonnes/hour operation has an average mining cash cost of $343/tonnes rutile over the life of the mine, comparable to Sierra Rutile's existing mining operations

-          Low-risk execution: Sembehun Dry Mine will have an almost identical design and configuration to Gangama and Lanti Dry Mining operations, enabling Sierra Rutile to leverage its proven experience in constructing dry mining projects on-budget and on time

-          Production flexibility and optionality: Dependent on market conditions, the Prefeasbility Study confirms the Sembehun group of deposits can support a variety of throughput options. The two 500 tonnes/hour units can be brought online either simultaneously or in stages in order to respond to prevailing market conditions

-          Next Steps: Sierra Rutile will now focus on further detailed value engineering, specifically focused on operational flexibility, capital cost reductions and operating cost optimisations.

Sierra Rutile Chief Executive Officer John Sisay says: “The Prefeasibility Study reaffirms the robust pipeline of value-enhancing organic growth options within Sierra Rutile’s existing project portfolio. If commissioned, the Sembehun Dry Mine would be the third dry mining operation constructed at Sierra Rutile.

“The experience gained from the Lanti and Gangama Dry Mines will be leveraged in the construction of Sembehun Dry Mine, helping to ensure even greater confidence that the project will be constructed on-time and on-budget. Moreover, 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

The fully-permitted Sembehun group of deposits, located 45 km northwest of Sierra Rutile's existing operations, represent the largest resource within Sierra Rutile's existing endowment, containing 3.6 million tonnes of rutile at an average in-situ rutile grade of 0.98%.

The Prefeasibility Study is based on a throughput of 1000 tonnes/hour sourced from an open pit dry mining operation consisting of two 500 t/h concentrator plants, an owner-operated mining fleet, product haulage vehicles and infrastructure. The projected life of mine is expected to be 21 years, dependent on the size and number of units in the final configuration of the operation.

The first five years of operation of Sembehun Dry Mine will mine ore at an average rutile grade of 1.43%, optimising the large resource base of the Sembehun group of deposits, and will have an average mining cash cost of $285/tonne, comparable to Sierra Rutile's existing dry mining units.

The Prefeasbility Study expects the mine can be developed in 15 months, with production starting after 12 months. Alternatively, the Prefeasibility Study also demonstrates that upfront capital costs can be further staged by utilising a two-phased approach to the construction of the two 500 tonnes/hour concentrator plants over 15 months.

Sierra Rutile will continue the value-engineering process to further optimise and reduce risks around Sembehun Dry Mine. It does not have a requirement to commence construction of the 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.

www.sierra-rutile.com

News courtesy of International Mining