Strandline Resources (ASX: STA) (Strandline, or the Company) is pleased to provide its Quarterly Activities Report for the period ending 31 March 2020.
Coburn Mineral Sands Project - Western Australia
Following the completion of the Coburn Definitive Feasibility Study (DFS) in mid-2019, Strandline continues to make strong progress towards project financing and preparation for construction.
During the Quarter, negotiations progressed with a group of potential lenders, including the Federal Government's Northern Australia Infrastructure Facility (NAIF). NAIF provides access to debt finance, which may be lent on concessional terms to support infrastructure development that generates public benefit for northern Australia. It also seeks to encourage and complement private sector investment to further that objective.
As part of this process, SRK Consulting (Australasia) Pty Ltd (SRK) has been appointed as Independent Technical Expert (ITE) to review the technical, environmental and social aspects of Coburn on behalf of the lenders. The outcome of the ITE process is expected to feed into the selection of preferred lender(s) and will play a key role in securing debt funding.
In conjunction with financing activities, Strandline is working with engineering and contracting firms on the major procurement and construction packages. The early works site surveying and detailed design of the bulk earthworks and main access road packages have already been awarded.
Strandline has entered into an exclusive period with the Woodside-EDL Joint Venture (WEJV) as the preferred power provider for Coburn based on the development of an innovative hybrid gas and renewable energy solution. Contract documentation and refinement of WEJV's technical solution is well underway. Tenders have been received for several major construction packages, including the process plant infrastructure, bulk earthworks and village, with early indications that prices will be in line with DFS capital estimates.
During the Quarter, the Company also announced more metallurgical bulk test results which further strengthen the financial outlook, product offtake negotiations and funding strategy for the project. The latest tests included optimisation of equipment settings (no change to equipment selection from the DFS design) and attritioning of the feed material. The tests demonstrate the scope to further increase recoveries and therefore production of the higher-value zircon and rutile final product streams, resulting in a potential increase to the already-strong financial returns. An updated financial model will be released as part of the current financing process.
Subsequent to the end of the Quarter, the Company signed three binding product offtake agreements with some of the world's leading consumers in their respective industries across Europe, America and China. Strandline now has 66% of Coburn's forecast revenue secured via sales contracts. The agreements cover 100% of ilmenite, 100% of zircon concentrate and the substantial portion of the premium finished zircon product to be produced at Coburn for the first five years. The agreements have a forecast combined value of circa US$400m (A$615m at USD: AUD 0.65) over five years, based on the pricing structures contained in the agreements and TZMI's commodity price forecast assumptions contained in the Coburn DFS. Offtake negotiations for Coburn's remaining revenue streams are advancing well, including 24,000 tonnes per year of rutile and the rest of the premium finished zircon.
A critical aspect of the Project is the Company's approach and long-term commitment to regional socioeconomic benefits, indigenous and stakeholder engagement and Australian Industry Participation. This work continues ramp-up as the project moves closer to implementation. Coburn's long life and location has strategic appeal and importantly, its products of zircon, titanium and monazite containing rare earths are classified as Critical Minerals and are considered vital to the economic wellbeing of the world's major and emerging economies.
The Coburn DFS shows the Project will generate strong financial returns over an initial 22.5 year life of mine (LOM), with a pre-tax NPV of A$551m (USD:AUD 0.72, 8% discount rate), an IRR of 32%, LOM revenue of A$3.9b and EBITDA of A$1.9b (average annual EBITDA of A$86 million). Coburn's JORC-compliant Ore Reserves underpin an initial 22.5-year mine life, with a further 15 years of potential production targets identified (titled 'Mine Life Extension Case' with an expected total 38-year LOM). The Mine Life Extension Case financial metrics include pre-tax NPV of A$710m (USD: AUD 0.72, 8% discount rate), with revenue of A$6.98b and EBITDA of A$3.67b over 38 years.
For more information on the Coburn mineral sands project, refer to the ASX Announcement dated 16 April 2019, 14 January 2020 and 20 April 2020 for details of the material assumptions underpinning the production target and financial resultsfor the Coburn Project DFS, Ore Reserve and Mine Life Extension Case Scoping Study. The Company confirms that all the material assumptions underpinning the production target and financial results continue to apply and have not materially changed.
Fungoni Mineral Sands Project - Tanzania
Fungoni is Strandline's 100%-owned, high-margin 'starter' project in Tanzania, situated 25km from the port of Dar es Salaam. Development of Fungoni will pave the way for a succession of major mineral sands projects along the coastline of Tanzania, as well as establish a new industry in Tanzania. The Fungoni project is based on a capital efficient and proven execution strategy, with a fixed price EPC contract secured with international contractor, GR Engineering Services, that underpins a 12-month build phase to first production. The DFS shows the Project will generate strong financial metrics including project pre-tax NPV10 of US$48.7m (real, no debt), an IRR of 61% and LOM EBITDA of US$115m (avg annual US$18.5m), based on TZMI commodity price forecast.
Strandline achieved another important step towards the development of Fungoni by signing a US$26 million Project Finance Facility Agreement (Facility) with Nedbank CIB (refer ASX release dated 6 April 2020). Fungoni has an estimated capital cost of US$35 million (excluding financing costs), meaning the Facility would meet most of the project's capital requirement once Financial Close is achieved. During 2019 Nedbank conducted detailed due diligence of technical, financial, market, legal, environmental and social fundamentals and has since progressed compilation of documentation for the Facility.
The Facility remains subject to finalisation of conditions precedent to Financial Close and first draw down. This includes finalising the additional finance documents with Nedbank, obtaining the remaining governmentrelated approvals (including completing documentation for the Tanzanian Government's 16% free-carried interest in the project company, compensation and resettlement agreements and access arrangements in relation to the project site), as well as satisfying the equity shortfall. In view of the current evolving COVID-19 pandemic, the parties will also continue to evaluate the potential impact of the pandemic on the project fundamentals. The outcome of this evaluation will lead into Strandline and Nedbank's final investment/credit decision to proceed with the construction of the project prior to Financial Close. Key terms for the Facility are described in Schedule 1.
With key mining and environment licences in place, the DFS completed, offtake contracts secured for 100% of forecast product revenue, major construction contracts executed and the Nedbank debt Facility Agreement now signed, Strandline remains on track to develop its first project in Tanzania and capitalise on the forecasted strong mineral sands market. For more information on the Fungoni mineral sands project, refer to the ASX Announcement dated 06 October 2017 (Original DFS) and subsequent update on 01 November 2018 (Updated DFS) for details of the material assumptions underpinning the production target and financial results.
The Company confirms that all the material assumptions underpinning the production target and financial results continue to apply and have not materially changed. Fungoni is expected to pave the way for development and value appreciation of Strandline's other mineral sands projects in Tanzania, including the large-scale Tajiri project in northern Tanzania.
Tajiri Mineral Sands Project - Tanzania
Strandline's 100%-owned Tajiri mineral sands project comprises a series of higher-grade mineral sands deposits stretching along 30kms of coastline in northern Tanzania, near the port city of Tanga.
As announced on 09 July 2019, Tajiri hosts a worldscale JORC-compliant Mineral Resource of 268Mt at 3.3% THM, containing 8.8Mt of Heavy Mineral, which includes in-situ rutile (580,000t), zircon (335,000t), ilmenite (5,206,000t) and almandine garnet (1,477,000t).
All Tajiri resources start from surface, with no overburden and contain large coherent high-grade domains comprising mostly high-value titaniumdominated mineral assemblage. The project is likely to continue to grow further over time with resources remaining open and Strandline has recently identified several highly prospective targets close to Tajiri (including the Sukura deposit situated some 10km south along strike).
The Tajiri deposit provides the geological robustness and critical mass to underpin project feasibility evaluation and progress early stage development approvals and partnering activities. During the Quarter, Strandline commenced works associated with the Tajiri Scoping Study and awarded a number of engineering services packages including, but not limited to, environmental and social baseline and impact assessment, mining study, process plant design, hydrology, geotechnical and tailings management, as well as investigations across key infrastructure of water, power, road, logistics and port facilities.
Bagamoyo Project - Tanzania
The Bagamoyo tenements are located approximately 40km north of Dar es Salaam and close to the proposed Bagamoyo port development in Tanzania. Strong assays received from the maiden drilling program during the September 2018 Quarter confirm Bagamoyo as a major mineral sands discovery.
The Company has estimated a maiden Exploration Target at Bagamoyo comprising 78 to 156Mt at 3% to 4.5% THM. Minor field activity was performed during the quarter and a further drill program is required to test the veracity of the Exploration Target. Strandline would caution the reader that the potential quantity and grade of the combined Exploration Target is conceptual in nature and there has been insufficient exploration to define a JORC compliant Mineral Resource. It is also uncertain if further exploration and resource development work will result in the determination of a Mineral Resource.
Sudi Project - southern Tanzania - in Joint Venture with Rio Tinto
Subsequent to the Quarter, Strandline received notification from Rio Tinto Mining and Exploration Limited (Rio Tinto) that it will forgo its option to continue to sole-fund exploration under the Earn-in and Joint Venture (JV) Agreement in southern Tanzania. The JV was originally announced by Strandline on 26 April 2017. The JV has been successful in enabling Strandline to accelerate early-stage exploration activities in southern Tanzania, with Rio Tinto contributing expertise and funding.
The JV was separate from Strandline's other more advanced mineral sands assets, including Fungoni, Bagamoyo and the large-scale Tajiri project in northern Tanzania, as well as the flagship Coburn Project in WA. The JV drilling programs in southern Tanzania conducted over the past three-years have resulted in several notable discoveries, comprising thick mineral sands intersections from surface at the Sudi and Rishungi project areas, near the port city of Mtwara (refer ASX announcement 14 Mar-2018 and 07 November 2018).
These discoveries will be defined further over time by Strandline and are expected to complement its more advanced mineral sands projects to the north. Strandline Managing Director Luke Graham said the Company had benefitted significantly from working with Rio Tinto in southern Tanzania over the past few years. 'The relationship has delivered some very strong outcomes in the field and we look forward to exploring other strategic options with Rio Tinto and others in the future as our business continues to evolve into a major player in the global mineral sands market,' Mr Graham said.
Fowlers Bay Nickel-Gold Project
Exploration activities are being funded by Western Areas Limited (ASX: WSA) (Western Areas), which covers Strandline's 700km2 Fowlers Bay Project in the Western Gawler region of South Australia. Western Areas have now earnt 90% of the project and under the terms of the agreement entered into between Strandline and Western Areas, the remaining 10% held by Strandline will be converted into a 1% net smelter royalty. There was no material work completed during the Quarter.
Contact:
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 an extensive portfolio of 100%-owned development assets located in Western Australia and within the world's major zircon and titanium producing corridor in South 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 with development optionality, geographic diversity and scalability. They include two zircon-titanium rich, 'construction ready' projects, being the world-scale Coburn Project in Western Australia and the Fungoni Project in central Tanzania, as well as a series of titanium-dominant exploration assets spread along the highly prospective Tanzanian coastline, including the advanced and large scale Tajiri Project in northern Tanzania.
STRANDLINE RESOURCES LIMITED 
