TIDMCMET
RNS Number : 2409L
Capital Metals PLC
12 May 2022
12 May 2022
Capital Metals plc
("CMET" or the "Company")
Results of Development Study and Project Economics
Study Demonstrates Exceptional Economics
Capital Metals plc (AIM:CMET), a company developing the Eastern
Minerals Project in Sri Lanka (the "Project"), one of the
highest-grade mineral sands projects globally, is pleased to
announce the results of an independent Development Study and
Preliminary Economic Assessment (the "Study").
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.
Highlights
-- Base Case ungeared post tax internal rate of return ("IRR")
of 56% and Net Present Value (using an 8% discount rate) ("NPV(8)
") of US$155m, with a Upside Price Case IRR of 73% and NPV(8) of
US$235m
-- Base Case shows total revenues of US$645m, operating
cashflows of US$391m and net profit of US$262m over initial 10-year
Project life
-- Base Case comprises a conservative 3.5 year, 4-stage approach
to the development of the Project, with production expansion funded
through operations, and 3.7 year payback period
-- The staged development approach means that the funding
requirement is $37.3m until the Project is self-funding compared to
the total development capex of $81m
-- Significant positive benefits to Sri Lanka and local
community identified with over 300 direct new jobs to be created
and over US$100m in direct government royalties and taxes
-- The Study assesses the Project with less than 10% of the
Project area having been drilled to date and historic drilling
ending at 3m from surface whilst still in mineralisation
Staged Scale Up of Mining and Processing Operations
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 ("Mtpa"), 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 ("HMC") 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 ("LOM") 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
NPV(8) to capex funding ratio is 4.2, whilst the LOM revenue to
cost ratio is 2.5 ("RC Ratio"). 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 US$45m.
Further details on the Base Case and Upside Pricing Case
scenarios are included in the Additional Information section at the
back of this release.
Resources and Exploration Upside
The Study is based only on an initial JORC Compliant Resource of
17.2Mt with an average grade of 17.6% Total Heavy Minerals ("THM").
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.
On 29 March 2022, the Company announced the issue of an
additional exploration licence ("EL") to further extend the Project
by 12km to the north, encompassing the Oluvil Port. The EL contains
areas prospective for further mineral sands resources, which have
been identified for follow up drilling later this year.
Michael Frayne, Chief Executive Officer commented:
"The Study confirms the exceptional economics of the Eastern
Minerals Project even on price assumptions well below the current
market prices for our minerals, and before taking into account any
further upside from potential resource extensions.
"This Study now paves the way for the Company to begin
engineering and procurement work for a conservative, low-risk,
staged development plan which targets low capex and an early
revenue model.
"As a result of our staged approach, the Project benefits from a
low funding requirement compared to the overall investment required
- with only $37.3m of investment required to become self-funding.
With the low capex requirement for Stage 1, which targets
production and sale of a mineral sands concentrate, we have a range
of financing options available to the Company, for example, offtake
finance with upfront payments and/or project debt.
"Given the products we will produce are facing supply
constraints, we believe the Base Case assumptions are conservative.
With a market capitalisation today of just around 10% of the
Project's Base Case discounted NPV, the CMET equity proposition has
become compelling."
For further information, please visit www.capitalmetals.com or
contact:
Capital Metals plc Via Vigo Consulting
Michael Frayne (CEO)
James Mahony (CFO)
Vigo Consulting (Investor Relations) +44 (0)20 7390 0234
Ben Simons / Oliver Clark capitalmetals@vigoconsulting.com
SPARK Advisory Partners (Nominated
Adviser)
Neil Baldwin / James Keeshan +44 (0)20 3368 3554
WH Ireland Limited (Joint Broker)
Harry Ansell / Katy Mitchell +44 (0)20 7220 1666
Tavira Securities Limited (Joint
Broker)
Jonathan Evans / Oliver Stansfield +44 (0)20 7100 5100
About Capital Metals plc
Capital Metals is developing the Eastern Minerals Project in the
Eastern Province of Sri Lanka, approximately 220km east of Colombo.
The Eastern Minerals Project is one of the highest-grade mineral
sands projects globally, with a current JORC Resource of 17.2Mt
with an average grade of 17.6% Total Heavy Minerals, and potential
for resource extension. Our goal is to become a high margin
producer of mineral sands for the international market, with a
commitment to applying best-in-class mining practices and bringing
significant positive benefits to Sri Lanka and the local community
with over 300 direct new jobs to be created and over US$100m in
direct government royalties and taxes.
Additional information
Capital Metals (via its subsidiaries) owns the exploration
licences that comprise the Eastern Minerals Project ("EMP"). The
EMP is located in the Ampara District of the Eastern Province of
Sri Lanka, approximately 220km east of Colombo. Capital Metals is
listed on the London Stock Exchange AIM market. The EMP comprises
the Project Licences which cover 108 sq km. Since September 2016,
CMET has made additional licence applications, totalling 599 sq km,
surrounding its current licences both onshore and offshore, to
cover potential extensions to the mineral sands deposits.
The mineral sands deposit consists of active coastal sand and
older sand berms that form a continuous strip of sand with
concentrations of heavy minerals. The THM component of the mineral
sand deposit is composed of valuable ilmenite, rutile, zircon, and
garnet. The sand component is composed predominantly of quartz with
a small percentage of feldspar.
In June 2016, a Scoping Study was produced, including a Mineral
Resource Estimate, based on the drilling and sampling work to date.
Preliminary assumptions for operating costs and recoveries that
were assessed during the Scoping Study were in turn benchmarked
against similar mineral sands projects. The Scoping Study concluded
a total mineral resource of 17.2Mt at an average heavy minerals
grade of 17.6% for total contained heavy minerals in excess of 3Mt.
The largest component of these resources was ilmenite, constituting
almost 35% of the total heavy mineral assemblage.
Resources
Optiro Pty Limited ("Optiro"), a mineral resource consulting and
advisory group, has reviewed the documentation provided for the EMP
resource model in June 2016. As part of this review, visual
validation of the block model was carried out by examining
cross-section and plan views of the drill hole data and the
estimated block grades.
In Optiro's opinion, the Mineral Resource models provide a
realistic estimation and classification of the global Mineral
Resources as summarised below:
Deposit Classification Tonnes THM grade Contained THM
(Mt) (%) (kt)
Total Measured 5.82 19.9% 1,159
---------------- ---------- ------------ ------------------
Indicated 8.60 16.6% 1,432
-------------------------- ---------- ------------ ------------------
Inferred 2.79 16.0% 446
-------------------------- ---------- ------------ ------------------
Total 17.21 17.6% 3,037
-------------------------- ---------- ------------ ------------------
Project Description
Capital Metals is currently working towards the grant of its
first Industrial Mining Licence ("IML") which will be issued by the
Geographical Survey and Mines Bureau of Sri Lanka ("GSMB"). In
November 2021, CMET announced the approval of its Environmental
Impact Assessment ("EIA"). The completion of the EIA is required by
the GSMB in order to issue the IML for the Project.
Capital Metals is committed to applying best practice in its
mining operations, including continuous post mining rehabilitation.
The proposed method of cell mining aims to ensure a minimal active
footprint and prompt rehabilitation of the mined areas. Planned
operations will have appropriate buffer and exclusion zones
identified as a result of the EIA study, which went through a
stringent public and governmental review process.
The Study considered a number of development scenarios, which
were analysed through the Financial Model. The Base Case, which
outlined a four-stage development strategy over three and a half
years, was selected as the preferred development option.
Base Case
The Base Case represents the Project economics based on the
Study undertaken by IHC Mining aiming to exploit the Mineral
Resources defined by the Mineral Resource Estimate (dated
2016).
The heavy mineral sands are expected to be extracted using
surface mining techniques due to the shallow nature of the orebody.
Material will be transported to mobile wet concentrator plants
(WCPs) to produce a Heavy Mineral Concentrate. The HMC will then be
transported to a Mineral Separation Plant to produce ilmenite,
rutile, zircon and garnet products.
Oversized materials and tailings rejected will be returned to
the mining areas for disposal, allowing for continuous
rehabilitation of the mining areas.
The Base Case was selected as the preferred option after taking
into consideration the following
points:
-- Despite not generating the highest NPV or quickest payback,
the Base Case rather takes into account a number of factors,
namely:
o it provides the smoothest (lowest start-up) lending/debt
profile;
o it simplifies the social licence to operate (minimal footprint
and disturbance);
o it offers the greatest flexibility if considering upgrading
the Mineral Resource / Ore
Reserve inventory for a dredging scenario; and
o it provides the lowest technical exposure for Capital Metals
taking into consideration the development of mine sites, port
development, establishment of the owner's team for operations and
securing production/export targets.
The Base Case assumes a 3.5 year staged scale-up as follows:
Stage 1 - using a Mining Unit Plant ("MUP") and a Wet
Concentrator Plant ("WCP") at a mining rate of 0.55Mtpa to produce
a Heavy Mineral Concentrate that is then washed through a
Concentrate Wash Plant ("CWP") to be ready for sale
Stage 2 - using a Magnetic Mineral Separation Plant ("MMSP") to
refine the HMC into ilmenite, garnet and non-magnetic concentrate
products
Stage 3 - adding a second MUP and WCP to increase the mining
rate to 1.1Mtpa and proportionally increasing operating hours at
the CWP and MMSP
Stage 4 - adding a third MUP and WCP to increase the mining rate
to 1.65Mtpa, upgrades to the throughput capacity of the CWP, MMSP
and the installation of a non-magnetic MSP ("NMSP")
The Base Case assumes that each stage is implemented
approximately 12-18 months apart which enables a steady ramp up of
production and minimises the overall funding requirement.
The Base Case also identifies a number of owners costs including
working capital, resource planning and port upgrades.
The capex estimate for the Base Case is as follows:
Stage Stage Stage Stage Grand
1 2 3 4 Total
US$m US$m US$m US$m US$m
------ ------ ------ ------ -------
OWNERS COST
------ ------ ------ ------ -------
Owners cost incl working
capital 6.3 0.1 0.1 0.1 6.6
------ ------ ------ ------ -------
Port and Admin 2.7 - 0.2 0.1 3.0
------ ------ ------ ------ -------
Resource 3.5 - 1.6 0.6 5.7
------ ------ ------ ------ -------
TOTAL OWNERS COST 12.4 0.1 1.9 0.8 15.2
------ ------ ------ ------ -------
MINING & PROCESSING
------ ------ ------ ------ -------
Mining Unit I 6.7 - - - 6.7
------ ------ ------ ------ -------
Mining Unit II - - 6.0 - 6.0
------ ------ ------ ------ -------
Mining Unit III - - - 6.0 6.0
------ ------ ------ ------ -------
Concentrate Wash Plant 2.0 - - 0.6 2.6
------ ------ ------ ------ -------
Magnetic MSP - 9.8 - 1.4 11.1
------ ------ ------ ------ -------
Non-Magnetic MSP & Zircon
Plant - - - 10.7 10.7
------ ------ ------ ------ -------
Load-out facilities 2.7 - 3.1 1.9 7.6
------ ------ ------ ------ -------
Process Water System 0.7 - 0.5 0.3 1.5
------ ------ ------ ------ -------
TOTAL PROCESS CAPEX 12.1 9.8 9.6 20.8 52.3
------ ------ ------ ------ -------
TOTAL CAPEX 24.5 9.9 11.5 21.6 67.5
------ ------ ------ ------ -------
Contingency 20% 4.9 2.0 2.3 4.3 13.5
------ ------ ------ ------ -------
GRAND TOTAL CAPEX 29.4 11.9 13.8 25.9 81.0
------ ------ ------ ------ -------
The Base Case requires funding of only US$37.3m (see below). The
total cost to produce final mineral sands products at a rate of
1.65Mtpa is US$81m (including 20% contingency), with this balance
of $43.7m to be funded from cashflow.
The Base Case funding requirement is as follows:
Stage 1 Capex $29.4m
Stage 2 Capex $11.9m
Net Revenue Year
1 (part) ($4.0)m
Total Funding Requirement $37.3m
Revenue and Operating Costs
The IHC study assesses the operating costs for each stage of the
Project as well as the Government royalty payable:
REVENUE & OPERATING COSTS
Total US$/t VHM US$/t Ore
Revenue 645.3m 394.23 45.09
Operating Costs 194.7m 118.96 13.61
Government Royalty 59.5m 36.39 4.16
Operating Cashflow 391.0m 238.88 27.32
Revenue to Cost
Ratio 2.54
-------------------- ------- ---------- ----------
Base and Upside Pricing Case
For the Study, IHC Mining and the Company obtained pricing
assumption curves from TZMI, the global independent mineral sands
consulting group. The base pricing curve used in the Base Case
considers current pricing and future supply demand expectations for
each mineral before reverting to a long-term price.
The average price realised during the Project for the Base Case
is shown below alongside current market prices ("Spot Price") which
suggest even more attractive economics are feasible :
BASE SPOT PRICE
USD$/tonne USD$/tonne
----------- -----------
Ilmenite 231 380
----------- -----------
Garnet 245 300(1)
----------- -----------
Zircon 1,777 2,000
----------- -----------
Rutile 1,617 1,500 (2)
----------- -----------
(1) Directors' estimate
(2) The Directors believe there will be a rutile supply shortage in the coming years
Note that HMC is sold during the scale-up phase which will
result in a lower price received for the contained VHM.
TZMI also noted that potential existed for prices for the
Project's mineral products to remain higher than their base case
pricing estimate. The upside price case assesses Project economics
where the average price across all minerals was 24% higher and
increased the NPV(8) to US$235m and IRR to 73%.
Comparison of Base and Upside Price Assumptions
PRICE ESTIMATE BASE UPSIDE
NPV(8) USD$m 155 235
------- ----- -------
IRR 56% 73%
----- -------
Payback Years 3.7 3.2
------- ----- -------
Capex USD$m 81.0 81.0
------- ----- -------
Capex Funding USD$m 37.3 36.4
------- ----- -------
NPV/Capex Funding 4.2 6.5
----- -------
RC Ratio 2.5 3.0
----- -------
Sensitivity Analysis
Pricing for mineral sands are currently above the average price
used in the PEA. Sensitivity analysis shows that the Project
economics are most sensitive to price and product recovery.
SENSITIVITY ANALYSIS
----------------------------------------------------------
-20% -10% 0% 10% 20%
------------------------- ----- ----- ---- ---- ----
Commodity Price USD$m 88 122 155 189 223
Reserves USD$m 185 169 155 140 126
Recovery USD$m 7 73 155 255 375
Capex USD$m 169 162 155 149 142
Opex USD$m 174 165 155 146 137
------- ----- ----- ---- ---- ----
Discount Rate 8% 9% 10% 11% 12%
-------------------------- ----- ----- ---- ---- ----
USD$m 155 146 137 129 121
------------------------- ----- ----- ---- ---- ----
Cautionary Statement:
The Preliminary Economic Assessment ("PEA") summarised in this
news release is preliminary in nature and is intended to provide an
assessment of the Project's economic potential and design options.
The PEA mine plans and economic models include numerous assumptions
and the use of Inferred Resources. Inferred Resources are
considered to be too speculative geologically to have economic
considerations applied to them that would enable them to be
categorised as mineable reserves. Mineral resources that are not
mineral reserves do not have demonstrated economic viability. There
is no assurance that the results projects in the PEA will be
realised.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
MSCGPUCCAUPPUAP
(END) Dow Jones Newswires
May 12, 2022 02:02 ET (06:02 GMT)
Equatorial Palm Oil (LSE:PAL)
Gráfica de Acción Histórica
De Nov 2024 a Dic 2024
Equatorial Palm Oil (LSE:PAL)
Gráfica de Acción Histórica
De Dic 2023 a Dic 2024
