Diatreme Resources announced a boost for its Cyclone Zircon project
Diatreme Resources Limited (ASX:DRX) announced today a positive prefeasibility study for the
Cyclone Zircon Project, boosting the prospects for Western Australia’s biggest new zircon deposit.
The PFS has shown the potential for the Cyclone Project to mine 10 million tpa of ore for 10 years.
Expected annual production of 147,000 tpa heavy mineral concentrate would yield an average of
65,000 tpa zircon, 46,000 tpa HiTi67 and 10,000 tpa HiTi87.
With the initial discovery of the Cyclone Deposit in 2007, and progressive exploration over the past
four years, the Company upgraded its resource estimate in January 2012 to Measured and
Indicated status (JORC). This was followed closely in February 2012 with the release of Cyclone’s
maiden Ore Reserve (JORC).
Diatreme’s Executive Chairman, Tony Fawdon, said Cyclone was of world significance as the
highest grade zircon deposit in WA, having the potential to generate significant exports, royalties
“The PFS has demonstrated the potential for Cyclone to become a company-making project for
Diatreme. On an annual basis, the project would generate sales revenue of $191 million a net
operating profit after tax of $78 million, contribute $28 million a year to government tax revenue and
$7 million in government royalties.”
The Cyclone Project is located within the northern Eucla Basin, an emerging zircon province of
global significance, being 25 kilometres west of the South Australian border and 230 kilometres
north of the transcontinental railway.
Conventional technology will be used for the project, with concentrate proposed to be trucked 240
kilometres to Forrest, WA, where it would be loaded and transported by rail to an appropriate
seaport. The concentrate would be stored in containers at the seaport before being loaded into
vessels for bulk shipping to a mineral separation plant overseas, possibly China.
Water supply for the project is expected to be sourced from a deep aquifer in the Officer Basin, a
large sedimentary basin underlying the project area with known substantial aquifers.
Based on estimates, the PFS financial forecasts include a base case net present value of $194
million and an internal rate of return of 32%, with a payback period of just 2.1 years.
The PFS results are underpinned by strong fundamentals for the three proposed mine products
comprising zircon, HiTi87 (86.6% TiO2) and HiTi67 (67.3% TiO2). These products would be sold into
overseas markets, where current forecasts are for limited supply of zircon and titanium feedstocks
and continued high prices.
The forecasts are based on a strategy of building the proposed mineral separation plant in China
and marketing the products in that country, resulting in estimated long-term prices of US$2,100 per
tonne for zircon, US$1,200/t for HiTi87 and US$400/t for HiTi67.
Diatreme has recently signed a Negotiation Protocol for seeking to develop a mining agreement
with the Native Title holders, the Pila Nguru, on whose land the Cyclone Deposit is located.
“Diatreme is committed to engaging with the local community, and where possible, employing locals
and using local suppliers to build this important project for Australia,” Mr Fawdon said.
Having successfully delivered a substantive and positive PFS, Diatreme will now commence the
Definitive Feasibility Study (DFS). This will incorporate test drilling for water within the underlying
sedimentary rocks of the Officer Basin, and conducting environmental, flora and fauna surveys for
the mine site and proposed haulage roads.
Bulk sample collection for detailed plant design and environmental surveys are already underway as
part of the DFS, which is planned for completion in 2013.
“Having received considerable interest in the project from leading industry players, Diatreme
continues to hold discussions regarding investor partnerships. Based on heavy mineral demands,
the Company aim to secure project financing in 2013 and undertake project construction and
development over 2013/2014. Depending on receipt of necessary approvals, the Company expects
first production by 2015.”
The project will propel Diatreme into the mid-tier category of mineral sands producers, backed by a
highly experienced and effective geological and engineering team.
“The Cyclone Project is the right project in the right sector, and at the right time,” Mr Fawdon said.
“There is potential for extension of the Cyclone mine life due to adjacent deposits and new
discoveries. With Diatreme’s additional suite of attractive mineral sand, copper and base metal
projects, the Company is well positioned to generate substantial growth in shareholder value.”
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