Members of the board visit the Thunderbird project site. All Images: Sheffield Resources.

SHEFFIELD Resources is advancing development of its flagship Thunderbird mineral sands project, between Derby and Broome in Western Australia, with first production to begin in Q4 of 2020.

 

The Thunderbird mineral sands project is one of the largest, high-quality mineral sands discoveries in recent decades, and after securing all key permitting early this year, is now construction ready.

The project will generate a suite of mineral sands products, including premium zircon suitable for the ceramic sector and LTR ilmenite – which would be one of the highest-grade sulphate feedstocks available globally.

Sheffield Resources anticipated a two-year construction phase for the project with the Bankable Feasibility Study (BFS) supporting a low cost, low risk operation over a 42-year mine life.

Early works were already completed, including the commissioning of 52 rooms, messing and laundry facilities within the accommodation village), mine site arterial road construction and development of communications infrastructure and a waste water treatment plant

In addition to mine development infrastructure expenditure, about $4.3 million was incurred on engineering and design.

Expenditure directly associated with local contractors and staffing in the Kimberley region totaled $5.2 million.

Sheffield’s social licence to operate in the Kimberley was confirmed through the signing of the Native Title Co-existence Agreement with traditional owners in late 2018.

In 2018, GR Engineering Services Limited (GRES) was appointed to design and construct a 7.5 million tonne per annum Stage 1 mineral processing plant and supporting infrastructure.

Liquefied natural gas (LNG) would be used for processing at Thunderbird, which would be supplied via a 15-year joint venture agreement between Woodside and Energy Developments (EDL).

This would include the supply and delivery of 1950 terajoules per annum of LNG to the Thunderbird project from Woodside’s Pluto LNG Truck Loading Facility near Karratha, which would equate to double the current supply in the Kimberley and almost double again once stage two came online.

“For Sheffield, there are three key benefits of using LNG at Thunderbird; it provides a low cost and a low emission fuel source that is very well suited to the ilmenite low temperature roast (LTR) process,” Sheffield managing director Bruce McFadzean said.

“The BFS assumed an outsourced LNG storage and power station facility model on a Build Own and Operate (BOO) basis.

“The Northern Australia Infrastructure Facility (NAIF) funding arrangements enable in-sourcing of LNG storage and power station facilities to take place, providing significant reduction in operating costs compared to BFS assumptions.”

On 19 September 2018, Sheffield secured infrastructure funding support from the Northern Australia Infrastructure Facility (NAIF).

Part of the $95 million financing package will be allocated to the proposed Thunderbird LNG storage and power station facilities – which would be constructed and operated under separate agreement with third parties.

Mr McFadzean said Sheffield was extremely pleased with the level of support shown by Woodside and EDL in delivering a low cost, long-term energy solution for Thunderbird.

 

“The project is now fully permitted and construction ready, with offtake and financing agreements in place,” he said. “We look forward to continuing our relationship with Woodside and EDL as we move toward development during 2019.”

 

Market Outlook

 

In a recent market update, Sheffield said it was continuing discussions with potential offtake partners for the project.

It said a range of potential customers had received samples of ilmenite, and encouragingly all samples reviewed and assessed were approved by the respective parties as a direct feedstock for sulfate pigment production or chloride slag feedstock.

“Currently with 77 per cent of Stage 1 Thunderbird forecast revenue contracted under binding offtake agreements, covering 100 per cent of the Stage 1 zircon products and 50 per cent of Stage 1 LTR ilmenite, we have satisfied all debt requirements,” the company stated.

“Many enquiries have also been received from potential offtake partners for the possible supply of Stage 2 products, particularly zircon related products.

“A majority of the groups who have made enquiries have already received and assessed the samples approving the material for processing in a wide range of applications, including the largest share of the market in ceramic applications.”

Mr McFadzean said the zircon price had rallied in the past few months, meaning the outlook for minerals sands in Australia remained positive.

“During the past 18-24 months the excess stock levels have reduced leaving little inventory,” he said.

“Demand is strong and expected to grow in the coming years – from 1.2 to 1.5 million tonnes (Mt)/year by 2025/26.”

The major mines supplying zircon also had declining grades, which, combined with strong demand, had led to mining groups accelerating the depletion of their mines as they mined aggressively to meet demand.

“There has been inadequate investment in the industry over previous years meaning no new large deposits are coming on line,” Mr McFadzean said.

“Thunderbird is the largest undeveloped project globally and you’d need about four Thunderbirds to fill the supply deficit – and no one knows where the remaining supply is going to come from.”

Mr McFadzean also said that Australia was a safe jurisdiction for potential investments compared to suppliers in Africa.

“Over the past one to two years the second largest producer, RBM in South Africa, has been subject to continuous strikes and industrial action reducing their output,” he said.

 

Sheffield Resources managing director Bruce McFadzean.

 

Titanium dioxide demand was also expected to grow from 7.3mt to exceed 9.0mt by 2026, with future growth to be supported by the pigment industry – which accounted for between 85 and90 per cent of the total end market.

“Sulfate ilmenite supply is expected to remain relatively flat in the short to medium term, followed by a declining profile if no new supply is brought online in the near future,” Mr McFadzean said.

“Net sulphate ilmenite is also expected to decline without further investment, as more product is utilised to produce chloride slag – the Thunderbird ilmenite feeds both chloride and sulfate pigment processes.”

Mr McFadzean also said that even though Australia is the biggest supplier in the market our output was declining.

“An apparent lack of investment in the industry together with the major producers’ (Iluka and Tronox) declining grades (and thus more difficult mining) – will result in lower output,” he said.

“You might say a void is forming because no new significant mines coming on line.”

 

Exploration Options

 

A regional exploration program in 2018 led to the discovery of a high-grade maiden mineral resource at Sheffield’s Night Train deposit at the Dampier mineral sands project.

This included a high-grade component of 50 million tonnes at 5.9 per cent heavy minerals (HM), above a 2.0 per cent HM cut-off, similar high in-situ zircon and titanium mineral grades to those of Thunderbird, which sits about 20km south of the Night Train deposit.

 

“Night Train has the potential to extend the life of the Thunderbird operation, by providing an alternative feed source for the plant,” Mr McFadzean said.

 

“It could enable greater flexibility for future development and add value this emerging world class mineral sand province.

“Mineral sands is a product that doesn’t involve chemicals and environmentally it’s a very low impact process that really suits the Kimberley region.”

While positive about Night Train, Mr McFadzean said the potential quality and grade of the exploration target was conceptual in nature, with insufficient exploration to estimate a mineral resource – and uncertainty that further exploration would results in the estimation of one.

Follow up aircore drilling to extend the regional discoveries and infill Night Train was scheduled for Q3 2019 in conjunction with geotechnical and geochemical test work on the Derby East silica sands samples.

Further exploration planned for 2019 included bulk sample mineral characterisation test work at Night Train, and mineral assemblage determination test work for Night Train, Cold Duck, Porphyry Pearl, Cisco, Nomad, Concorde, Bohemia and Buckfast deposits.

Sheffield remained confident that the multiple new mineral sands prospects identified during the 2018 regional exploration program confirmed that the Canning Basin was a major new mineral sands province.

The Thunderbird workers village is under construction.

 

Looking Local

 

In late 2018 the Kimberley Land Council held an Authorisation Meeting of Traditional Owners from the area surrounding Thunderbird which authorised the Thunderbird project Co-existence Agreement.

The Agreement established a framework by which the company would work with the

traditional owners to protect Aboriginal heritage and the environment, and deliver sustainable employment and business outcomes for traditional owners and the wider Aboriginal community.

Following this, Sheffield aimed to achieve a 40 per cent indigenous representation in its workforce by 2028 and with an Aboriginal Employment Strategy consisting of five pillars; employment, skill development, retention and career development, community and contractor commitments.

“Our aim to achieve 40 per cent Aboriginal employment by Year 8 of operations is informed by a long held imperative to contribute to the economic and social benefit of the Kimberley and Aboriginal people, the company’s SLTO, NAIF funding and the Co-existence Agreement with the Mt Jowlaenga Polygon #2,” Mr McFadzean said.

“Our point of difference: Sheffield offers a work environment where local Aboriginal people can work and live on country, on a drive in and drive out basis, on a family friendly roster, with transport provided to and from nearby Aboriginal communities.

There were about 18,000 to 20,000 people between Broome and Derby, 44 per cent of which are aboriginal, and Mr McFadzean said the company would target these potential employees who want to live and work in the Kimberley on an 8:6 roster.

“We will structure our work place to reflect Kimberley lifestyle and cultural values – this has been a prominent theme in our extensive consultation program,” he said.

“We’ll be operating in an area where people desperately need jobs and jobs for a long time so we can create some intergenerational opportunities for aboriginal people.

“The traditional owners have signed an agreement because they want it to go ahead as much as we do because they see that opportunity for their children and their children’s children.”