Image Resources (ASX: IMA) has executed an offtake agreement with Hainan Wensheng High-Tech Materials Co for 50% of heavy minerals concentrate production from the high-grade, zircon-rich Boonanarring mineral sands project, in Western Australia’s North Perth basin.
It is the second agreement of its kind for the project – the first offtake agreement was signed in May with Shantou Natfort Zirconium and Titanium Co for life of mine – and has been considered a “positive step” to minimising the potential risks associated with a single offtake partner.
Wensheng is a wholly-owned subsidiary of Shenghe Resources and one of China’s largest suppliers of zircon sand, titanium concentrate and rutile.
Both agreements require Natfort and Wensheng to purchase up to 100% of Image’s production in the event the other is unable to take delivery of any or all of its allotted 50%.
The arrangement provides Image with “even greater certainty” of the sale of its heavy minerals concentrate and lower risk of revenue interruptions.
Under both agreements, the offtake companies are to provide an irrevocable letter of credit to Image prior to loading a shipment
Once a shipment leaves port, Image is able to convert the letter of credit to cash, incurring minimal interest penalty if the conversion occurs before the letter’s 90-day maturity date.
Project on schedule
Located 80 kilometres north of Perth, the Boonanarring project is considered one of the highest heavy mineral grade, undeveloped projects in Australia, capable of producing zircon and titanium dioxide for processing into zirconium compounds, intermediate products and zirconium metal.
Image completed a bankable feasibility study for the project in mid-2017 and finalised funding earlier this year.
Construction on the open cut mine and processing facility commenced in April and first production is on schedule for the current quarter.
Image said it is fully funded to complete the development of the project, including funds for corporate overhead and exploration expenditures through to positive cashflow, forecast to occur at the end of first quarter 2019.
At mid-morning, Image Resources shares were steady at $0.125.