Sheffield Resources forms JV with Yansteel to advance Thunderbird mineral sands project

Advanced mineral sands developer Sheffield Resources (ASX: SFX) has joined forces with China’s YGH Australia Investment (or Yansteel) to develop the Thunderbird mineral sands project and adjacent tenements along the Dampier Peninsula in Western Australia’s northwest.

Yansteel has confirmed it will invest $130.1 million to acquire a 50% interest in the joint venture, subject to final negotiations, agreement and execution of formal agreements and Foreign Investment Review Board approvals.

The company will also become a shareholder in Sheffield, following a 9.9% placement amounting to the issue of 34.2 million fully paid ordinary Sheffield shares at $0.376 per share, for a total consideration of $12.9 million.

Sheffield has confirmed the share placement is not conditional upon the completion of the joint venture transaction or the FIRB process.

Ilmenite offtake

Yansteel is a wholly-owned subsidiary of Hong Kong private company YanGang Co, which in turn, is a subsidiary of manufacturing giant Tangshan Yanshan Iron & Steel Co. Tangshan produces approximately 10 million tonnes per year of steel products and has annual revenues of approximately $6 billion.

Tangshan has commenced the construction of a 500,000tpa integrated titanium dioxide processing facility featuring a titanium slag smelter.

The complex will consume 100% of low temperature roast (LTR) ilmenite offtake from Stage 1 of the project, under a binding life-of-mine take or pay offtake agreement between the two partners.

The agreement is independent of the joint venture and will automatically convert to a minimum seven-plus-three-years ilmenite offtake deal should the joint venture not proceed for any reason.

Project equity

Yansteel’s investment will fund Stage 1 of Thunderbird, which will see the construction of a 10.4 million tpa mine and process plant producing a zircon-rich, non-magnetic concentrate and LTR ilmenite.

Sheffield managing director Bruce McFadzean said his company will cover an equity shortfall up to $143 million, less project costs incurred prior to a final investment decision.

“To attract such a strong partner [to this project] is testimony to the quality of the Thunderbird project,” he said.

“This transaction secures offtake for all of the ilmenite [from Stage 1] and the joint venture itself will provide the means for [our] shareholders to realise the underlying value of the project,” Mr McFadzean added.

Bankable feasibility study

The partners will now progress a bankable feasibility study (BFS) funded by the share placement, building on an update to a 2019 BFS, which estimated an after-tax net present value of $980 million.

Mr McFadzean said the new study will include an LTR process flowsheet, which was removed from the update to reduce capital intensity.

“We have always believed the LTR process will produce the best ilmenite product from Thunderbird,” he said.

“The current flowsheet re-introduces LTR and removes the mineral separation plant components related to producing a final zircon product, with the non-magnetic concentrate now containing all of the premium zircon and zircon-in-concentrate materials.”

High-grade discovery

Thunderbird is believed to be one of the largest and highest-grade mineral sands discoveries of the last 30 years.

Sheffield has previously referred to it as a “technically low-risk, modest capex project generating strong cash margins from globally-significant levels of production over an exceptionally-long mine life spanning multiple decades”.

The project is expected to produce a high-quality suite of mineral sands products containing zircon suitable for the ceramic sector and ilmenite suitable for the paint pigment industry.

It is estimated to generate $750 million in royalties and $2 billion in taxes over its lifetime.

Mr McFadzean said it will provide a “new source of competitive supply” into the mineral sands and downstream product markets, which are facing an emerging structural decline in supplies.