Mineral sands explorer Strandline Resources (ASX: STA) is taking another step towards developing its Coburn project in Western Australia after naming the preferred contractor to build a 32 megawatt (MW) power plant.
Perth-based Contract Power, which since 1996 has specialised in remote power plant construction and operation, will own and operate the hybrid gas and renewable energy station.
Coburn, 240km north of Geraldton, has an initial 22.5 years of ore reserves containing zircon, ilmenite and rutile and is capable of supplying 5% of the world’s zircon consumption.
Strandline also has two mineral sands projects in Tanzania.
The Coburn power station, to be located near the mineral separation plant, will be powered by liquefied natural gas complemented by solar energy.
The appointment of Contract follows Strandline’s recent $18.5 million equity raising.
Contract serving miners for 24 years
Contract began 24 years ago by building a 9MW power plant for the former Central Norseman Gold.
Since then the company has installed 397MW of capacity, most of it still in operation, for a wide range of companies including Fortescue Metals Group (ASX: FMG).
Strandline managing director Luke Graham says the appointment of Contract marks another key step in the company’s strategy to bring Coburn into production.
Coburn is regarded as construction-ready with a definitive feasibility study (DFS) confirming robust economics and its future as a large, long-life strategic asset, the company said in a recent presentation.
Pivotal sales contracts signed
Four “pivotal” sales contracts have been signed with customers in Europe, China and the US covering 72% of Coburn’s forecast revenue for the first five years of production.
These agreements cover 100% of both ilmenite output and zircon concentrate as well as a “substantial” portion of the premium finished zircon product.
The rutile output remains available.
Strandline’s product mix is weighted to premium zircon and high-grade titanium feedstock products that are used in ceramic tiles (50% of the market), refractory applications, paint, titanium metal and welding rock applications.
At present, China dominates the 1.1 billion tonne per annum zircon market with a 47% share, while Iluka Resources (ASX: ILU) is the most influential company in setting benchmark prices.
Tanzania project has all permissions and contracts in place
On the titanium dioxide front, Strandline says there are likely to be long-term supply deficits for chloride pigment feedstocks, with China’s imports and consumption growing due to new environmental standards and technology developments.
Meanwhile, Strandline continues to advance its Fungoni project which is to become what it describes as Tanzania’s first major mineral sands mine.
A DFS has been completed and Strandline states it shows “exceptional economics”.
It has a low capital cost of US$35 million ($46.7 million) and South Africa’s Nedbank Credit and Investment Bank will underwrite US$26 million ($36.15 million) of the debt raising.
Take or pay agreements have been signed covering all planned production, a mining licence has been issued and key construction contracts are in place.