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MZI Resources Ltd (ASX: MZI) have made waves in the mining press with their story of overcoming today’s tough market conditions to become a fully-fledged producer of mineral sands products at Keysbrook, (WA) in less than 9 months.
We took the opportunity to speak with Managing Director, Trevor Matthews, ahead of the 16th Annual Mineral Sands Conference. He shared his thoughts on the rise to success for the Keysbrook team, and the challenges, opportunities and milestones along the way.
Informa: 2015 was a busy year for the business – What were some of your personal highlights from last year’s activities?
Trevor: “2015 was a true watershed year for MZI and all our shareholders, in which we made the transition from an aspiring mineral sands developer to a fully-fledged producer of high value mineral sands products.
The overall highlight for me was our success in turning our vision into reality for shareholders after so many years of hard work to get Keysbrook off the ground, including periods in which circumstances were extremely challenging.
In addition to that, I take great pride in the long list of our achievements during the year – notably in taking Keys brook from being an empty paddock to a fully operational mining and processing operation in less than 9 months – well ahead of schedule and most importantly, on budget. Precious few other miners can match that. And to end 2015 by exporting our first cargo of Keysbrook zircon concentrate was the perfect way to cap off an outstanding year.”
Informa: Now that Keysbrook is fully operational, what are the key objectives and focus areas for 2016?
Trevor: “Our immediate objective is to fully bed down operations and demonstrate that Keysbrook is able to deliver the significant margins and strong cashflows we expect.
At the same time, we will be focusing on a number of other objectives to further enhance the performance and value of the project. These include:
> Finalise formal offtake agreements for the small proportion of annual production (<15%) not currently committed
> Significantly increase total Keysbrook Ore Reserves from the +30 years of resources we have already confirmed at the project
> Continue work on optimising the Keysbrook operations in the near term by increasing throughput and product sales through small scale capital works
> Act on the findings of test work last year to significantly improve HM recoveries
> Progress our evaluation of larger scale expansion options and other longer term development options
Informa: In a time of increased difficulty to access funds, you and your team have been very successful in raising capital for Keysbrook – What would you say has been your ‘recipe for success’ during challenging market conditions?
Trevor: “I think it reflects a number of factors, notably the clear value and robust economics of the project itself, which mean it can generate excellent returns even in current soft market conditions and isn’t dependent on a price recovery to succeed.
It also helps to have strong supportive financiers and foundation shareholders, such as RCF which has been prepared to take a long term view in funding the Keysbrook development through the bottom of the cycle.
The discipline and expertise of the whole Keysbrook team in progressively achieving the key project milestones early and on budget has also clearly helped us in a very tough market for smaller companies.”
Informa: In your opinion, what are the biggest challenges facing the mineral sands industry when moving a project into production and how have MZI Resources approached some of these challenges? Are there any factors that you think are unique to mineral sands and why?
Trevor: “Developing any project in uncertain economic conditions is always a challenge. But from a technical perspective, the main risks for all mining projects are broadly similar – you need to properly understand the nature of your orebody, the specific mining and processing requirements and characteristics of the resource, the regulatory/approval environment you are operating in, and the specific market for your product.
The relationship with another mineral sands producer, Doral, has been important in providing a low capex, lower risk and timely solution to our mineral separation requirements through the processing agreement we have with them. Alliances such as this can be important in progressing with the development of projects in difficult economic conditions.
For a company with a single greenfields project to fund and develop, debt financiers will generally seek some form of future revenue protection. Given the inability to hedge the price of future production in industrial minerals generally, locking in prices for contracted forward sales becomes an important element for funding. Our fixed price L70 contract with Chemours and ability to contract 85% of annual production under long term sales agreements was an important feature of our commercial arrangements.
Our approach to dealing with these was to apply diligence and discipline to all facets of the project from the very early stages – we were comprehensive and systematic in our evaluation, planning, and execution, which is reflected in our excellent record in bringing Keysbrook on-stream.
Where mineral sands is slightly different probably comes down to more limited general understanding of the mineral sands market. The mineral sands market is generally more specialised and less transparent than other mineral commodities, and is traditionally dominated by fewer, larger groups on both the supply and demand sides. This can make it tougher for new or aspiring entrants to gain the support of financiers, investors and customers alike.”
Informa: The outlook for the global mineral sands industry remains challenging in the near term. In your opinion, what are the factors influencing the current market?
Trevor: “Essentially the same factors as those driving other markets – fundamental supply and demand metrics, which reflect the outlook for global GDP movement, and particularly the impact of the changed conditions in China.
Because mineral sands products are used in everyday applications like paint and household ceramic products, they are very closely linked to global GDP
Like other commodities, oversupply of feedstocks from large scale mine developments combined with slowing growth for end use products, has contributed to softer mineral sands prices over the last few years.
However, general consensus is that prices for most mineral sands products should improve during 2016 as GDP growth continues, suppliers exercise production discipline and inventory levels align with demand.
Importantly, the price and demand outlook for higher value products like zircon, rutile and leucoxene is stronger than for lower value mineral sands products, so the outlook for our Keysbrook products is more positive than for companies which produce large volumes of lower grade ilmenite.”
Informa: Trevor, you will be speaking at the 16th annual Mineral Sands Conference in Melbourne, what are the conversations you look forward to having with your peers?
Trevor: “It’s always good to speak to your peers to get a feel for how their businesses are doing, what strategies they are adopting in these difficult markets and how they see market conditions playing out.
New developments in technology and process improvements are a value adding aspect of the conference.
I also look forward to sharing MZI’s really positive story, and our confidence of cementing ourselves as a significant and successful long term producer of high value mineral sands products.”
The Mineral Sands Conference is being held at the Rendezvous Hotel in Melbourne on the 15th & 16th March. Full conference details can be seen here
