Sheffield Resources - (ASX: SFX, Share Price: $0.89, Market Cap: $142m, coverage initiated @ $0.50 in Sep 2015 – current gain of 78%)
Key Catalyst
Continued strong progress on multiple fronts with respect to its Thunderbird mineral sands project in Western Australia, including the receipt of key state environmental approvals.
Since its 2010 listing, SFX has remained focused on exploration, appraisal and development of its 100%-owned Thunderbird deposit in Western Australia. Thunderbird is a remarkable and rather unique asset, representing one of the world’s largest and highest-grade, undeveloped zircon-rich mineral sands deposits. SFX was in the right place at the right time to acquire the project when RIO sold it in the wake of the GFC. SFX completed a high-quality Bankable Feasibility Study (BFS) on the project during 2017, which highlighted its robust economics, low technical risks and long operating life of 42 years. Once in full production in 2020, Thunderbird will provide the market with approximately 6% of the world’s zircon and approximately 3% of the world’s ilmenite. SFX’s share price has firmed solidly (but without much fanfare) since September 2017 on the back of growing market appreciation of its Thunderbird project.
Recent Activity
SFX’s solid share price performance has coincided with significant Thunderbird project development activity between Q4 2017 and Q3 2018 – predominantly involving important milestones related to product off-take, project financing and construction readiness. Let’s review some of the most recent developments.
Environmental Approvals
SFX has advised of having been granted environmental approval by the State Government of Western Australia for its Thunderbird project. A Ministerial Statement has been issued regarding EPA Report 1606, consenting to the development and operation of the project.
Following the completion of the State environmental approval process, final steps to obtain Federal approval under the Environmental Protection and Biodiversity Conservation Act 1999 (EPBC Act) from the Commonwealth is now underway. This process is expected to conclude during the current September quarter.
Technical Significance
The receipt of State environmental approval represents a significant milestone for the Thunderbird project and for SFX, whilst simultaneously highlighting the project’s low environmental impact. It also brings SFX a step closer to the commencement of project construction.
Regional Drilling
SFX has commenced a major exploration drilling program at its Dampier Mineral Sands Project, near Derby in northern Western Australia. The air-core drilling program will target multiple prospects along a 160km long prospective horizon. The program is expected to take two months and generate assay results progressively over the coming months.
The regional drilling program will commence at the zircon-rich Night Train prospect, then move to prospects with known mineralisation (Cold Duck, Nomad, and Buckfast) and targets located up-dip of existing drill intersections (Cisco and Concorde). In addition, a number of regional traverses will be completed with the aim of identifying mineralisation higher in the stratigraphy, including potential strandline style mineralisation.
At the East Derby project, SFX is investigating the potential for the prospect to yield commercial quantities of sand for construction purposes. Drilling will be undertaken to better define the potential quantities of these sands, along with additional test-work designed to assess suitability for specific end-use requirements.
Results including assays, mineral assemblage test work and geotechnical test work will be reported progressively during Q3 and Q4 2018.
Figure 1: Proposed drill-hole and prospect location plan
Technical Significance
This latest drilling program forms part of SFX’s exploration strategy of targeting additional large, zircon-rich deposits containing premium ceramic-grade zircon, suitable for downstream processing at the Thunderbird Dry Mineral Separation Plant. The Canning Basin has potential to be a significant new mineral sands province, with SFX maintaining a dominant ground position within the region. Importantly, Night Train is a high-priority target that’s located just 20km southeast of Thunderbird and within 2km of the proposed Thunderbird Access Road. It’s also provided significant results from previous work, with Scoping metallurgical test-work indicating ceramic-grade zircon specifications can be produced.
Some of the most interesting intercepts from previous drilling comprise:
9m @ 6.33% HM from 22.5m (DAAC052), including 7.5m @ 7.23% HM from 24m
13.5m @ 5.25% HM from 46.5m (DAAC094), including 7.5m @ 8.23% HM from 48m
24m @ 3.33% HM from 37.5m (DAAC093), including 12m @ 5.48% HM from 37.5m
Along these lines the graphic below is illustrative of the predicament facing the mineral sands industry – specifically the lack of recent success when it comes to identifying world-class zircon deposits. Prior to the identification of Thunderbird by SFX in 2012, the last discovery was back in 2008 – a decade ago.
Figure 2: Discovery timeline for significant zircon deposits
Summary
SFX’s Thunderbird project has been demonstrated to be a large-scale, technically low-risk project, supplying one of the highest-grade sulphate feed-stocks available globally. This of course hasn’t just happened overnight - a lot of hard work has been invested in the project over the past eight years. Encouragingly, the market is now beginning to fully appreciate the project’s value. An improving mineral sands market is also providing a positive backdrop. We look forward to more positive news-flow during 2018.
SFX Price at posting:
86.5¢ Sentiment: Buy Disclosure: Held
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