Sri Lankan government legislation designed to promote its mineral sands industry and exports has delivered a major boost for Titanium Sands and its bold development plans for its project on Mannar Island in the country’s north-east.
The legislation was brought in to ensure local participation in adding value to related products earmarked for export, handing companies such as Titanium Sands a timely leg-up. In a recent budget speech, Sri Lankan President Ranil Wickremesinghe said his government had “no choice” other than move towards a more export-based economy and it has set targets to generate a further US$3 billion (AU$4.7 billion) in exports and the same amount in foreign direct investment.
Perth-based Titanium Sands believes the proposed initiatives and clarifications will assist the company’s operations as its project moves towards production – specifically with respect to a two-year export approval strategy that would buy time for its required studies into creating local processing and value-adding industries.
In May, before the new legislation was announced, management released a scoping study on its Mannar project, revealing an EBITDA of $1.28 billion based on a stage-one 1.4-million-tonne per annum dredging operation over 20 years, with an internal rate of return of 52 per cent and the potential for capital pay back within 2 years.
And its mission appears to lock in with the Sri Lankan Government’s position on heavy mineralsands (HMS) project development. The government seems adamant that the export of raw or concentrated minerals should not be permitted without value-adding and that exploration or mining licences should only be issued to investors willing to produce value-added products locally.
Titanium Sands managing director Dr James Searle said: “The scoping study based on an initial project scenario of 4 million tonnes per annum mining rate over 20 years has indicated an economically robust project which gives TSL the confidence to examine in more definitive studies, 8 million tonnes and even 12 million tonnes per annum production rates over 20 or more years of project life.”
The company holds a 100 per cent interest in five HMS exploration licences at Mannar Island and the adjacent mainland coast of north-west Sri Lanka. The company is focussed on developing high-grade, high-value and easily-minable HMS deposits with modest capital requirements.
Management completed the initial acquisition of its Mannar Island project in December, 2018 and made a further acquisition of adjacent tenure in March, 2020.
It views Mannar Island as an ilmenite feedstock project, with minor credits from other mineral components. Its high-quality ilmenite product is expected to find a ready market with titanium slag and sulphate route pigment producers in the Middle East, Korea, India, China and elsewhere.
Mannar Island is the biggest of a chain of sand islands and shoals that extend more than 100km west from Sri Lanka to southern India in a broad arc. It is a geologically-young feature formed by gradual northward sediment transport and accumulation that has concentrated HMS along the beaches and coastal dunes of Mannar Island.
International mineral sand miner Iluka Resources has a major resource of 689 million tonnes with 8.2 per cent total heavy minerals (THM) on the mid-west coast around the Sri Lankan town of Puttalam. Ilmenite is the dominant heavy mineral, comprising 67 per cent of the heavy mineral suite.
Prior to Titanium Sands’ involvement, hand auger drilling at Mannar in 2010 and 2014 revealed significant high-grade concentrations of heavy minerals along the northern and south-eastern portions of the coast.
While the drilling was largely restricted to within 150m inland of the modern beach, it proved sufficient for an initial JORC-standard inferred mineral resource estimate (MRE) of 10.33 million tonnes, with a THM content of 11.7 per cent. Additional hand auger drilling in 2016 and 2017 showed that significant HMS concentrations occur in large areas of the Mannar Island interior.
A later round of Titanium Sands drilling comprised 315 drill holes for a total of 3438m within the previously defined MRE area, in a pattern measuring 8km long and from 1 to 2km wide. The company’s updated scoping study sought to demonstrate not only the technical and commercial viability of the project, but also that it could be rolled out with a modest capital outlay and still be of sufficient scale and project life so that its products would be attractive to potential offtake partners.
The selected study zone contains 82 million tonnes at a THM content of 6.03 per cent using a lower grade cut-off grade of 3 per cent, out of the total MRE of 187 million tonnes at 5.36 per cent THM, based on a lower cut-off content of 3 per cent THM. It means the mineral resources constitute about 44 per cent of the total MRE for the project at lower cut-off content of 3 per cent.
Management considers that its revenue-to-operating cost ratio of 2.75 is competitive with other ilmenite feedstock producers globally and that its high-grade zone is an ideal stage-one aspiration for the project.
Other relevant considerations of the study include the fact that the resources are exposed at surface with no internal dilution or barren overburden. The capital expenditure cost is estimated at $122 million, while the project resources remain open at depth within natural basement limits and open laterally within the extents drilled.
Titanium Sands believes that could lead to a second and possibly even a third dredge expansion opportunity.
The company also proposes that as its area of operation advances, rehabilitation would progressively develop plantation agriculture and natural vegetation protection zones that will be owned and operated by local communities. It would provide substantial and sustainable socio-economic benefits in addition to the those directly associated with the operation.
The company’s environmental impact assessment process is progressing as anticipated and expected completion targets are to be advised.
It will be fascinating now to see if a company that listed on the ASX just before Christmas way back in 1988 – yes, that is 35 years ago – can use a lift from the Sri Lankan Government to deliver its biggest and best sack full of presents yet.
Is your ASX-listed company doing something interesting? Contact: matt.birney@businessnews.com.au
By Doug Bright
