Image Resources NL (ASX:IMA) - mineral sands developer


by Anna Napoli

Image Resources NL Limited (ASX:IMA) Managing Director, Patrick Mutz talks about the company's Boonanarring mineral sands project, financing, construction and offtake partners.

Anna Napoli:
Hello Anna Napoli for the Finance News Network and joining me now from Image Resources NL (ASX:IMA) is Managing Director, Patrick Mutz. Patrick, welcome to FNN.

Patrick Mutz: Hi Anna, thank you very much for having me here.

Anna Napoli: Now for investors that are new to your company, can you give us a bit of an introduction?

Patrick Mutz: Image Resources is an emerging mining production company. That means that we are actively constructing an open pit mine and a processing plant, at our flagship property called the Boonanarring project, in Western Australia. Boonanarring happens to be a very high-grade mine, rich in zircon and therefore, it’s a very valuable mine. The total reserves, all reserves at Boonanarring are some 20 million tonnes. And in fact though, the important thing about that is it’s still expandable both to the south and the north, and even to the west. The mine life is currently scheduled for about 5.5 years in known reserves. But as I say, it is expandable and we’ve identified an extension of high grade to the north that would clearly add mine life, for years to come.

Anna Napoli: Where are mineral sands used and how have prices performed?

Patrick Mutz: Mineral sands produces a couple of different products. The principal ones from most of them, even though they vary a bit from mine to mine, is zircon and rutile and ilmenite. It’s the zircon that’s the value driver for most of the products and in particular in our case, it represents about 70 per cent of our revenue. Zircon today sells for about $1900 per tonne. Zircon is processed into zirconium compounds of a variety of sort, and the most common use for zircon and zirconium compounds, is in floor tiles.

Zircon is also used for many other things including fibre optics and it can be used to make zirconium metal. And that metal is a specialty metal; in fact it’s used in nuclear reactors. So there’re a lot of different uses for zirconium.

Anna Napoli: Can you tell me about the construction and production agreements, and the offtake agreements?

Patrick Mutz: Since the middle of March of this year, we’ve officially started construction and we’re fully funded now to build a plant and get to operation, and to positive cash flow. The current schedule has the construction only taking six to seven months. So effectively, later in the fourth quarter, we’ll start commissioning the project and by the end of the fourth quarter of this year, we’ll be in production. And the important thing about the project is that the company has already secured an offtake agreement, for 100 per cent of the revenue 100 per cent of the production, for the life of the mine. And it’s based on market prices. So as market prices continue to rise, which they are rising, that’s all a big benefit to the company from the standpoint of revenue.

Anna Napoli: How about the project economics?

Patrick Mutz: The project economics are some of the most positive things. It starts with the fact that the capital cost to get the project into production is only $52 million. That means it’s one of the lowest cost capital projects anywhere in Australia. Importantly, the net present value of the project is currently shown to be $197 million. It has a rate of return; an IRR of over 100 per cent and the payback period on the debt is only 16 months. So it’s very attractive. That means that it is a high cash flow and has very high margins.

Anna Napoli: Can you tell me about the proximity to infrastructure, including plans to build a solar farm?

Patrick Mutz: One of the attractive parts about the project is that it has very low capital cost. And the reason is because the project is only located 80 kilometres north of Perth. That means it is an infrastructure rich area, power is available, actually great power is available and we have access to all the other services that we need. This is an area that’s actually been an active mineral sands production area, for more than 25 years.

Now relative to the solar farm and the reason we’re doing it, is not because we need solar power, we’re not technically a remote project, we have great power. This is because we have a great opportunity to work with the Sunrise Energy Group, to install solar power. And in fact, it’ll provide about 25 per cent of our total energy requirements and it gives a little start-up company, a mining company, a little bit of a green footprint. So this is something we actively are doing for the purposes of the environment.

Anna Napoli: Last question Patrick. Why should investors consider adding Image Resources to their portfolio?

Patrick Mutz: There are many reasons, but I think the primary one is that this is an opportunity to invest in a company, that is on its way to realising its full value. And what I mean by that is that as a company moves through the production phases, it’s only once it gets into production that the market will value the company, to its full value. And we are basically going to be at that position, at the end of this year or early in 2019. Aside from that, the fact that we’re fully funded already and it’s a low capital cost project, it’s a very high-grade project and zircon rich. So the positives just keep coming.

The final thing that I think is important for investors to consider is that this is a company, moving to production at a time, when the commodity prices are rapidly rising. And that’s a very positive part to catch. When you have the wind at your back, there’s a full sail and commodity prices are rising, you have the most opportunity for the company to be successful. I’ve been doing this a long time and frankly, I haven’t had a project yet that looked this attractive to me, in my 45 years.

Anna Napoli: Patrick Mutz, thank you for the update.

Patrick Mutz: Thank you for having me, Anna.