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Sierra Rutile Ltd (SRX)

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Thursday 10 May, 2012

Sierra Rutile Ltd

Production Expansion Update

RNS Number : 0647D
Sierra Rutile Limited
10 May 2012

Sierra Rutile Limited

Production Expansion Update

London, UK, 10 May 2012:  Sierra Rutile Limited ("SRL") is pleased to provide an update on its production expansion plans.


·     Dry mining plant construction commenced.  Project progressing on schedule and on budget, first production now expected this year;

·     Significant year-to-date cash generation allows dry mining project to be owner-mined.  Project economics significantly superior than using contractors;

·     Mogbwemo tailings project expanded in scope to include additional dry mining processing, prolonging the project's life.  Plant tenders currently under review;

·     New dredge feasibility study well underway with target completion date in early Q3 2012;

·     Further optimization potential identified at dry processing plant and other infrastructure will be evaluated in conjunction with increased throughput requirements from expansion projects' production; and

·     SRL remains on track to achieve its target of producing rutile at a run rate in excess of 200,000 tonnes during 2014, on completion of all expansion projects.


Dry Mining ("DM")

As initially announced on 19 September 2011, SRL plans to selectively dry mine certain of its deposits, commencing with parts of the Lanti deposit that the existing dredge ("D1") cannot mine.  The DM project is expected to produce 30,000 to 35,000 tonnes of rutile and 6,000 to 9,000 tonnes of ilmenite per annum for a period of at least seven years.

Development of the DM project is advancing well, both on schedule and on budget, with first production expected during this year.  Major milestones achieved to date include:

·     Completion of plant site preparation;

·     Commencement of plant earthwork construction;

·     Shipment of concentrator unit, now in-transit to mine site; and

·     Development of a raw feed stockpile for the DM plant, allowing uninterrupted production post-commissioning.

Due to the significant cash generation of the business during the year-to-date, SRL has decided to undertake the dry mining internally and operate its own fleet of earthmoving equipment, rather than use contractors. Analysis over the life of the DM project illustrates that owner-mining will have significantly improved economics compared to the cost of tenders submitted by third-party contractors.  The fleet includes articulated dump trucks, wheel loaders, dozers and graders, at a capital cost of $20.7 million.  SRL expects to place orders for its DM equipment fleet in the near-future and will consider debt financing alternatives for the fleet as appropriate.

Mogbwemo Tailings ("D2")

As also announced on 19 September 2011, SRL will mine certain historical tailings on the Mogbwemo deposit that continue to hold economic grades of rutile.  This project, entitled "D2", is expected to produce 20,000 to 25,000 tonnes of rutile and 3,000 tonnes of ilmenite per annum, commencing in the second half of 2013 for a period of at least six years.

To date, the following milestones have been achieved:

·     Tenders received for the concentrator unit; and

·     Mine plan for D2 refined and finalized.

Significantly, the scope of the D2 project has been expanded to allow the concentrator unit to process dry mining material as well as tailings, thus allowing the extension of the life of the project from a second feed source.  Tenders for the expanded scope concentrator are currently being evaluated, and an order for the selected concentrator is expected in the near-term.

New Dredge ("D3") Feasibility Study

On 24 October 2011, SRL announced the commissioning of a feasibility study ("Feasibility Study") into a new large-scale dredge ("D3").  The Feasibility Study has been separated into several components:

·     Dredge costs and operating parameters - SRL has requested tenders directly from suppliers for the dredge itself, thus increasing the level of confidence in this component of the Feasibility Study.  These tenders are due to SRL in the near term;

·     Floating treatment plant ("FTP") costs and operating parameters - The Feasibility Study into the FTP is being conducted by CPG Mineral Technologies, part of the EDI Downer group; and

·     Pricing assumptions - SRL has commissioned a pricing study from TZMI that will be used in the Feasibility Study.

The entire Feasibility Study is expected to be finalized during early Q3 2012.

Dry processing plant ("DPP") and infrastructure

SRL has identified several opportunities to realize meaningful improvements in optimizing and increasing recovery rates and production from the DPP and other parts of SRL's extensive existing infrastructure.  At the same time, and as previously announced, expansions to both the DPP and other infrastructure will be required to process and handle the expanded production from DM, D2 and D3.  SRL is in the process of aligning process improvements and production expansions to optimize the impact of these developments at both the DPP and other infrastructure.

With the decision to operate the DM earthmoving fleet in-house, an opportunity has arisen to internalize SRL's existing ancillary earthmoving needs.  Taking this service in-house should allow for increased optimization of SRL's full earthmoving fleet and help to ensure that SRL can prioritize its earthmoving requirements without reliance on a contractor.  The fleet has a capital cost of $7.3 million and has an estimated payback period of two years against the cost SRL currently incurs on contractors.

Support service 

With numerous growth projects underway and the planned increase in production, SRL has begun the process of increasing the size of its existing mining camp to accommodate the higher number of workers who will be present during the expansions and when production is at a higher level.  To this effect, in the year-to-date, SRL has constructed accommodation capable of housing a further 133 workers and contractors, added a second mess hall, expanded sanitation facilities and refurbished recreation facilities.  The cost of these upgrades and expansions were included in the previously announced capital expenditure budget for the year.     

Commenting on developments John Sisay, SRL Chief Executive said

"We remain very much on plan to achieve our medium-term growth target of producing over 200,000 tonnes of rutile a year.  All our projects are progressing well and on schedule, and we are particularly pleased that the strong cash generation of the business has enabled us to owner-mine the DM project." 

For further information please contact:

Sierra Rutile Limited                

John Sisay, Chief Executive Officer

Joe Connolly, Chief Financial Officer

Tel: +44 (0) 20 7074 1800

Canaccord Genuity Limited

John Prior / Adam Miller

Tel: +44 (0) 20 7523 8350

Kreab Gavin Anderson                                                                   

Fergus Wylie / Rupert Trefgarne                                                            

Tel:  +44 (0) 20 7074 1800



Notes to Editors

About Sierra Rutile Limited

Sierra Rutile produces titanium feedstock industrial minerals (primarily rutile, with some associated ilmenite), as well as smaller quantities of zircon.  Sierra Rutile's mine, located in the south west of Sierra Leone, is one of the largest natural rutile deposits in the world, with a JORC-Compliant Mineral Resource for measured, indicated and inferred resources for the Sierra Rutile mine of over 600 million tonnes (as at February 2011).





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