Heavy Minerals: ‘We’re going to be producing by 2027’

For the uninitiated investor, it can be all too easy to get sucked into the hubris that swirls around ‘hot’ commodities. People seemed to lose their collective minds when, for example, uranium blew past US$100 per pound in mid-January. And with the price of gold apparently bent on hitting high after high, they’ve gone similarly nuts. As for the copper bulls, well . . . they’re rarely disappointed.

But for those willing to think outside the box, there can be found some compelling — if slightly more obscure — opportunities.

Heavy Minerals (ASX:HVY) is potentially one such opportunity. Based in Perth, it owns 100% of the Port Gregory and Red Hill garnet projects north of Geraldton, Western Australia, and 70% of the Inhambane Mineral Sands Project in southern Mozambique.

Though its use dates back to the Bronze Age, garnet enjoys a variety of modern applications: industrial blast-cleaning, polishing, filtration, water jet cutting, abrasives, and painting. More recently, lithium-oxide garnets have been the focus of research for their use as electrolytes in batteries.

A report published at the end of March by Business Research Insights estimated the global garnet market was valued at US$390.64 million in 2021, and is expected to grow at a compound annual growth rate (CAGR) of 7.08% to US$774.34 million in 2031.

A separate report by Straits Research went even further, suggesting the garnet market was worth US$642 million in 2022 and expected to hit US$973.15 million by 2031.

But analysts at Maryland-based research firm Fact.MR took the most buoyant stance, valuing the world’s garnet market at US$688.6 million in 2023 and predicting a CAGR of 5.5% to US$1.18 billion by the end of 2033.

“Garnet is a very inert material and one of the most preferred materials for preparing surfaces before protective coatings or paint is applied. It’s used in marine applications, anything where you need a very high quality surface finish to ensure a coating is going to adhere very well, and you don’t need to go back and repaint the surface,” Heavy Minerals CEO Andrew Taplin tells Mining.com.au.

“People are prepared to pay a premium for that. It’s inert, which means it doesn’t have health and safety risks associated with it. It doesn’t have risk associated with it, unlike silica sands, unlike slags, which have health and safety risks and environmental risks associated with them, respectively. For all of those reasons, people are prepared to pay a premium.”

Heavy Minerals is still three years away from staking its claim as a garnet producer. But with the global garnet market — according to multiple forecasts — set to grow significantly over the next decade, the timing could work rather well.

Port Gregory and Red Hill

In order to realise its garnet dreams, Heavy Minerals has identified the 226km2 Port Gregory Project as its star player.

A maiden JORC resource for the project was published in May 2022, measuring 135 million tonnes at 4% total heavy minerals (THM), representing 4.9 million tonnes of contained garnet.

Following a number of successful drilling programs, the resource estimate was upgraded in July 2023 to 166 million tonnes at 4% THM, representing 5.4 million tonnes of contained garnet. Importantly, 126 million tonnes of the total resource — almost 76% — sits within the measured category, which Taplin says “is a pretty healthy position to be in”.

In September 2022, prior to the resource upgrade, Heavy Minerals released a Scoping Study for Port Gregory. It outlined a post-tax net present value (NPV) of $253 million, capital expenses of $110 million, and a payback period of 4.2 years. Over a minimum 16-year life, the project would deliver almost $1.6 billion in revenue, with $588 million in post-tax cash flow — some $37 million a year — based on yearly production of 141,000 tonnes of garnet and 6,000 tonnes of ilmenite.

“One of the standout economic features I observed is a very healthy free cash flow — off the back of a low capex investment — of $37 million a year free cash after tax, annually, for 16 years,” Taplin adds.

“But we know the resource has been extended since that Scoping Study was done, so we’re probably looking at about $37 million free cash after tax for closer to 20 years.”

Heavy Minerals has now launched a Pre-Feasibility Study for Port Gregory, which is due for completion by the end of this year.

The Red Hill Project, on the other hand, lies roughly 37km south of Port Gregory. Less advanced, it has not yet been the subject of resource estimation, but nevertheless hosts an exploration target — announced in May 2023 — of between 90 million and 150 million tonnes at 4.1% to 5.4% THM.

Red Hill was the focus of a 48-hole aircore drilling program in January 2023, with results measuring up to 60m at 6.8% THM.

“We’ve already developed an exploration target at the Red Hill tenement. Further south, we’re doing investment in a contiguous tenement, and investment in another tenement to the north of Red Hill as well. So there are significant expansion opportunities,” Taplin says.

“What would likely play out is replicated mill sites. We’d have a mill up at Port Gregory, and then we’d replicate what we’ve built, with all of the lessons carried over, and develop another processing facility at one of those other tenements. But substantial expansion opportunities exist, and we’ve been negotiating land access agreements in order to do further exploration on those tenements and prove up some resources.”

Inhambane

Situated on the border of Mozambique’s Inhambane and Jangamo districts, the Inhambane Project is owned 70% by Heavy Minerals and 30% by Galilei LTDA, which will be free-carried to a decision to mine.

“They’re businessmen, Mozambican businessmen, and have got other interests in the resource sector in Mozambique and possibly beyond,” Taplin explains.

“They’re quite enthusiastic to see the project progress, and are looking to develop a number of proposals with us to advance that asset as well. We’re quite optimistic that there’s a pathway forward to develop Inhambane.”

Though it consists of a single mining concession application, lodged on 11 March, 2020, Inhambane hosts a JORC-compliant resource measuring 90 million tonnes at 3.0% THM. It also sits directly adjacent to Rio Tinto’s (ASX:RIO) Mutamba Project, which had until late-2021 been held in partnership with London-based Savannah Resources (AIM:SAV).

“When I was up there, there’s also a pilot plant being run by our neighbours at Rio Tinto, which is indicative of the quality of the resource and quality of the mineral sands. It’s good to see another developer actually realising an asset there, albeit a pilot plant at this stage,” Taplin adds.

“The fact that they’re prepared to process the material gives us confidence that there’s a transportation pathway for that product to market as well. It’s good to be a fast follower in some of these cases and let others pioneer some of those challenges. So all of that bodes well for the development of Inhambane.”

‘Real hard rock miners would laugh at what we call mining’

The major benefit of these projects, Taplin explains, is the low capital expenditure required to get them up and running.

“I go to these investor conferences and have a look at some of the other projects that are being developed. The starting capex for these is $300 million for a small project, but typically $500 million-plus, and there are people that are chasing $1 billion on the market,” Taplin says.

“We’re looking for $100 million capex — orders of magnitude less than what other developers are looking for. When you JV and when you bring other partners in, it’s normally because you’re looking for a funding pathway for these projects. My view is, to the fullest extent possible, we’ll try and develop these ourselves wherever we’ve got a relatively small sticker price.”

Though the Port Gregory Scoping Study cited capital expenditure of $110 million, Taplin often waves the lower figure of $100 million around — proof of his faith that Heavy Minerals can do things even cheaper by the time it reaches production. 

But it begs the question: how can the company do it all for “orders of magnitude less” than other developers?

The answer lies in the simplicity of Heavy Minerals’ projects. With a straightforward processing flow sheet, and small processing facilities handling just two to three million tonnes of product a year, it’s “something you can wrap your arms around.”

“We’re mining sand. Real hard rock miners would laugh at what we call mining,” Taplin chuckles.

“We’re in a little sandpit moving sand around. You don’t need to blast this material. It’s got low breakout forces. There’s low wear and tear on ground-engaging tools moving this sand from A to B. All of that, be it capex or opex, contributes to a low-cost operation. It’s small volumes, but a high-value product. Combined, that generates high revenues, low costs, and healthy margins.”

Finding buyers for that product doesn’t seem to be much of an issue either.

In March, Heavy Minerals signed a non-binding off-take agreement with Abrasive Blasting Service & Supplies (ABSS). Over an initial three-year period, ABSS will purchase 15,000 tonnes of Port Gregory garnet per year for distribution to sand blasting and water jet cutting markets across Australia and New Zealand.

“ABSS is one of the larger suppliers of blasting hardware, but also abrasive materials. They saw the opportunity to secure some of the highest quality garnet in the world for the domestic market, and rapidly worked with us to put in place a memorandum of understanding, a non-binding off-take,” Taplin says.

“Within the next 12 months, we’ll secure a binding agreement. We’ve just got to land on the price point for the product.”

Heavy Minerals has also been attracting international interest, having recently attended a conference in the United States at which “lots of parties were interested in securing more of our product.”

The road to production

For now, Taplin and the rest of the Heavy Minerals team aren’t getting ahead of themselves.

In six months’ time, it’s the Pre-Feasibility Study they want done, with a Bankable Feasibility Study primed to kick off shortly thereafter. From there, it’s a matter of securing a final investment decision from the board, along with the relevant permits and construction contracts.

“The priority is Port Gregory, and finishing off that Pre-Feasibility Study, moving into a Feasibility Study, getting a mine stood up, generating some of that cash flow I mentioned earlier, but at the same time, advancing Red Hill,” Taplin explains.

“And at the same time, investing in and retaining those neighbouring tenements, which will provide us with optionality. And, of course, we’ve got the project over in Mozambique, too, which is also moving ahead. So there are a number of irons in the fire, but the priority is to realise the Port Gregory Project as soon as we can.

“We’re going to be producing by 2027 — have the plant constructed and mine developed so we’re producing in 2027.”

Write to Oliver Gray at Mining.com.au

Images: Heavy Minerals
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Written By Oliver Gray
Originally from Perth, Oliver has a keen interest long-form journalism. He has written for a number of publications and was most recently Contributing Editor of The Market Herald’s opinion section, Art of the Essay.