Sierra Rutile boosts economics for African production

Sierra Rutile (ASX:SRX) has released the results of a Definitive Feasibility Study (DFS) for its Sembehun project in Sierra Leone that it says will substantially improve the financial metrics of the company’s mineral sands production. 

The DFS outlines a 14-year operation targeting an annual production rate of 14.4 million tonnes (Mt) each year to produce an additional 2.2Mt of rutile over the life of the mine.

Rutile contains titanium dioxide, which is used to produce titanium alloys because of its light weight and strength. Titanium dioxide is a pure white substance which is why it is also used as a pigment in paints, plastics, sunscreen, toothpaste and paper. 

The latest study reduced the capital outlay by 11%, or US$36 million ($55 million), to $301 million compared to the 2022 Prefeasibility Study (PFS). 

Meanwhile, the Sembehun project is estimated to have a post-tax net present value of US$408 million and deliver a post-tax internal rate of return of 27.8%, generating US$1.7 billion in earnings before interest, taxes, depreciation and amortisation over the life of mine.

Payback is expected less than five years from project completion. 

The DFS is based on a long term rutile price of US$1,391/t, with steady state cash production costs of US$600/t (net of credits).

“The Sembehun DFS clearly demonstrates the significant value the project holds, and the ability of Sembehun to fundamentally change the cost base and economics of mineral sands production by Sierra Rutile,” Managing Director and CEO Theuns de Bruyn says.

“The current fourteen-year mine life also demonstrates that this is a long-term project with the potential to contribute economic benefits over an extended period of time to both Sierra Rutile and our local stakeholders in Sierra Leone.”

Sierra Rutile says Sembehun, which is one of the largest and highest grade natural rutile deposits globally, will significantly extend the company’s mine life, materially lower its cost structure, leverage existing infrastructure, and generate significant long term value.

The project has a reserve of 173.7Mt at 11.46% rutile and will also produce 1.2Mt of ilmenite and 107,000t of zircon as by-products.

Shares edged up over 4% to $0.125 on Friday (12 April 2024). 

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Written By Angela East
Managing Editor Angela East is an experienced business journalist and editor with over 15 years spent covering the resources and construction sectors and more recently working as a communications specialist handling media relations for junior resources companies.