Pathfinder Minerals (LON:PFP) has licences to mine 32,000 hectares of heavy minerals sands in Mozambique. The licence area is located approximately 50km south of Kenmare Resources' producing Moma mine and is known to contain the titanium dioxide (TiO2) minerals ilmenite and rutile and in addition, zircon. Today they announced the results of an initial scoping study estimating:
-- Run of Mine Production: 47 million tonnes per annum (tpa)
-- Llmenite 1,245 tpa, rutile 24,000 tpa and zircon 65,000 tpa
-- Gross revenues from production $246,493,000 per annum
-- Mine life: 30 years
According to the announcement, the direct capital cost was $533 million, the Internal Rate of Return (IRR) was 18.8%, and the Net Present Value (at a 10% discount rate) was $529 million. The metal prices used in the study were conservative. DuPont, a global leader in TiO2 production, has just put up the price of Titanium Oxide and Goldman Sachs is estimating further rises going forward. On the supply side, Pathfinder management believe that global supply of titanium dioxide (TiO2) and zircon will be in significant structural deficit by 2013, with only a limited number of known new sources of substantial supply. Titanium Oxide has a wide range of use from paint pigment to sunscreen to food colouring. Zircon is hard and durable and is mainly used in the decorative ceramics industry.
The next steps are to undertake confirmatory drilling and metallurgical test work to allow conversion of the historic mineral resource into a current estimate/commission a full feasibility study. The first products are expected to be extracted and sold in 2014 and the mine is expected to be at full operating capacity by 2015.
The market capitalisation is £48m and there is little cash in the bank. Nevertheless, assuming they can raise the necessary capital to keep the project moving and there are not too many of the usual delays and obstacles so often seen in the sector, there seems to be a chance to buy into a company potentially valued at £330m (i.e. the NPV of $529 million converted into Sterling) for £48m.
Disclosure: The Author has a holding in Pathfinder Minerals (LON:PFP)
