PERTH (miningweekly.com) – Mineral sands developer Sheffield Resources has warned of a cost blow-out at its Thunderbird project, in Western Australia, of some A$115-million.

The company on Friday said that the Stage 1 capital cost for the Thunderbird project was expected to be some A$463-million, compared with the A$348-million estimated in the 2017 bankable feasibility study (BFS).

The company said that some A$50-million of the costs would relate to scope changes to the project, while a transition from a build-own-operate model to infrastructure ownership would result in a further A$65-million increase to the costs.

The company told shareholders that nearly 80% of the increase in the capital cost would be covered by the proposed funding facilities from the North Australia Infrastructure Facility (NAIF), and as a result, the project would require only A$20-million of additional equity funding compared with the previous estimate.

This amount did not include ramp-up working capital, corporate overheads or financing costs.

Sheffield currently has a $175-million debt facility that will be provided by Taurus Mining Finance Fund and Taurus Mining Finance Annex Fund, as well as A$95-million worth of long-term debt facilities provided by the State of Western Australia, for which the NAIF has made an investment decision.

The NAIF funding will include a A$30-million project development facility and a A$65-million infrastructure development facility.

Sheffield said that the NAIF facilities would enable the company to acquire power generation, gas storage, accommodation facilities and other key infrastructure, as well as reduce the overall operating costs, following the removal of the build-own-operate-related capital recovery charges.

Meanwhile, all key permits necessary to start the development of the Thunderbird project are in place, and the company is in the process of progressing an engineering, procurement and construction (EPC) contract to de-risk the project development.

“We are delighted with the progress made by the Sheffield team to continue to de-risk and improve the basis for the development of the world-class Thunderbird project,” said Sheffield MD Bruce McFadzean.

“The NAIF facilities provide us with a fantastic opportunity to capture important improvements to the BFS. Firstly, we have significantly improved plant throughput and operability, while in-sourcing our infrastructure requirements enables us a reduction to our life-of-mine operating costs with improved margins.

“With a mine life of 42 years, this makes Thunderbird a financially more robust project.”

Over its 42-year mine life, Thunderbird is expected to deliver 76 100 t/y of premium zircon, 68 500 t/y of zircon concentrate, 387 800 t/y of ilmenite and 229 800 t/y of titano-magnetite.