Image Resources (ASX: IMA) continues to define its Boonanarring Project as a quicker, low risk path to production of heavy mineral concentrate and has added A$1.9 million cash to the kitty to support further drilling and the ongoing Feasibility Study.
First production is scheduled for early 2014 for the North Perth Basin mineral sand project, which hosts the Boonanarring Project.
The company was strongly backed by investors in a recent capital raising, with the placement at $0.30 per share to sophisticated and professional investors a positive outcome in the current market, given it was at the prevailing market price with no discount.
Image has also completed drilling of the Northern Section of the 12 kilometre-long Boonanarring Project, with results likely to be highly anticipated as it adds a further JORC Indicated Resource to the company’s inventory at Boonanarring.
Preliminary assessment of these results suggests that the mineralisation is of similar grade, assemblage and depth as that seen in the defined resource.
George Sakalidis, executive exploration director, told Proactive Investors today Image had extended the Boonanarring area and it looks like it continues into the central area.
“We’re now thinking that this deposit is about 12 kilometres long, which will be probably our biggest deposit, twice as big as the main one called Atlas.
“We anticipated that it continued but we hadn’t drilled it before so the drilling verifies the interpretation, and it’s important because it’s one of our main deposits. So both Atlas and Boonanarring are shaping up.”
Image has also begun drilling immediately to the south, an area which is subject to a recently announced option to purchase.
Importantly, visual estimates from this partially completed drilling program indicate that the geophysical interpretation of high grade mineralisation, already confirmed to the north, extends over the strike length of the area drilled so far, for at least 1.2 kilometres.
Drilling over the remainder 1.8 kilometres of the interpreted strike within the option area is continuing.
The current drilling program, due for completion in the September quarter, is expected to substantially upgrade and increase the size of the Boonanarring resources.
Feasibility Study progress
Feasibility study work continues focusing on seasonally dependent environmental and hydrological studies and other activities that are time critical to the targeted mine start-up date.
This includes the collection of samples for bulk sample testing and drilling at the initial mining target, the high grade Boonanarring heavy mineral deposit, with the aim of expanding the resources.
Early cash flow potential
Fast tracking the development of Boonanarring would generate positive cash flow earlier than indicated by the Scoping Study, which excluded the deposit due to insufficient drilling at the time, with Image potentially beginning production by early 2014, if not sooner.
While recent technical studies have shown that, solely on an operating cost margin basis, Atlas is still a more attractive target than Boonanarring based on average grade, overall Boonanarring offers a quicker and lower risk route to production – and provides short payback even on average grades.
If the expected higher grades in the sections currently being drilled are confirmed, then this approach will be reinforced.
The development of Boonanarring would provide the operating platform and cash flow for the staged development of the dry mill at Boonanarring and satellite mining operations at Atlas and the other projects.
Boonanarring is one of the largest undeveloped high grade heavy mineral resources in Australia, with existing infrastructure and upside exploration potential.
Next steps at Atlas
Image plans to bring Atlas online as a parallel mine and wet plant as soon as possible, to further improve the overall project economics.
Drilling recently completed at the southern extension of the Atlas resource, which remains another high priority for Image, appears likely to extend the length of that resource by at least 700 metres. Results from this drilling are being collated.
Ramp up in focus of North Perth Basin assets
Image plans to divest its non-core mineral assets, including its gold tenements in the Erayinia area, to focus on its core North Perth Basin mineral sand project.
Sakalidis said the company is currently in discussions with parties regarding the divestment of the first round of non-core assets.
“We have at least four or five different packages of land that we’re looking at divesting to maintain the focus on the mineral sands.”
The company is closely monitoring its expenditure and programs while examining a number of financing options to underpin completion of the Feasibility Study and, as targeted, deliver first production in 2014.
Analysis
Image has a strong project with robust economics with its North Perth Basin mineral sands project.
The resource inventory currently stands at 7.9 million tonnes of heavy minerals in 11 separate JORC Resources, with current drilling programs directed at shallow high grade resources containing 3.1 million tonnes at an average grade of 6.5% heavy minerals that are rich in zircon.
Image’s investment case is further enhanced with the expected increase in mineral sands prices and demand.
The North Perth Basin Feasibility Study is due for completion by the end of 2012, acting as a catalyst for re-rating.
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