Mar. 3, 2010
Diatreme Resources Limited announced today the completion of a scoping study on its Cyclone Deposit in Eucla Basin, Western Australia.
The study showed the potential for a profitable zircon mine producing about 280,000 tonnes of concentrate annually at a mining rate of 9 million tonnes ore per annum.
Executive Chairman Tony Fawdon said the study forecast an annual average profit of $50 million for 10 years at the world-class Cyclone Deposit, with projected capital expenditure of $311 million.
"Diatreme is excited by the results of the scoping study, which show the potential for the Cyclone Deposit to serve as a new source of zircon and other highly valuable heavy minerals," Fawdon said.
"Due to the positive results, DRX is launching pre-feasibility studies with the aim of developing Cyclone into a profitable mining operation by 2014."
Located in the northern portion of the Eucla Basin, the Cyclone Deposit contains an attractive mineral assemblage of 33% zircon, 12% rutile and 27% leucoxene, in addition to 17% altered ilmenite and only minor amounts of slimes such as clay.
These features make it one of a rare number of new, high quality sources of heavy minerals potentially available to the global industry.
Zircon is a mineral sand used in the production of ceramics, including sanitary ware, tiles and tableware. It is also used in refractories, TV glass and foundry applications.
Zircon is the source material for zirconia and a range of chemicals used in high-tech applications, including fuel cells and abrasives. Zirconium metal is used in nuclear fuel rods, while zirconia is used in jewellery.
Global zircon consumption in 2008 was estimated at 1.3 million tonnes, with China the largest single consumer followed by Western Europe, North America, Japan and other countries.
The JORC resource for the Cyclone Deposit, excluding the recently identified overburden mineralisation as announced on 28 January 2010, currently comprises 98.4 million tonnes yielding 2.88 million tonnes heavy minerals.
Diatreme has conducted more than 42,500 metres of drilling at Cyclone, with the mineralisation covering an area up to 5 kilometres long and up to 2.5 kilometres wide. The deposit is believed amenable to typical mineral sands mining methods, and is low in slimes and induration, thereby reducing mining costs.
Costs are expected to be further reduced with the recent discovery of mineralisation grading up to 4% heavy minerals in the overburden.
Fawdon said recent zircon prices achieved by producers of more than US$900 per tonne showed the value of the resource, with analyst forecasts of constrained supply from 2013 set to result in significant price rises.
Current rutile prices average US$550 per tonne, with leucoxene up to US$300/t and ilmenite around US$100/t, depending on titanium content and impurity levels. Zircon prices are forecast to rise above US$1200/t by 2014.
"China has become the world's biggest consumer of zircon, and with its consistent double-digit economic growth and forecast growth in urban population to nearly 1 billion people in the next 15 years, the outlook for zircon demand from ceramics and other applications remains strong," Fawdon said.
Diatreme Resources shares rose 4.8% in trading today.
