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Interview: Sierra Rutile Sees Mine Expansion Plan Cost $200M

By: SEM on July 11, 2012.

LONDON – Sierra Leone–focused titanium miner Sierra Rutile Ltd. (SRX.LN) expects its plans to double production over the next three years and it will cost around $200 million funded from cash generation, as it seeks to take advantage of high prices in an economic environment where funding is difficult and expensive to get, its chief executive said Monday.

As a result of its three-pronged expansion plan, group production is expected to rise to 120,000 metric tons in 2013 from an anticipated 80,000 tons this year. By 2015, the company expects to produce 200,000 tons a year.

Declining supply and rising demand have meant that Rutile prices have more than quadrupled from last year, Chief Executive John Sisay told Dow Jones Newswires. He noted that in the first half of this year the miner averaged around $2,650 a ton for its Rutile compared with around $650 a ton during the whole of 2011. Although he expects prices to fall back a bit, in the longer term, he doesn’t anticipate that prices will sink below $1,500 a ton.

The company’s expansion plans, which Mr. Sisay said were put into motion in anticipation of the price rise, firstly includes the construction of a dry mining plant that should add around 30,000 tons of production a year for more than six years. Mr. Sisay said he expects the plant to be commissioned in October and although the cost per ton of dry mining is higher than its usual dredge mining, the high current Rutile prices should mean the cost of the project is recovered within a year.

Secondly, Sierra Rutile plans to retreat tailings dumps at its mine, as historic, less advanced mining techniques left the waste stockpiles relatively rich in Rutile, which at current prices are deemed economical to extract.

Mr. Sisay said he expects the tailings to add another 20,000 tons of production a year for at least the next four years. Again, he expects the cost of undertaking the plan to be recovered within 12 months.

In October 2011, the company estimated that the combined cost of the dry mining and tailings treatment plans will amount to $52 million. Mr. Sisay Monday didn’t comment on cost expectations other than to say that taken together, the three parts of the expansion plan will cost around $200 million.

The company’s third prong is to build another dredge, like the other, with capacity to produce 80,000 to 100,000 tons a year. A study examining the technical feasibility is currently being prepared and expected to be released shortly with an investment decision anticipated late in the third quarter or early in the fourth quarter, he added. The CEO anticipates construction to take around 18 months.

Despite the large amount of investment required, Mr. Sisay is also examining dividend options and his plans are for Sierra Rutile to start paying an annual dividend, which could even commence before the company hits its annual production target of 200,000 tons by 2015, he said.

As well as the production expansion, Mr. Sisay noted that the company could also see an upgrade to its resources estimate towards the end of this year, in light of further exploration undertaken through 2012.

In February 2011 the company said its resource stood at 600 million tons, confirming Sierra Rutile’s mine as one of the largest primary rutile deposits in the world. The mine has historically produced 30% of the world’s rutile and has a mine life of over 70 years at 2011 production rates, according to the company’s website.

By Iain Packham

2 July 2012

Dow Jones International News

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Interview: Sierra Rutile Sees Mine Expansion Plan Cost $200M

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