Sheffield Resources Limited

• Sheffield Resources Limited advised that Kimberley Mineral Sands (KMS) has completed its maiden bulk shipment of approximately 10,000 metric tonnes of non-magnetic (zircon) concentrate from its Thunderbird Mineral Sands Mine in Western Australia.
• The shipment, which also included an additional 1,100 metric tonnes of bagged non-magnetic (zircon) concentrate, has departed the Port of Broome and will be delivered to an existing offtake customer.

• Sheffield Resources has entered into a share subscription agreement with Capital Metals Plc (Capital Metals) (AIM: CMET), the owner of the Eastern Minerals Project in Sri Lanka, whereby Sheffield shall subscribe for 34,500,000 ordinary shares of Capital Metals for total consideration of GBP 1,250,000.
• Following completion of the Agreement, Sheffield will own approximately 10% of the issued capital of Capital Metals, with the Company also securing a 12 month share option to acquire a further 17,250,000 shares for total consideration of GPB 843,750, enabling Sheffield to increase its interest in Capital Metals to approximately 14% of total issued capital.
• Sheffield and Capital Metals have also agreed conditional terms to fund project development, providing the Company with the opportunity to acquire up to 50% of the Eastern Minerals Project in Sri Lanka.
• Sheffield expects to fund the initial share subscription, any subsequent option exercise, and any pre-FID investment at the project level from existing cash reserves.

Arrowhead is updating its coverage on Sheffield Resources Limited (Sheffield, SFX, or the company) with a fair value of value of AUD 2.0 per share in the low-bracket scenario and AUD 2.4 per share in the high-bracket scenario (share price on March 12, 2024: AUD 0.58), which was derived using a blended valuation.

• Sheffield Resources is an Australian mineral exploration and development company that aims to create a diverse portfolio of mineral sand assets globally. The company’s primary focus is its flagship project – the Thunderbird Mineral Sands Project.
• SFX achieved the first ore production at the Thunderbird project in October 2023, several weeks ahead of its Final Investment Decision (FID) schedule, within the original capex budget of AUD 484M.
• The company delivered its first and second customer shipments of 300 Mt and 5,100 Mt of bagged non-magnetic (zircon) concentrate in January 2024. Further shipments of magnetic (ilmenite) concentrate and non-magnetic (zircon) concentrate are expected over the coming months as the Thunderbird mine continues to ramp up in 2024.
• During Q2 2024, Sheffield mined 740,593 tonnes of ore with an average heavy mineral (HM) ore mined grade of 13.3%. The company produced a total saleable concentrate of 34,349 tonnes during the quarter including 26,910 tonnes of magnetic concentrate, 7,067 tonnes of non-magnetic concentrate and 472 tonnes of paramagnetic concentrate.
• SFX has secured 80% of its Stage 1 revenue through binding take or pay-offtake agreements for the first five years of production.
• As of December 31, 2023, Sheffield had cash reserves of AUD 23.2M, and is fully funded to execute its proposed work program until the end of FY 2025 with no further equity infusion required for Stage 1 of the Thunderbird project. 

Highlights:

CORE ASSET:

• Thunderbird Mineral Sands Mine (50% interest)
  • Production commenced, ramp up underway
  • A$75m cash & undrawn facilities at the start of 2024
  • On target for first bulk customer deliveries in Q1 2024, first shipment in bags completed
  • Stage 1 NPV8 $842m1 Sheffield share $421m – c.100% above current market capitalisation

KMS GROWTH:

• Enhance KMS through
  • Thunderbird Stage 2, incremental NPV8 of $548m1
  • Additional zones of mineralisation along a 120 km trend
  • East Derby construction sand opportunity

SOUTH ATLANTIC:

• South Atlantic Option
  • Exploration Target ranging between 500 to 720Mt at 3.2 to 4.0% HM2
  • Exploration Targets comprising sulfate ilmenite and zircon
  • Option Agreement executed with US$2.5m contribution to fund de-risking activities

FUTURE GROWTH:

• Review of other quality mineral sands opportunities
  • Targeting advanced projects with potential to unlock value by applying Sheffield’s mineral sands and funding experience

Highlights:

• Sheffield Resources Limited (ASX: SFX) announces the completion of a shipment of approximately 5,100 metric tonnes of bagged non-magnetic (zircon) concentrate from its Thunderbird Mineral Sands Mine in Western Australia.
• The bags were directly placed in the hold of a bulk vessel from the Port of Broome and are bound for existing overseas offtake customers, with revenue expected in February 2024.
• Additional shipments of bagged non-magnetic (zircon) concentrate are scheduled throughout the March quarter.
• The Kimberley Port Authority is progressing final state regulatory clearances to enable the commencement of bulk shipments of non-magnetic and magnetic concentrate via the Port of Broome in the current quarter.

Thunderbird Mineral Sands Mine (Sheffield interest – 50%)

• Thunderbird mine commenced mining and processing operations
• Construction activities concluded during the quarter on time and within final investment decision (FID) budget of $484m
• Zero lost time incidents throughout construction, commissioning and initial operations
• Mining and processing ramp up performance above FID assumptions
• First export shipment of approximately 300 metric tonnes of non-magnetic concentrate dispatched following the end of the quarter
  

South Atlantic Project

• Drill line clearing and rig construction continued, with drilling to commence in the current March quarter
• Hatch appointed to undertake PFS for South Atlantic Project, with PFS scheduled for completion mid-2024
• Bujuru bulk sample test work results due in the current March quarter

Corporate

• Cash balance of $23.2m as at 31 December 2023 (unaudited)
• Investor & Shareholder Webinar – Tuesday, 23 January 2024 (refer link herein)

Highlights:

• First shipment of non-magnetic (zircon) concentrate
• Early start of production enabled bagged shipment ahead of planned bulk shipment
• Commencement of bulk shipments expected as planned during Q1 2024
• Ramp up proceeding well with quarterly production statistics to be provided in the upcoming December quarterly report

Highlights:

CORE ASSET

• Thunderbird Mineral Sands Mine (50% interest)
  • Production commenced, ramp up underway
  • A$60m cash buffer at start up
  • On target for first customer deliveries in Q1 2024
  • Stage 1 NPV8 $842m, generating ~$120m pa of cash to Sheffield following debt repayment (mid FY2027 in the base case)

KMS GROWTH

• Enhance KMS through
  • Thunderbird Stage 2, incremental NPV₈ of $548m
  • Additional zones of mineralisation along a 120 km trend
  • East Derby construction sand opportunity

SOUTH ATLANTIC

• South Atlantic Option
  • Exploration Target ranging between 500 to 720Mt at 3.2 to 4.0% HM²
  • Exploration Targets comprising sulfate ilmenite and zircon
  • Option Agreement executed with US$2.5m contribution to fund de-risking activities

FUTURE GROWTH

• Review of other quality mineral sands opportunities
  • Targeting advanced projects with potential to unlock value by applying Sheffield’s mineral sands and funding experience