Image Resources NL (ASX:IMA) is finalising the award of a contract for constructing the site entry intersection for its zircon-rich Boonanarring Mineral Sands Project in the North Perth Basin.
Importantly, the issue of this contract will be the first project construction related contract for Boonanarring, signalling the impending start of site activities.
This contract will enable the contractor to finalise planning and schedule mobilisation to Boonanarring to initiate construction.
Iluka Resources increases Zircon reference price by 15%
The decision to issue this contract comes on the heels of a recent move by Iluka Resources (ASX:ILU) to increase its Zircon reference price by nearly 15% to US$1,410 per tonne effective 1 April 2018.
This price increase further enhances the overall economics of the Boonanarring project given that Iluka’s price for premium grade zircon in China will be used to determine the market price for Image’s product.
READ: Image Resources delivers 60% increase in proved reserves at mineral sands project
Last year, Image upgraded the total tonnes of proved ore reserves at Boonanarring by 60% from 5.8 million to 9.3 million tonnes, at a higher concentration of zircon (23.2%).
Higher price compared to the bankable feasibility study
It is worth noting that Zircon represents more than 70% of total revenue from the Boonanarring Project.
The new zircon price is 8% higher than the zircon price forecast in Image’s bankable feasibility study (BFS).
Image’s BFS estimates a pre-tax net present value (NPV) of $135 million for the Boonanarring project with a payback period of 22 months.
If overall average life-of-mine commodity prices increase by just 10% above the projected prices used in the BFS, the NPV of the project will increase by nearly $60 million to over $190 million.