Diatreme’s flagship project, the Cyclone Zircon Project in Western Australia’s Eucla Basin is considered the largest undeveloped high-grade zircon project in the Basin.
Discovered in 2007, the project is located along the Barton shoreline within the Wanna Lakes area of the northern Eucla Basin, 25 kilometres from Western Australia’s state border with South Australia and 220km north of the transcontinental railway.
The Cyclone deposit occurs within adjoining tenements M69/141 (Cyclone), held by wholly owned subsidiary, Lost Sands Pty Ltd and R69/1, (Cyclone Extended), held by Diatreme Resources.
Following the acquisition of the Cyclone Extended Heavy Mineral Resource, Cyclone’s JORC Mineral Resource (Measured and Indicated) has been estimated at comprising 211 million tonnes at 2.3% heavy minerals (HM) (1% cut-off grade), containing 4.8 million tonnes HM (refer ASX announcement 9 April 2015). This includes a Measured Resource of 156Mt at 2.4% HM and an Indicated Resource of 55Mt at 1.8% HM (both at 1% HM cut-off grade).
In January 2017, Diatreme updated the Cyclone Mineral Resource estimate to 203Mt at 2.3% HM (1% HM cut-off grade) containing 4.70Mt of HM (refer ASX announcement 27 April 2017).
In November 2014, Western Australia’s Department of Mines and Petroleum granted a Mining Lease for the project (ML69/141), which followed the signing of a Project Agreement with the traditional owners, the Pila Nguru Spinifex People. In January 2017, the project received final ministerial consent, allowing for the development of a mineral sands mine and associated infrastructure.
In January 2018, Diatreme signed Cooperation and Consulting Services agreements with leading mining services company China ENFI Engineering Corporation (ENFI), for the completion of Cyclone’s definitive feasibility study (DFS). ENFI, which is backed by one of the world’s largest mining groups, China Minmetals, also agreed to use its network within China’s state-owned enterprise and banking sectors to assist in sourcing potential project investors, offtakers and project debt funding.
In November 2018, Diatreme released a positive definitive feasibility study (DFS) for the Cyclone project which highlighted the potential for the asset to be a profitable new WA zircon mine.
The results included an estimated net present value (NPV) of A$113m, an internal rate of return of 27% (after tax) and capital payback within the first 2.7 years of an estimated mine life of 13.2 years. The capital cost was slashed to A$135m, considerably lower than the previous estimate of A$161m. The results were based on life of mine production of 1.94Mt of heavy mineral concentrate (HMC), containing 936kt zircon and producing 772kt of zircon final product.
In January 2019, Diatreme appointed specialist corporate advisers, Blackbird Partners, to facilitate and optimise commercial outcomes from Cyclone for the benefit of shareholders.
In August 2019, Diatreme signed a Memorandum of Understanding with China's Hunan Rare Earth Industry Group (HRE) for potential life of mine offtake of HMC product and potential investment into the project. An Expression of Interest was also received from MCC International Corporation Ltd (MCC), part of the leading China Minmetals Group, for the provision of engineering, procurement and construction services, in addition to sourcing suitable project finance to facilitate investment.
Cyclone's potential to deliver value has also been boosted by the identification of a potential additional product, the strategic rare metal hafnium (HFO2), within the zircon component of the HMC. Global demand for hafnium is on the rise amid supply constraints following Japan's post-Fukushima nuclear plant shutdowns, with Diatreme working with HRE and other potential development partners to further explore this opportunity.
How We've De-Risked the project
Water supply discovered and test bore completed (refer ASX announcement 11 November 2013)
Native Title and Mining Agreement (refer ASX announcement 17 November 2014)
Mining Lease granted by the WA Department of Mines and Petroleum (refer ASX announcement 24 November 2014)
Extension of Cyclone’s projected mine life to 14 years at a mining rate of 10 million tonnes per annum, following the acquisition of Cyclone Extended (refer ASX announcement 14 December 2015)
Independent project enhancement and update study reveals robust financial robults (refer ASX announcement 15 June 2016)
Environmental approvals granted by WA Environment Minister (refer ASX announcement 10 January 2017)
China ENFI Agreements signed in January 2018, for the completion of the DFS and sourcing of potential project investors, offtakers and project lenders