Rutile spin-off, Sierra Rutile is hoping to take a final investment decision on the Sembehun project, in Sierra Leone, within the next 18 months and following its listing on the ASX.

Mineral sands miner Iluka is in the midst of demerging Sierra Rutile, which also holds the Area 1 operation in the African nation.

Iluka shareholders will vote on the demerger on July 22, under which Iluka shareholders will be entitled to receive one share in Sierra Rutile for each share held in Iluka on the record date. At the time of the demerger, Sierra Rutile will have some 424.2-million shares on issue, and the company will trade under the ticker SRX.

The directors of Iluka have unanimously recommended that vote in favour of the proposed demerger, after an independent expert concluded that the demerger would be in the best interest if Iluka shareholders.

Sierra Rutile MD and CEO Theuns de Bruyn said in a briefing on Wednesday that the company’s immediate focus post the demerger would be to bring the Sembehun project online, and to extend the operating life at the Area 1 project.

Sembehun is considered to be one of the largest and highest grade natural rutile deposits in the world. A prefeasibility study for the project found that a capital investment of $337-million would be required for the project, with $284-million to be spent on the Phase 1 development, and a further $52-million on the Phase 2 development.

Over the 13-year mine life at Sembehun, annual rutile production will peak in year six of the operations, at 205 000 t, steadying to between 190 000 t/y and 160 000 t/y over the majority of the mine life, while ilmenite production is expected to remain at some 75 000 t/y over the majority of the project’s life.

Operating costs for the Phase 1 project is estimated at some $1 048/t, while operating costs for phase to would decrease to $818/t.
De Bruyn said on Wednesday commissioning of the Phase 1 operation would start in 2025, while commissioning of the Phase 2 operation is currently planned for October 2027.

The phased approach is expected to see the development of Sembehun integrated with the remaining operations at Area 1, with mining activities expected to transition to the Sembehun group of deposits over time.

The development approach is expected to minimize pre-production capital expenditure and would maximise Sierra Rutile’s ability to use cash flows generated from the Area 1 operation to assist in funding the development of Sembehun.

Finance Director Martin Alciaturi told Mining Weekly Online that financing options to fund the Sembehun development was near limitless given the long-standing relationship with current offtake partners at the Area 1 operation, Sierra Rutile’s sole ownership of the asset, and the fact that the company had no existing debt facilities.

He also pointed out that Area 1 was cash generative, and had a remaining mine life of some four years.

Sierra Rutile is currently working to extend the mine life at Area 1, with a drill programme focused on converting the resources at the Pejebu and Ndendemoia deposits to ore reserves.