Mutamba Mineral Sands Project, Mozambique

Key Info

Savannah has been operating in Mozambique since 2013 and entered a Consortium Agreement with Rio Tinto in October 2016, to jointly define a potential dry mining heavy mineral sands (“HMS”) operation. The Agreement combined Savannah’s Jangamo Project with Rio Tinto’s adjacent Mutamba Project, which included three adjoining deposit areas (Jangamo, Dongane and Ravene), and the Chilubane deposit, located 180km to the south west, to create the new, world-class, Mutamba Project. 25 year Mining Licences (valid until 2044) were awarded on the three contiguous concessions covering the resource-bearing Jangamo, Dongane and Ravene deposits in December 2019/January 2020 while a Mining Licence application for the Chilubane concession remains under consideration by the Mozambiquan authorities.

The Project is located in the Gaza and Inhambane provinces of Mozambique approximately 450km northeast of the capital city of Maputo and benefits from excellent infrastructure, including road, power and access to the nearby ports of Inhambane and Maxixie approximately 40km away. The Project also benefits from Rio Tinto’s existing camp and equipment.

Savannah is the operator of the Project and may earn up to a 51% interest in the combined project as it moves towards production through completion of Scoping (completed in May 2017 and securing a 20% stake), Pre-Feasibility (underway to secure a 35% stake) and Feasibility Studies. In addition to providing its existing camp, facilities and associated equipment, Rio Tinto (or an affiliate) also has the rights to purchase 100% of production from the Project on commercial terms under the Consortium Agreement.

Mineral Resources and Additional Resource Target

The Project covers a large area of prograding, siliciclastic sediments and contains heavy minerals derived from the Limpopo River. Heavy minerals derived from this river system have been reworked over a long period of time and now appear in ancient and current beach deposits over much of the south east African coastline, forming a world-class HMS region.

The global Mineral Resource estimate for the Mutamba Project (Jangamo, Dongane and Ravene) currently stands at 4.4 Billion tonnes at 3.9% total heavy minerals ("THM") comprising both Indicated and Inferred material and containing ilmenite, rutile and zircon. The Resource includes a high-grade portion of 92Mt at 6.2% THM, which was defined at Ravene. Importantly, significant potential remains to expand the resource beyond its current boundaries, which will be the focus of future prospecting activities.

 

May 2017 Mineral Resource Estimate summary

Deposit/

Licence area

Resource

Category

Sand (Mt)

HM (%)

Ilmenite

(% in HM)

Ilmenite

(% in sand)

Rutile

(% in sand)

Zircon

(% in sand)

Jangamo

9228C

Indicated

1,780

3.8

62

2.4

0.06

0.11

Jangamo

9228C

Inferred

200

3.5

63

2.2

0.03

0.11

Jangamo

9735C

Inferred

65

4.2

60

2.5

0.08

0.15

Dongane

9229C

Inferred

1,400

3.8

61

2.3

0.07

0.10

Ravene

9229C

Inferred

900

4.1

56

2.3

-

0.10

Total

Indicated & Inferred

4,400

3.9

60

2.3

0.05

0.11

 

Project Concept and Development Strategy

Based on the prospectivity of the area and the significant resource potential defined to date, Savannah is confident that there is excellent potential to establish the Mutamba Project as a leading HMS producer. The mineralisation is amenable to dry mining and dredge mining in parts, with ilmenite being the dominant heavy mineral present. Savannah’s overall objective is to build, together with Rio Tinto, a commercial mineral sands presence in Mozambique, delivering, via Rio Tinto’s offtake, a stable supply of titanium feedstock to global markets.

Mineral sands industry expert TZMI was commissioned to conduct a Scoping Study to evaluate an initial phase, low capex, long life, dry mining operation. Key findings of the study, which was published in May 2017 include:

 Initial mine life ('LOM') of 30 years based on a resource of 451Mt at 6.0% THM (based on a conceptual mine plan utilising 33% indicated resource and 67% inferred resource

 Modelled production of 15Mtpa mined at a LOM strip ratio (waste/ore) of essentially zero (2:451)

 Average annual production of 456,000t of ilmenite and 118,000t of non-magnetic concentrate

 US$4.23 billion LOM revenue forecast based on Management Case Two (base case revenue of US$3.53 billion forecast)

 Pre-production capital expenditure of US$152 million plus US$74 million of contingency, EPCM (Engineering, Procurement, Construction Management) and spares, with identified opportunities that may reduce capital expenditure (based on conceptual estimate +/-35%)

 Considerable upside potential remains through cost refinements and further resource drilling

 Financial outcomes modelled on three key scenarios:

 

May 2017 Scoping Study headlines

 

Mutamba TZMI

Base Case Prices

Management

Case One

+10% Product Price

Management

Case Two

+20% Product Price

Ilmenite Price (FOB)

US$185/t

US$204/t

US$222/t

Nonmagnetic Concentrate (FOB)

US$250/t

US$275/t

US$300/t

Pre-Tax Free Cashflow (LOM)

US$1,007M

US$1,347M

US$1,686M

Pre-Tax Average Annual Free Cashflow

US$41M

US$52M

US$62M

Pre-Tax NPV (10% discount)

US$154M

US$245M

US$335M

IRR (pre-tax)

19%

23%

27%

Payback Period (pre-tax)

5yrs

4yrs

3yrs

Note: FOB = Free on board (shipping), LOM = Life of Mine (30 years)

Based on the positive outcome of the Scoping Study, preparations for a Pre-Feasibility Study ('PFS') into the potential development of the Mutamba Mineral Sands Project were commenced in August 2017. Following its work on the Scoping Study, TZMI was appointed to consult on this phase of work.

Alongside work on the PFS, a 20 tonne per hour pilot plant was constructed (commissioned in December 2017) to produce bulk samples of concentrate for metallurgical and product test work , and leading Mozambique environmental consultants, IMPACTO and ERM, were awarded the contract to conduct environmental studies for the Project.

In light of the extended review period undertaken by the Mozambiquan authorities during 2018 and 2019 on the Mining Licence applications made in 2018, work on the PFS was temporarily reduced. Following the award of the key Mining Licence Concessions in December 2019 and January 2020, Savannah is in the process of accelerating its work on the PFS again.

Completion of the PFS would see Savannah’s ownership in the joint venture increase from 20% to 35%. Assuming the PFS results support the positive conclusions of the 2017 Scoping Study, we expect to then complete a Bankable Feasibility Study which would lift our ownership in the Consortium to a final and majority position of 51%.

Mutamba Mineral Sands Project, Mozambique

Mutamba Pilot Plant Project: Week 20, Plant Commissioned, November 2017

Preparation Work for the Mutamba Pilot Plant Construction, September 2017

Mutamba Pilot Plant Construction, September/October 2017


Consortium agreement made with Rio Tinto in 2016 to define a dry mining operation for staged, early development

Project of world-class scale with Indicated and Inferred Mineral Resource Estimate of 4.4 billion tonnes at 3.9% THM - with significant exploration upside

2017 Scoping Study outlined an operation with average annual production of 456,000t of ilmenite and 118,000t of non-magnetic concentrate. Pre-Feasibility Study underway.

SAV can earn up to 51% in the Project and Rio Tinto may purchase 100% of heavy mineral production on commercial terms.

Three Mining Concessions awarded in December 2019/January 2020 covering the full 4.4 billion tonne resource.

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Note: The Mutamba Project includes three deposit areas: Jangamo, Dongane and Ravene. The Chilubane Deposit is located 180km to the south west of the Mutamba Project. The current resource statement includes only the Jangamo, Ravene and Dongane deposits.

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