2Q 2017 OPERATIONS REVIEW

MDL's primary asset is a 50% interest in the TiZir joint venture (TiZir), which owns the Grande Côte mineral sands operation (GCO) in Senegal, West Africa and the TiZir Titanium & Iron ilmenite upgrading facility (TTI) in Tyssedal, Norway. ERAMET of France is MDL's 50% joint venture partner in TiZir.

KEY POINTS

GCO

  • Record quarterly ore tonnes mined and heavy mineral concentrate (HMC) produced

  • Record quarterly ilmenite production

  • Mine optimisation initiatives delivering positive results

  • Fourth successive quarter of positive free cash flow

    TTI

  • Production continues according to plan

  • 2Q 2017 titanium slag production rate represented 86% of the expanded capacity target of 230,000t per annum

  • Sales volumes largely in line with production

    TiZir Corporate

  • Refinancing of US$275m corporate bonds maturing in September 2017 complete

    Market

  • Positive developments continue in the zircon and titanium feedstock markets

GCO

GCO mining operations sustained the higher runtime and throughput rates achieved in both 4Q 2016 and 1Q 2017, resulting in the third successive quarter of record total ore tonnes mined (11,793kt) and a new quarterly record for HMC production of 204.2kt, a 5% increase over the previous record achieved in 4Q 2016. Compared to 1H 2016 results, HMC production was 23% higher in 1H 2017 at 344.6kt whilst ore mined was 18% higher at 23,454kt.

The record mining performance in 2Q 2017 is a direct result of the continued focus on mine optimisation initiatives at GCO. Throughput rates increased to 6,802tph in 2Q 2017, a 5% increase from 1Q 2017 and a 12% increase compared to the 2016 average. Average runtime declined slightly during the quarter to just over 79% reflecting an extended maintenance shutdown in April.

Compared to 1H 2016, average runtime for 1H 2017 of 81% was 12% higher, whilst throughput was 6% higher at 6,648tph in 1H 2017.

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The graph below demonstrates the continued improvement of the mining operation since commissioning in 2014:

Note: Operating time and throughput for 2014, 2015 and 2016 represent annualised figures for each calendar year.

The mineral separation plant (MSP) continued to operate near design capacity with high plant availability. The increased production of HMC in 2Q 2017 generated record quarterly ilmenite production (126,030t). Zircon production (16,203t) was only marginally below the record achieved in 4Q 2016 (16,462t).

The strong performance of the MSP throughout 1H 2017 is demonstrated by the increase in production of all finished goods, in particular ilmenite (13% higher than 1H 2016) and zircon (15% increase compared to 1H 2016). The introduction of medium grade zircon sands in 1Q 2017 - which has been well received by global customers - has broadened GCO's capacity to take advantage of improving zircon prices.

GCO production volumes

100% basis

2Q

2016

3Q

2016

4Q

2016

1Q

2017

2Q

2017

1H

2016

1H

2017

Mining

11,793

19,874

23,454

Ore mined

(kt)

10,291

8,071

11,258

11,661

HMC produced

(kt)

138.9

140.0

194.1

140.5

204.2

279.6

344.7

Finished goods production

126,030

199,964

225,430

Ilmenite

(t)

92,783

96,503

119,882

99,400

Zircon

(t)

13,608

11,844

16,462

11,688

16,203

24,321

27,891

Medium grade zircon sands

(t)

-

-

-

7,179

2,927

-

10,106

Rutile & leucoxene

(t)

2,524

2,192

3,042

2,152

2,384

4,430

4,536

GCO sales volumes

100% basis

2Q

2016

3Q

2016

4Q

2016

1Q

2017

2Q

2017

1H

2016

1H

2017

Sales volume

129,713

183,650

211,349

Ilmenite

(t)

118,649

84,857

142,408

81,636

Zircon

(t)

12,758

14,721

15,961

13,030

13,722

22,419

26,752

Medium grade zircon sands

(t)

-

-

-

2,711

8,043

-

10,754

Rutile & leucoxene

(t)

2,300

2,620

2,159

2,588

3,208

4,040

5,796

GCO sales volumes were stronger in 2Q 2017 in line with the increase in production of finished goods. In particular, ilmenite shipments of 129,713t represented the second highest quarterly volume on record.

Compared to 1H 2016, overall sales volumes were 21% higher in 1H 2017, driven by a 19% increase in zircon sales, a 15% increase in ilmenite sales and the sale of 10,754t of medium grade zircon sands.

GCO generated a new quarterly EBITDA record in 2Q 2017, leading to its fourth consecutive quarter of positive cash flows. This positive financial performance is the combined result of product price increases, strong production performance, ongoing cost reduction initiatives, and sound working capital management.

Social responsibility activities for the quarter focused on school infrastructure projects and the installation of street lights and market stalls in the local community of Meckhe. Further, construction of a community market at Mboro is in progress and is scheduled for completion in 3Q 2017. Development of agricultural land for project affected people has begun, with the local community taking occupancy. Each agricultural plot is equipped with irrigation facilities and farming activities have begun with the assistance of GCO in collaboration with Agence Nationale des Éco-villages and the Forestry Department.

Grande Côte Operations, Senegal

TTI

Production at TTI continues according to plan. Titanium slag production for 2Q 2017 was 12% higher compared to 2Q 2016 at 49.5kt, whilst high-purity pig iron production was 13% higher at 20.1kt. Production of titanium slag in 2Q 2017 represented 86% of expanded nameplate capacity (230,000t per annum), with May performance reaching production levels over 90% of expanded capacity. Encouragingly, the operation is consuming less coal and energy to achieve targeted production levels, which is enhancing the cost efficiencies of the operation. Further, optimisation of the crushing plant has resulted in higher chloride slag yields.

Production for 1H 2017 is slightly below that achieved in 1H 2016, with both titanium slag and high-purity pig iron production 2% lower compared to the corresponding period. Both periods were impacted by furnace restarts and production ramp up.

The graph below illustrates the strong ramp-up profile throughout 1H 2017:

Shutdown for furnace reline

Shipments of both titanium slag and high-purity pig iron in 2Q 2017 were broadly consistent with production levels. The quarter on quarter increase in sales volumes is primarily due to increasing production volumes as illustrated in the graph above. Shipments of both products have returned to 2Q 2016 levels and products continue to be well received by current and potential customers.

Titanium slag sales volumes for 1H 2017 are significantly below 1H 2016 due to the impact of shipping residual sulphate process titanium slag inventory during 1Q 2016 following the conversion to chloride slag in December 2015.

TTI physical volumes

100% basis

2Q

2016

3Q

2016

4Q

2016

1Q

2017

2Q

2017

1H

2016

1H

2017

Titanium Slag

Produced Sold

(kt)

(kt)

44.2

50.2

24.6

36.5

-

3.9

27.8

11.5

49.5

47.1

79.1

81.4

77.3

58.6

High Purity Pig Iron

Produced Sold

(kt)

(kt)

17.8

20.5

10.6

13.2

-

3.7

11.2

7.0

20.1

20.0

32.0

30.5

31.3

27.0

Note: 4Q 2016 production performance was impacted by furnace repairs following an operational incident in August 2016.

Mineral Deposits Limited published this content on 24 July 2017 and is solely responsible for the information contained herein.
Distributed by Public, unedited and unaltered, on 25 July 2017 07:19:05 UTC.

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