Sheffield fails to attract project partner

Mineral sands company Sheffield Resources says it will scale back activities at its flagship Thunderbird project in Western Australia and seek ways to develop the project at a lower cost, after failing to secure a strategic partner.

Shares in the company slumped more than 14 per cent on the news to trade at 14 cents per share, as at 3:40pm AEDT.

Sheffield said cost reduction measures, such as scaled-back activities and reduced holding costs, would generate around $7.5 million in annualised savings and a cash runway into 2021.

The West Perth-based company will also suspend third-party project financing and corporate advisory related fees as well as restructure its board, executive management and employee positions.

Sheffield managing director Bruce McFadzean said the company had been unable to secure an acceptable equity funding solution for the construction-ready project, located on the Dampier Peninsula.

The company has put a hold on strategic partner and project financing strategies, and will investigate ways to develop the project under materially lower capital and corporate structure costs, which Sheffield says will enable a low risk entry into the mineral sands market.

Financing commitments from key project partners Taurus and Northern Australia Infrastructure Facility, as well as corporate advisors, will be suspended from the end of the March quarter until a final investment decision has been reached.

In late 2018, Sheffield received a $95 million loan from NAIF and a $US175 million ($A260 million) loan from Taurus Mining Finance to develop the project.

The cost of doing so was valued at $478 million - reduced by $101 million, as announced in the company's bankable feasibility study in mid-2019.

“Sheffield is disappointed that the strategic partner process had been unable to deliver an equity funding solution in the desired time frame,” Sheffield said today in an ASX announcement.

“Nonetheless, discussions will continue with third parties who have expressed interest in project investment and have supported existing and alternate strategies for the development of Thunderbird.”

The company has initiated a number of related personnel changes, including the resignation of executive technical director David Archer, following a decade-long tenure.

Mr Archer will remain on the board as non-executive director for a transitional period, alongside non-executive chairman Will Burbury.

Both will receive reduced remuneration packages, while the company continues to review the board composition.

The changes follow the resignation of Bruce McQuitty as non-executive director of the company, announced in November.

Mr McFadzean said there was potential upside that a rescoped Thunderbird project and organisational changes would deliver to shareholders.

“We continue to engage with potential funding partners and other third parties to develop the project,” he said.

“We also remain open to pursuing alternate funding and project development strategies to support near term construction of Thunderbird.”

The Thunderbird project forms part of Sheffield’s Dampier project, and is the first major mineral sands deposit to be discovered in the Canning Basin.

Sheffield says it is one of the largest mineral sands deposits to be discovered in the last 30 years.

Thunderbird has a mineral resource of 3.23 billion tonnes at 6.9 per cent heavy minerals and a 40 year mine life, according to results from a pre-feasibility study in 2015.