Sheffield Resources is an emerging, diversified Western Australian bulk commodities play, with a focus on minerals sands in the Kimberley region, along with an exciting nickel-copper exploration play within the Fraser Range province.
|Status: Emerging Producer|
|Size: Small Cap|
|Commodity Exposure: Multi|
|Share Price: $0.80|
|12-month Range: $0.50 – $1.02|
|Shares: 134m, Options: 8m|
|Top 20: 35%|
|Net Cash: $8.7m|
|Market Value: $107m|
|Key Parameters||Rating (✓out of 5)||Quarterly Statistics|
|Management Quality||✓✓✓✓✓||Q3 2014 Exploration Spend: $2.308m|
|Financial Security||✓✓✓✓✓||Q3 2014 Admin Spend: $0.374m|
|Project Quality||✓✓✓✓✓||Exploration Spend 86%, Admin Spend 14%|
|Exploration / Resource Potential||✓✓✓✓✓||Q4 2014 Forecast Exploration Spend: $3.0m|
|Project Risk||✓✓✓✓✓||Q4 2014 Forecast Admin. Spend: $0.33m|
Sheffield Resources is an advanced bulk commodity play that we introduced to our Portfolio during August 2012. The company’s primary attraction is that it provides a rather unique proposition for investors, incorporating a diverse mix of advanced bulk commodity projects within Western Australia. The major driver of interest at present however is the company’s Dampier mineral sands project, within which the Thunderbird deposit has now been proven to host a world-class deposit in terms of both size and grade.
Bulk commodities typically present a challenge for junior companies, however Sheffield’s board and management team have demonstrated that they possess the requisite skills and experience to advance and extract full value from these types of assets. The company boasts the previously-successful, formerly ASX-listed Warwick Resources management team. Not many junior companies can manage one, let alone a host of bulk commodity opportunities; however Sheffield is successfully managing to do just that.
There is also solid interest and strong levels of appraisal activity with respect to the company’s other exploration assets, comprising its Red Bull exploration project near Sirius Resources’ high-profile Nova discovery in the Fraser Range province, its Oxley potash project and also its North Pilbara iron ore project. These projects are important in terms of providing a high level of exploration sizzle, whilst the company simultaneously appraises and advances its Thunderbird mineral sands project towards production status.
Sheffield’s share price has traded between a 12-month low of $0.49 during November 2014 to a recent 12-month high of $1.12 during August. This robust share price performance reflects continued strong exploration and appraisal progress with respect to its Thunderbird mineral sands project, where a world-class mineral sands resource has been identified and where Scoping Study results demonstrate strongly robust project economics. The next major step is the release of a Prefeasibility Study during Q1 2015.
Thunderbird Minerals Sands Project
Sheffield this week announced further high-grade drilling results from its Thunderbird mineral sands project, located near Derby in northwest Western Australia. The results relate to the remaining extensional drill-holes from the 2014 air-core drilling program and follow the initial batch of high-grade results announced during September 2014. Significant results include:
• 36 metres @ 10.3% HM from 7.5m (THAC484), including 27m @ 12.6% HM from 10.5m
• 42 metres @ 8.63% HM from 6m (THAC487), including 27m @ 11.9% HM from 13.5m
• 42 metres @ 8.46% HM from 12m (THAC486), including 24m @ 12.0% HM from 22.5m
• 39 metres @ 8.57% HM from 10.5m (THAC488), including 16.5m @ 13.8% HM from 22.5m
Down-dip Infill & Extension
• 60 metres @ 8.10% HM from 70.5m (THAC505), including 27m @ 11.4% HM from 81m
• 75 metres @ 6.14% HM from 64.5m (THAC504), including 27m @ 9.5% HM from 78m
• 43.5 metres @ 9.69% HM from 76.5m (THAC511)
(>3% HM cut-off, including >7.5% HM cut-off)
The results indicate that thick, high-grade mineralisation extends well beyond the current resource limits in the up-dip direction. The discovery of additional high grade mineralisation in the up-dip region is particularly significant because the Scoping Study delivered higher margins in early production years by incorporating similar high-grade mineralisation in adjacent areas.
Similarly, the results of down-dip drilling have demonstrated the strong continuity of mineralisation within the portion of the resource currently classified as Inferred, whilst extending the mineralisation beyond the current resource boundaries. All results are outside the 32-year life-of-mine (LOM) optimised pit shell used in the April 2014 Scoping Study, and therefore have potential to improve the project’s already outstanding economics.
The project comprises a vast regional acreage position, situated 60km west of Derby in Western Australia’s Kimberley region. Thunderbird is the first major mineral sands deposit to be discovered in the Canning Basin, which is rapidly emerging as an important new mineral sands province. The project was explored by previous owner Rio Tinto from 2004 until 2009. Rio’s decision at the time to relinquish the project had very little to do with overall prospectivity – rather, in the wake of the GFC Rio had to clear the decks and reduce expenditures.
Cross-section F-F’ through the Thunderbird deposit showing the resource and 32-year pit shell outline, resource classifications and drill-holes in today’s release.
Thunderbird hosts total mineral resources of 2.62Bt @ 6.5% HM (Measured, Indicated and Inferred) for 170Mt of contained HM, including a high-grade component of 740Mt @ 12.1% HM. The Thunderbird Scoping Study released during April 2014, showed the project has the potential to generate consistently strong cash margins from globally significant levels of production over an initial 32-year mine life.
All drilling and field-based Pre-Feasibility activities are now complete for 2014. In total, 119 air-core drill holes for 7,644 metres were completed at Thunderbird and 61 air-core drill-holes for 3,081 metres completed on regional exploration targets. Other field activities included the drilling of 20 sonic drill core holes (total 781 metres) for geotechnical information, and the drilling and pump-testing of three full-sized production water bores (total 294 metres) for hydrological studies.
Results from infill air-core drilling at Thunderbird and regional exploration drilling are expected to be received during Q4 2014 and Q1 2015, respectively. Pre-feasibility work is well advanced and is on schedule to be finalised during Q1 2015.
Plan view of Thunderbird deposit 32-year pit shell outline showing location of drill-holes
Strong ongoing drilling results at the company’s Thunderbird mineral sands deposit led to a robust resource upgrade earlier this year that exceeded market expectations, which in turn flowed through into an outstanding Scoping Study result. At the same time the company is also enjoying considerable success with respect to its initial exploration activities at its Red Bull exploration project in the Fraser Range province of WA, just a stone’s throw from Sirius Resources’ Nova deposit. Accordingly, Sheffield Resources remains our stand-out bulk commodity Portfolio pick. Due to our strong existing exposure we retain a Hold recommendation for the time being, although we maintain an Accumulate recommendation for those investors without current exposure.