Mineral sands producer Sierra Rutile has started the first of two development phases at the Gangama Dry Mine in Sierra Leone.
The open pit, dry mining operation Gangama comprises two independent 500t an hour units, each similar to the Lanti Dry Mine commissioned in 2013.
Scheduled to be constructed over a one-year period, phase one of the project is expected to reduce the company's total operating cash costs to $595/t and all-in operating cash costs to $670/t on average, over the first five years.
With the phase two expansion, costs would decline to $535/t and $600/t respectively over the specified period.
Phase one will be fully funded through internally generated cashflows and a drawdown on the $30m Nedbank senior-term loan facility, with the company signing a $15m standby loan facility with Pala Investments, to eliminate the risk of limited cash during the construction period.
Sierra Rutile CEO John Sisay said: "The Gangama Dry Mine is an extremely compelling project that will drive down unit production costs and cement Sierra Rutile as the premier low-cost producer of high-grade feedstocks across the cycle.
"Progressing the project without the need of additional equity finance and without placing undue strain on our balance sheet is very important, and positions us well to fulfil our aspiration to become a mature, cash-generative company and, ultimately, a dividend-yielding company in the medium-term."
Sierra Rutile aims to reach first production by the second quarter of 2016, while a phase two expansion decision is subject to review by the board of directors and market conditions.
The company has contracted DRA for engineering, procurement and construction of the project on a lump-sum, turnkey basis, to lower the risk of budget overruns.
Image: Phase one at Gangama will be fully funded through internally generated cashflows. Photo: courtesy of Sierra Rutile.