Aim-listed Kazera Global’s subsidiary Whale Head Minerals (WHM) has entered into a long-term mining cooperation and production sharing agreement with South Africa AT Investments (SAI), establishing a fully funded strategic partnership for the development of WHM’s flagship heavy mineral sands (HMS) project, in South Africa.

Kazera interim CEO Richard Jennings describes this as the most significant agreement in Kazera’s history, noting the culmination of months of work.

“Seeing first-hand the sheer scale of its zirconium and titanium processing operations gave us considerable confidence in its ability to develop our HMS assets at industrial scale, while the depth of HMS expertise within the SAI team addresses the operational constraints that have held WHM back in recent years,” he adds.

He describes the economics of the agreement for Kazera as transformational and fundamentally different from a conventional production sharing agreement.

The agreement is expected to transform the revenue potential of Kazera’s HMS assets by providing a fully funded pathway to industrial-scale production.

SAI will fund 100% of the capital investment, mining and processing operating costs, infrastructure and working capital required to develop the operation at scale, while WHM retains 20% of all HMS products produced over the life-of-mine (LoM), at no capital or operating cost to Kazera and with no dilution for Kazera shareholders.

This gives Kazera exposure to a potentially much larger, long-life production base without being required to fund the capital and operating costs of the mining and processing operations covered by the agreement.

Jennings explains that detailed production targets will be agreed with SAI within 30 days, but, subject to securing the 2A mining right, the intended scale is of a completely different magnitude to anything previously contemplated for WHM.

Once scaled, he notes that Kazera expects WHM’s 20% cost-free entitlement alone to materially dwarf the total production levels previously targeted at Walviskop.

“Put another way, if SAI delivers the scale of operation envisaged, the whole of our previous production ambition could ultimately look little more than a rounding error by comparison,” says Jennings.

In effect, he explains that Kazera has exchanged a funding burden for royalty-like economics on an operation many times the size, while substantially transferring the funding and execution risk to a seriously resourced strategic partner.

In addition, Kazera explains that the SAI-funded HMS mining operations are expected to generate diamond-bearing gravels as a by-product of production.

Those gravels and any recovered diamonds remain outside the SAI production sharing arrangements and for the account of Kazera’s diamond mining subsidiary Deep Blue Minerals (DBM), meaning that DBM is expected to receive diamond-bearing feed material without bearing the underlying cost of mining that material.

Kazera says the board believes this has the potential to materially improve the economics of DBM’s operations and provide a pathway to sustainable profitability as production volumes increase.

The agreement establishes a funded, long-term development framework for WHM's existing Walviskop mining operations and, following the anticipated grant of the adjacent 2A mining right, the future large-scale development of the broader 2A HMS project.

The agreement is for both the Walviskop and 2A project LoM, including any renewals and extensions. As such, Kazera says the board believes this agreement provides the foundations for the establishment of an industrial scale HMS production facility for many decades and has the potential to become a generational mining asset.

“Subject to the grant of the 2A mining right, we believe we have secured the framework for a generational mining asset capable of producing at industrial scale for many decades. Our immediate focus is now on completing the competent person’s report on 2A, which we expect will demonstrate just how large this opportunity is,” says Jennings.

"We are highly enthusiastic about finalising this production partnership with WHM at the Walviskop project.

“By combining our specialised primary extraction capabilities and wet magnetic separation technology with WHM's high-grade asset base, we have established a highly efficient operational framework. We are entirely focused on accelerating commercial volume output to unlock immediate, long-term value for both companies as we build a transparent and mutually beneficial operation,” adds a spokesperson for the board of SAI.

IMPLEMENTATION, NEXT STEPS

Kazera says SAI intends to start implementation immediately, with first production under its development programme targeted by the end of this year and WHM’s 20% production entitlement accruing from the start of production.

The first phase of the programme will include the preparation by WHM and SAI of a comprehensive mine plan within 30 days of the effective date, establishing production and HMC grade targets on a six-month, 12-month and ongoing basis.

In parallel, the parties will progress site preparation, equipment mobilisation, establishment of the required mining and processing infrastructure and the operational workstreams necessary to support increased production at Walviskop and, subject to the grant of the 2A mining right, the targeted step-change to industrial-scale production across the broader project area.

Alongside this work, WHM will continue its programme of optimising recoveries, concentrate grades and production from the existing Walviskop operation through its ongoing operational initiatives.

In parallel, Kazera says it will continue to work with the Department of Mineral and Petroleum Resources towards the grant of the 2A mining right. Upon grant of the 2A mining right, SAI will make the second advance payment of $1.75-million and start the next phase of development, expanding operations into the substantially larger 2A mining right area.

Kazera explains that the board's objective is to create a seamless transition from the existing Walviskop operation to the long-term development of the 2A project, with SAI providing the capital investment, mining capability and operational platform required to support the project's long-term growth.

The company says the board expects to provide shareholders with regular updates as key implementation milestones are achieved.

“Richard has worked tirelessly in the interests of all Kazera's shareholders since stepping into the interim CEO role to achieve this pivotal announcement for Kazera, which sets WHM on the path of industrial-scale production, with zero dilution to shareholders, in a very short space of time following the board restructuring in April this year.

“We welcome our new partners SAI and look forward to supporting their aggressive development plans and to benefitting from what is effectively a 20% free carried interest in the revenues generated from the WHM asset for the LoM,” says Kazera chairperson Geoff Eyre.

SAI is a subsidiary of Xiamen Antai Zirconium Co – a division of a major Chinese industrial group specialising in the extraction, production and deep processing of zirconium and titanium raw materials and zirconium silicate.