Image Resources' North Perth Basin mineral sands project just keeps getting better

Image Resources' financial returns for its North Perth Basin mineral sands project just got a whole lot better with increases in the prices of titanium dioxide and zircon mineral sand products.

Tellingly, the increases would boost the Internal Rate of Return (IRR) of the project to 47% at the current A$/US$, up from 43%.  The net cash flows for life of the mine to $381 million, up from $259 million.

The capital for the project would be repaid from cash flows after just 13 months of operation, previously 18 months.

Capital costs are estimated at $84 million.

The project would produce some 1,393,000 tonnes of ilmenite, 85,000 tonnes of rutile, 193,000 tonnes of zircon and 93,000 tonnes of leucoxene over a twelve year mine life.

Image has commenced a Feasibility Study on the North Perth Basin project.

Environmental consultants are carrying out baseline studies and the environmental permitting of the Atlas deposit, the first of the deposits to be developed.

Bulk samples from the Atlas and Red Gully deposits are being collected in preparation for further metallurgical test work to be carried out during the first quarter 2012.

This test work is expected to demonstrate that metallurgical recoveries for these resources can be improved.

There has been an 80-85 per cent increase in rutile prices and 85-90 per cent projected increase in synthetic rutile prices next year.  While zircon prices are expected to flatten early next year after strong increases the last few years.

The pigments are used in paints and other building materials and then on-sold to China and other developing countries.

While new supply is coming on stream, the new suppliers will simply help satisfy the demand growth out of China.

The key markets for zircon, a product used in ceramics and tiles, are generally outside of the regions affected by the current sovereign debt issues. zircon in particular, the ceramic-centric cultures, the tile-centric cultures tend to be Latin American, Asian, Islamic and the Middle East.

With very strong demand for minerals sands products the outlook for Image's North Perth Basin mineral sands project is very solid based on projected financial returns.

If Iluka is anything to go by, Image presents a real opportunity for investors with booming mineral sands prices and demand for rutile and zircon.

Iluka is up more than 470 per cent since the lows of July 2009 and is up more than 86 per cent since January. In comparison, the ASX 200 index is down about 13 per cent this year.

While Iluka is an industry leader, it was not always the case and in 2009 was down and almost out.  For keen investors, there is an opportunity to potentially catch a wave with Image riding high demand for minerals sands products as it moves closer to development of its Perth Basin mineral sands project.