Leucoxene Sales Agreements Volume Reduction Notice
Perth, Feb 22, 2016 AEST (ABN Newswire) - MZI Resources Ltd (
ASX:MZI) advises that it has received formal notification from its leucoxene offtake customer that under the terms of the L70 and L88 five year sales agreements, it is exercising its contractual right to reduce the quantity of each product to be purchased by the customer in the current contract year. As MZI understands the customer's position and under the terms of the sales agreements, the reduction is being applied to all the customer's contracted sales volumes for equivalent material and is in accordance with their current global pigment production strategy.
The reduction in volume of L70 and L88 to be purchased in the 2016 calendar year, which coincides with the contract year, is 6,440 tonnes of L70 and 6,750 tonnes of L88.
The volume reduction does not take effect for three months from the receipt of the notice and therefore sales commitments for the next three months will not be affected.
There will not be any impact on sales of zircon concentrate, which is fully committed to Tricoastal/Wensheng, China's largest zircon processor, under a five year offtake agreement.
During the past 12 months MZI has established effective marketing links for the sale of its leucoxene production and expects strong interest for all available L88 and L70 due to the high quality and value-in-use benefits of Keysbrook leucoxene products.
As indicated previously, MZI is in active discussions with a number of parties regarding the potential supply of leucoxene from the Keysbrook Project. Prospective customers include Jinzhou Titanium Industry Co, one of China's leading chloride pigment producers, which signed a Letter of Intent and Co-operation regarding potential L88 supply in December 2015. The Company is currently finalising a sample shipment of L88 to Jinzhou for trial processing, as a precursor to further negotiations (refer 4 December 2015 ASX announcement).
Despite the reduced purchasing requirement, the customer remains the Company's largest offtake counterparty and will continue to purchase approximately 40,000 tonnes of leucoxene products from MZI this calendar year, accounting for approximately 55% of all planned leucoxene production from Keysbrook. Including the planned zircon concentrate production and sales, approximately 73% of planned 2016 production remains committed under existing sales contracts.
About MZI Resources Ltd
MZI Resources Ltd (ASX:MZI) is a mineral sands company focused on the high value minerals of zircon, rutile and leucoxene based in Perth, Western Australia. Its flagship operating asset is the Keysbrook Mineral Sands Project, located 70km south of Perth. At the Keysbrook mine, mineral sands are mined and processed to produce heavy mineral concentrate (HMC) which is processed into final products under a toll treating arrangement with Doral Mineral Sands Pty Ltd at the Picton Mineral Separation Plant (MSP) near Bunbury.
The Keysbrook mine hosts a world-class zircon / leucoxene ore body with total Ore Reserves equivalent to over 15 years of production at design output rates, and total Mineral Resources equivalent to over 30 years of production. Production commenced in late 2015, making the Keysbrook Project Australia’s first – and the world’s largest - primary producer of high value leucoxene.
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