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Diatreme Resources to develop Eucla Basin mineral sands

A Queensland based mineral sands explorer has upgraded
results for a major resource in Western Australia.

Diatreme Resources announced this morning their Cyclone
Project heavy mineral resource was estimated at 211 million tonnes with 2.3 per
cent heavy minerals of 4.8 million tonnes, an increase to their HM estimates of
60 per cent.

Zircon content was estimated at 27 per cent, representing
1.27 million tonnes, 40 per cent higher than previous estimates.

80 per cent of the HM tonnage has been classified as
measured, with the remainder indicated.

The low level of slimes, combined with oversized grains has
been taken as indication of the low level cost of mining and processing the

The Cyclone deposit is a tertiary beach sandline system
located 25km from the South Australian border near Eucla, and has been described
as analogous to Iluka’s Jacinth-Ambrosia deposit, which in 2005 was one of the
biggest mineral sands discoveries in the world.

Diatreme CEO Neil McIntyre said that although the Cyclone deposit
is not as large as the Jacinth/Ambrosia deposit, the same high levels of zircon
and low slimes that are characteristic of the Eucla Basin give it high
commercial potential.

“We’re at the tail end of the Eucla basin trend, but key
issue is the Eucla basin is unusual for its high zircon content, which our
deposit is consistent with, which is key in the current market,” he said.

“Iluka have come out publically and said that when they look
at other project developers, the necessary elements to make a project
successful include that high zircon, low slimes under five per cent and
particle size, so we’ve hit that sweet spot in terms of a project that will, we
hope, get up.

“We feel strongly now that the mine is more than commercially

McIntyre said that although the company does not have
sufficient capital to develop the resource as a mine yet, Diatreme has been in
discussion with Chinese investors and is confident they will be able to announce
a joint venture partner before the end of the year.

“We’re very honest in the fact that we don’t have the balance
sheet to develop a $140 million project, but we’d prefer to be realistic and we
need to bring in a major partner there’s no question of that,” he said.

“On the back of this announcement and others we’ve met with
a number of potential offtakers, processors and investors, and we were very
pleased with the response we’ve had.

“We’ve had ongoing discussions with several Chinese parties,
and we feel that its achievable to get that partner in place prior to the end
of this year.”

“The market for zircon and minerals sands generally has been
fairly subdued, there was a spike a couple of years ago when zircon hit $2000
per tonne, now its about $1150, so at those levels and with the Australian
dollar coming down the way it has, we think we’re looking at a three year
payback period on the mine, with around 30 per cent internal rate return.”

The remote location of the Cyclone site will require
construction of a remote FIFO camp, as was required at the Jacinth/Ambrosia
mine, with mine development forecast to hit production in 2017.

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