World Titanium Resources has a big, high grade, long life, low capital, high margins, good value mineral sands project on its hands that it discovered itself. And that's just the beginning.

WTR started scouting Madagascar with private money in 1994 and discovered the Ranobe resource near the southwest coast in 1999.

When joint venture partner Exxaro Resources bailed three years early in 2009, having spent nearly $20 million over 6 years, in the middle of the global financial crisis, the dire state of the commodities market and a coup in Madagascar, WTR was left with 100% of the project. In August this year, WTR published a 36% resource upgrade that now stands at a staggering 959 million tonnes at an impressive 6.1% average grade (3% cut-off) of total heavy mineral (THM).

This estimate also extended the mine life from 75 years - which was already enough - to 100, which, as far as WTR is concerned, is icing on the cake, at an expected initial mining rate of 8Mt per annum, which is impressive by mineral sands standards.

This will generate more than $US1 billion in free cash flow over the life of the mine, so it's a robust project to boot. It will take 18 months to build before production is due to start in the second half of 2014. WTR will raise the development capital between now and mid-2013, which will be a combination of customer off-take, strategic investment and equity raise.

Total production from the 21-year mine life starter pit will be 12.4Mt THM, with annual production of 407,000t of ilmenite and 44,000t of zircon rich concentrate.

This initial production will come from the high grade "starter pit" reserve of 161Mt grading an impressive 8.2% THM, which is a much higher grade than most other mineral sands mines.

Earlier this year, WTR was also granted two 40-year mining licences which contain 313Mt of the resource.

With all this, WTR is in a unique situation as it only listed in January this year, which chief executive Bruce Griffin said presented it with something of a conundrum - but a good one.

"Often a company at the stage we're at would have been listed for years and will have done endless share issues and consolidations, whereas we've recently listed so we've got a pretty tight register. We haven't been to the market repeatedly with ‘if you just give us another $10 million we'll make sure we'll get you there'," Griffin told RESOURCESTOCKS.

"It's a double-edged sword, because it means it takes quite a lot of effort to get people to know the asset because it's not been in a listed vehicle, so it takes a bit of education; but it does mean that you don't have people (the market) saying ‘oh no, not you again'.

"Selling something on a really good asset is better than apologising for the history. It's a ‘high-grade problem'."

What's more, the initial starter pit development will secure long-term optionality of the Toliara Sands project.

"It's just the beginning," Griffin said. "There's a lot more potential there."

This was confirmed by the definitive engineering study (DES), also completed in August. The value of the project is considerable, with an NPV of $US257 million using a 10% discount rate, at an average price of $169/t for ilmenite and $1206/t for concentrate, with an internal rate of return (IRR) of 27%, which means a payback of just three years.

A year ago, WTR had numbers based on the bankable feasibility study work that Exxaro had done, but the configuration had changed and time had moved on, so although it was an estimate it wasn't something you'd make a major investment on.

"We've simplified the concept from a year ago, when we had a road and a pipeline using the existing port," Griffin said.

"Now we've selected an option to use a road and a stand-alone jetty north of the existing town and port of Toliara, meaning we can put all our processing equipment at the mine site and can directly load ocean-going vessels through a dedicated port rather than use barges in the existing port.

"One of the key reasons of doing that, apart from costing much less and being much simpler, was that the jetty will have a lot of extra capacity, being underutilised, so if we want to expand we don't have an infrastructure constraints and therefore we shouldn't hit so many bottlenecks.

"When you've got such a large resource, you want to make sure your initial development doesn't box you in."

There's a small range on the capital cost of between $188-$200 million, because with the decision to move to a stand-alone jetty north of town, WTR needs to do some geotechnical work at that location to confirm the piling cost.

"That's relatively capital efficient - for a greenfields project in mineral sands, similar scale projects have higher capital, some considerably so.

The operational expenditure numbers confirm we've got a competitive cost structure," Griffin said.

"With the refinements that we have engineered into the export facilities, we will now have the flexibility to scale up the initial operation into a larger and truly world-class mineral sands operation."

WTR would use dry mining with two front-end loaders, as they present the most flexible method - "and in any new operation, flexibility in the early years is a good idea as you don't know what you don't know", Griffin said.

"The deposit is underlain by limestone and the risk is you leave a lot of sand behind if you have big intrusions, but with front-end loaders you can mine around them," he said.

Griffin, a chemical engineer by training, spent 16 years with Shell and BHP Billiton. He was involved in Shell's oil and gas drilling and production, and was then an economist in BHP's chemicals business.

He worked in strategy and business development for BHP's coal operations and for four years ran its titanium business (mineral sands), where he was a director of the world famous Richard's Bay Minerals JV with Rio Tinto.

"Initially, we're only using two front-end loaders, so if we introduce another two we will effectively double the mine size. It's very expandable," Griffin said.

"Our export haul is five trucks running back and forth between the mine site and the jetty on a dedicated 55km long haul road, which is not exactly a fleet.

"It's a relatively large mineral sands project, but it's by no means the largest. But the resource can clearly support life extension and production expansion. We could value-add some of the products, like separating rutile and zircon and sell them as individual products instead of as a concentrate.

"We could do the separation in the future ourselves - and thereby add value to these end products.

"We really see a process of de-risking and demonstrating that we can capture that value. It's a beautiful combination - it's a very large, high-grade and homogeneous mineral sands resource.

Developing a mine here is going to be the classic win-win-win situation: for the local people, Madagascar and for WTR shareholders."

*A version of this report, first published in the October 2012 edition of RESOURCESTOCKS magazine, was commissioned by World Titanium Resources