Estrella signals whopping US$1.5B jackpot for Timor limestone

Estrella Resources has kicked the door down on the potential economics of its Werumata limestone project in Timor-Leste, with a new scoping study projecting a stunning after-tax net present value (NPV) of US$1.45 billion (A$2.12 billion) and a hefty 46 per cent internal rate of return (IRR).

The review outlines a massive development based on a 25-million-tonne-per-annum open-cut mine and port facility with a 20-year mine life. Life-of-mine operating costs of just US$7.89 per tonne are set against an assumed sales price of US$20 per tonne free-on-board (FOB), delivering a quick 3.5-year payback. The NPV is calculated at a 10 per cent real discount rate, after tax and before financing.

The development is underpinned by a massive 533-million-tonne mineral resource, of which 274 million tonnes, or 51 per cent, is in the higher-confidence indicated category.

Estrella plans to roll out a staged, capital-light development designed to generate early cashflow and use the proceeds to largely self-fund its own expansion. Stage one proposes an initial 8-million-tonne-per-annum start-up operation, which could be built in just six months from a final investment decision (FID), for a relatively modest capex of US$117 million (A$171 million). The company says FID is targeted for the fourth quarter of 2027, with first production potentially pencilled in for the third quarter of 2028.

The study’s whopping US$1.45 billion NPV is largely driven by stage two, which envisages expanding production to 25 million tonnes per annum for a total capital outlay of US$476 million (A$695 million). However, cashflow from stage one is expected to help bankroll the expansion, reducing the peak funding requirement to US$363 million (A$530 million). The study also flags a potential ‘blue-sky’ stage three expansion to a staggering 50 million tonnes or more, subject to serious market demand.

Estrella is now turning its attention to commercialising its monster resource, having already secured a master agreement with Indonesian mining and energy services group PT Raka Energi Mandiri (REM) in May last year. The non-binding contract grants REM exclusive marketing for up to 500 million tonnes of high-grade limestone over five years, subject to definitive arrangements.

This Scoping Study confirms Werumata as a genuinely significant development opportunity for Estrella Resources and more broadly for the nation of Timor-Leste.

The project, which lies on the north coast of Timor-Leste, puts it within reach of Indonesia’s nickel processing industry, the largest in the world, with Morowali around 450 nautical miles away. High-purity limestone from Werumata is well suited to acid neutralisation, a critical part of nickel processing and a major driver of demand in Indonesia, the world’s biggest nickel producer, where regional limestone requirements for that application alone are estimated at 25 million tonnes annually.

The company says it is also in early discussions with potential buyers beyond REM, with mining, environmental and port approvals the next milestones to fall.

The Werumata study marks a major step in Estrella’s shift towards Timor-Leste, following last month’s $3 million scrip sale of its Spargoville nickel rights in Western Australia, as it turns its attention to the newly opened minerals province north of Australia.

While the limestone project provides a solid foundation for Estrella, the company is also advancing its Ira Miri manganese project, with the stated objective of defining more than two million tonnes of high-grade resource. The company recently excavated a 27,000-tonne sample from an open pit at site to validate material whose grades mirror previous high-grade drill intercepts of up to 8.05m assaying 53 per cent manganese.

Adding further depth to its portfolio, Estrella also recently kicked off a maiden drilling program at its Laleno Dome copper-gold prospect, also in Timor-Leste. The program is the first-ever direct drill test of the large, 10km-diameter structure that has delivered some impressive rock-chip grades at surface, including assays up to an eye-watering 60.34 per cent copper and 1.3 grams per tonne gold.

With a potential company-making limestone operation now looking solid on paper, Estrella appears to have laid the foundations for a serious resources business in Timor-Leste. The long-life, bulk-commodity nature of the project could provide a serious cash-flow engine if the company can lock in the funding.

Is your ASX-listed company doing something interesting? Contact: matt.birney@wanews.com.au