Earnings call transcript: Sheffield Resources sees stable zircon pricing in Q2 2025

Sheffield Resources reported its second consecutive quarter of positive operating cash flow in Q2 2025, maintaining flat pricing for zircon and making its first debt repayment on time. The company’s stock remained unchanged, closing at 0.195, amid a stable zircon market and expanded customer base. According to InvestingPro analysis, the stock appears undervalued based on their proprietary Fair Value model, with shares trading 56% below their 52-week high of $0.23.

Key Takeaways

• Sheffield Resources achieved positive operating cash flow for the second consecutive quarter.
• The company maintained flat pricing for zircon, despite market pressures.
• Sheffield expanded its customer base significantly, from 3 to 15 customers.

Company Performance

Sheffield Resources demonstrated resilience in Q2 2025 by achieving a positive operating cash flow for the second consecutive quarter. The company managed to maintain flat pricing for zircon, a critical mineral in its portfolio, despite slight price pressures in the market. Furthermore, Sheffield successfully expanded its customer base from 3 to 15 customers, signaling strong demand for its products. InvestingPro data shows the company maintains a strong liquidity position with a current ratio of 27.18, indicating robust short-term financial health.

Financial Highlights

• Achieved positive operating cash flow for the second consecutive quarter.
• Net movement in prepay of approximately AUD 20 million.
• First debt repayment made on time and in full.

Outlook & Guidance

Sheffield Resources is targeting a production capacity of 4 million tonnes per quarter by June 2024. The company expects a gradual increase in concentrate production and aims for 220,000 to 240,000 tonnes of ilmenite concentrate annually. Additionally, ongoing debt restructuring is planned to align with cash generation.

Executive Commentary

Bruce, the CEO of Sheffield Resources, emphasized the importance of aligning mining activities with the process plant’s capacity, stating, "We’re definitely not saying we’re going to mine flat out. We’ll need to be mining to fit the process plant." He also highlighted the company’s focus on increasing production margins, saying, "We see that as we increase production, we are looking for circa half of that to flow through as margin."

Risks and Challenges

• Potential supply deficit in the zircon market due to mine closures.
• Price pressures in the zircon market could affect profitability.
• Operational challenges in ramping up production to meet future targets.
• Dependence on the Chinese market, which is currently stable but could change.
• Ongoing debt restructuring may pose financial risks if not aligned with cash flow.

Sheffield Resources continues to navigate a stable but challenging market environment, with a focus on expanding production and customer reach while managing financial obligations and market conditions.

Full transcript - Sheffield Resources Ltd (SFX) Q4 2025:

Peter, Moderator/Host: Welcome back. The quarter’s gone pretty quick. It feels like we were only here a couple of weeks ago with Bruce and Mark. Looks like a pretty good quarter. The format will be the same as always.

Bruce will be giving a presentation, which will probably last around fifteen to twenty five minutes, and then we’ll go on to the audience Q and A. There is a Q and A button, so please post in your questions whilst Bruce is delivering his presentation. Bruce, yes, good start to the quarter. It looks like the plan is working. You must be pretty happy.

Bruce, CEO/Managing Director, Sheffield Resources: Yes. Thanks, Peter. Are definitely very happy with this quarter. That’s the first quarter since we announced the new business plan for Thunderbird. And yes, thanks, everybody, who’s online for joining again.

As Peter said, same same format, same slides updated. So with that, I’ll I’ll I’ll get into this. The so same same general intro. As always, I’ll focus mostly on Thunderbird and the ramp up there. First, it was worth mentioning, given that we had a couple of developments on our other projects during the quarter At South Atlantic, RGM were able to clear a maiden resource across the two larger deposits there at Rotero and Boujourou, 71,000,000 tonnes at 3%, which is more or less in line with the exploration target we identified when we started getting involved there.

So we’re pretty happy with that. It’s got an interesting assemblage. And the other thing was we did get installation license for Central Rotiro during the quarter. So where there’s other approvals required, think that was pretty important to show that you can continue to progress approvals that part of Brazil. And the other piece in Sri Lanka with our investment in Taperone via Capital Metals, we did follow our money alongside a new strategic investor from Sri Lanka, who is looking to actually largely fund the build of that project through secondary listing in the listing, the local subsidiary in Sri Lanka, plus some debt instruments.

So that was quite encouraging, and we followed our money there to protect our or effectively maintain our 10% interest and the associated rights we have. In terms of Thunderbird, just the obligatory pictures. Pit on the left, you can see, obviously, the pit in the background. In the foreground is waste clearing activities, continuing with drill and blast and now with our new contractor RE group in there with the larger excavator and trucks. We have seen a step change in productivity in waste mining as a result of both drill and blast and the new deal with the new contractor.

There’s still a low optimization there. They just started, but we’re very pleased with that and are confident that we’re ultimately going to get the waste mining capacity we need to increase our ore mining rate. To put in the background, I’ll probably comment on wood note as the pit gets bigger, you can see that the pit’s actually quite clean. The wall is quite clean. It stands up very well.

It’s being kicked at this very orderly mine, and you can actually see, the use of the oversize to build the wall. So you can see how we’re starting to develop the first of the cells for input metals disposal. And yes, general progress in mining is impressive now. On the right hand side, process plant and right in the quarter, in the foreground, a lot of ilmenite in the fingers drying before loading into the trucks to go to port. In the background, zircon concentrate stockpiles from the process plant sitting here.

So not a lot of change there, but process plant continues to run really well. So in terms of an update on the business plan, probably key points here. The plan on the left hand side is exactly what I presented in the quarterly end of the last webinar. And what we thought we’d do is probably focus on what we’ve done in the quarter, sort of what’s our rate of progress. So recap, key elements.

The drilling blast and transition to a new waste mining contract with a larger fleet designed to increase our waste mining capacity so we can uncover more ore to increase our mining rate, ultimately to the ability to mine up to 16,000,000 tonnes per annum. Although in reality, the focus is on keeping the process plant full. So once we’ve got the expansion to the mining, Harris grade varies and so on, what we’ll find is here, there are times when we will need to mine at 16,000,000 tonnes per annum equivalent in order to fill the process plant, but there will be other times we’ll mine at less than that. So we will I would describe it as become more like a normal mining operation where we’ll be process plant constrained and varying the mining rate to ensure the process plant stays full. With the process plant full, as we’ve indicated previously, we expect to see concentrate production increase.

We have the capacity to hurl and ship that. And overall, we are looking for reduction in unit costs as we increase production. Progress today, so drawn glass has been in place now for basically six months, and we have seen that has really made a big difference to the digability of the waste. I’d say we’re still learning the optimal way to blast and drill and blast and that continues to be optimized. But it’s optimization, the blasting itself is very effective.

New waste mining contractor with their larger fleet are mobilized by the May, first full month of in waste in June. Seeing a step change in the sort of daily waste movements, and we expect to continue to ramp that up to achieve the waste mining rates that we need. Again, similar to the fact that even more so the ore mining, the strip does vary as we move around in the pulpit. So there will be times when we mine less waste, times when we mine more, and we need to have the capacity to be able to handle that variability. Please already, at the EMU, we’ve managed to achieve record production for the quarter, but equally record production in June where we pushed over 1,000,000 tonnes of ore for the month.

And that’s a good step up than where we were before. It shows we’re clearly on that path to the sort of 16,000,000 tonne equivalent, but we’re not there yet. I think that’s good progress, but you’re looking at 1,200,000 to 1,300,000 tonnes a month of mine every month if you were to achieve 16,000,000 tonnes. And we there’s a bit of there’s an evolution still required to get there. I’m very confident we’re on that path, but it is going to take time to be able to be, as I say, mine enough waste to get far enough ahead and to consistently and sustainably able to be able to increase the mining rate above that 1,000,000 tonne a month.

So looking at the charts we always use, the consistency. So we’re looking here as always effectively back four quarters, we look at five quarters, the equivalent quarter last year and then the interim quarters. I guess what you can see is that through from the June ’4 through to the March, we really were mining at around that 2,500,000 tonnes a month, but 2,500,000 tonnes a quarter, we were able to sustain that, a little bit of variation. You can see in Q4, we had that distinct step up and we mined, think it was about 2.7, 2.8 in the end. And with the million tonnes, we’d be closer to that if we sustain that for quarter three.

So we’re now seeing that step up in mining rate. There’s a way to go yet, but we’re very pleasing that we’ve already started on that journey to ramp up the mining rate. And how does that translate through to FEED? Again, similar story. As we’ve done before, the BFF is the dark blue or green line, the actual is the light and then the dotted lines of grades from the block.

There are probably two key points here. The main point, you can see that we’ve seen the uptick in Wapahid fee from volume, largely driven by that uptick in ore mined. And that means that whereas previously we were running around 75% of overall electrical Wapahed feed being generated based on the ore we were mining, we’re now sort of circa or above a little bit above 80%. So we’re already seeing that benefit that as we push more all through the DMU, we will be able to raise the rapid head feed production and ultimately achieve that design rate consistently irrespective of the grade. Grade a little bit lower in the current quarter.

That was a few things just partly reflected where we were in the ore body, but also you can see that and the block model, a little bit below the block model partly because managing waste went to times with mining a bit more of the lower grade T1 ore to keep the DMU for what we were trying to avoid catching up with waste mining. So over time, we’ll continue to look at doing that at times because T1 was quite rich in zircon. And ultimately, we would feel that as the mining rate increases, we’ll largely be targeting the ore that we had in the original mine plan. Moses plant, same again, design versus actuals on both recovery and grade. What we are seeing is now consistent with very much consistent with design, still comfortable that as we’re pushing more material into the plant, we’re sustaining that good overall recovery as per design and we are making products that are aligned with our expectations.

We don’t have a hard target for quality. We basically we make what we are making a saleable product and allow that grade to vary a little bit. In terms of the ILDINO product, similar story. Recoveries still have been above and in line with design, and we’re sustaining that as we increase throughput. Grade very much in line with design.

We don’t do secondary processing on those materials, so it’s largely the greatest what you get out of or the quality of the material is largely determined by where you’re mining. Yes, so what does that sort of look like in terms of the key sort of production KPIs for the quarter? We can as I said before, you see the prior four quarters quite steady around that 2,500,000 tonnes, the big step up in the current quarter. And then the way to think about it is that was one quarter of a five quarter ramp up plan. We are still targeting to be or have the ability to mine at 4,000,000 tonnes a quarter by the first quarter of FY ’twenty seven, so effectively ’12 well, when we’re recording the June next year, twelve months from now, we would expect to have the capacity to mine at that rate, be able to mine at that rate, and have achieved that rate during the June, but not have sustained it for the full quarter.

So hence, we’d say the first full quarter at that high rate is the quarter a year from now. In terms of concentrate production, firstly, zircon production, again, quarter for production, up Q on Q, yes, consistently building, shipping a little bit above production. And then as you all know, we did have a deferment of some shipments late in the June. Unfortunately, we actually had a zircon vessel alongside the jetty ready to load when the crane failed. So we had to hold that load and then there was Boumanite vessel due in a couple of days later.

And so we actually missed 10,000 tonnes of June sales. So we would have expected to have made should we’ve been able to ship. We expect to catch that up in the current quarter as well as shipping what we produce. So overall, we’re looking at production to continue to increase sort of marginally quarter on quarter building towards higher production in a year’s time and shipping sort of what we produce plus a little bit of that catch up shipment or shipping that catch up shipment. I will say that the two deferred shipments actually did ship in early July.

So ultimately, the crane was unfortunately, the crane was down for circa a week and it bridged the year end. So the shipments that would have been late June ended up in early July. In terms of Irwini, similar sort of story. Sales and production were aligned for the quarter. We actually, again here, we would have done a little bit of catch up shipping, but we weren’t able to load the last vessel has shipped there.

Current quarter, again expecting production to increase quarter on quarter as we increase mining rates and to ship more than we produce. So we are looking at another record production of a record quarter of production and sales in the current quarter and building again, building towards that a year from now enhanced production rate at the 220,000 to 240,000 tonnes a year of top of the concentrate. The cash flow for the quarter, probably personal highlight of the way I sort of think about this is second consecutive quarter of operating cash flow positive. We don’t see certainly in a relatively restrained price environment, we’ve been able to we were able to produce positive net cash, which puts us in a different situation to perhaps some peer operations that found themselves operating with negative cash flow, which is a very situation to manage. Yes, there’s definitely room for improvement here as we ramp up.

We expect, obviously, revenue to go up and costs to go up risk. So we do expect to grow the cash operating cash flow per quarter independent of any change in price. Yes, I’ll add probably the non operating cash flow elements here, the prepay, it was a net movement in prepay of about AUD 20,000,000. We repaid the last of the first two facilities, and we did drill down another one, effectively to help manage cash flow through the quarter. And that more or less was equal to the principal payment that was made to arrive.

And so we did make the first debt repayment on time and in full. And yes, this is a pleasing outcome. And this outcome, we still had that we were still carrying inventory at the end of the quarter given those deferred shipments. Just in terms of the Orion, the debt facilities, we obviously made that first repayment. I think those who were on the equivalent call a quarter ago I spoke about the need to reshape the cash flows to align them sorry, reshape the debt repayments to align them with the expected cash generation given the new plan and colliding with the fact that the original repayments, June payment, been a step up for the next couple of six monthly payments and then a decline was based on a different ramp up schedule at different cost, different pricing.

So we’re in the exercise with the lenders of re forecasting the cash flows over their life of loan and looking to reshape those payments to align them with expected cash generation from the asset. That’s a process that takes time. It’s not complete, so I can’t make any comments about the likely outcome there. But the expectation is that we generate enough cash over the life of loan to allow the repayments to be made just not in the shape they were originally. Probably also we’re stressing that fixed repayments tend to be made on a low cost forecast.

So you always create a bit of room between your sort of base case expectations and what your fixed commitments are to the lenders, and we’re working through that process at the moment. I think that’s probably all I have wanted to say in terms of prepared remarks. So happy to take questions now.

Peter, Moderator/Host: Brilliant. Thank you, Bruce. We’ve got a few questions rolling in. For those watching, please feel free to submit your questions via the Q and A, and we’ll get around to them. Just remember as well, obviously, Sheffield Resources is a listed company.

So anything that’s too forward looking, they might not be able to talk about just based on the risk listing rules. But I think most of you sort of know what they can and can’t. Bruce, just to start off with, wouldn’t mind talking to you about the market, especially in China. Can you give us maybe bring out your crystal ball again as often ask?

Bruce, CEO/Managing Director, Sheffield Resources: How is the market looking?

Peter, Moderator/Host: We’ve had some commentary from Oluca. How are things on the Sheffield side?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. Look, I think it’s interesting. There’s been a lot of commentary from others and probably sort of generally in the market that we’ve seen price pressure in China this year sort of softening demand over the Luka decline to provide guidance for the current quarter. So there’s obviously a bit of uncertainty there. I think what I would observe is a little bit quarterly, we effectively we had flat pricing quarter on quarter, particularly about zircon, which is where we had our variable price exposure.

We had flat pricing quarter on quarter. There was a slight uptick, but it was driven by composition rather than sort of underlying price. And so we thought that was a pretty good outcome. Effectively, we’ve been flat for three quarters. So I think at least since we started resuming sales in the fourth quarter of last calendar year, we’ve more or less had that $5.3 ish type pricing in net.

I think what I would say is certainly, I was in China recently, there is I think there is certainly the I wouldn’t say the band is playing and everything’s rosy, but it also didn’t feel it didn’t feel terrible either. Sort of feels like there’s a bit of carrying on as we are at the moment. And I think we expect to continue to see some price pressure in zircon. It’s sort of inevitable. But I think we have a bit of a view that our product is probably more closely aligned with the way the Chinese market works today, predominantly a concentrate market, not a big consumer of premium zircon focused on sort of substandard, superstandard, substanders, a lot of different sector mixes.

Actually, ceramics, a lower proportion of consumption in China than elsewhere, more focused to some of it makes sense. China is an industrial manufacturing hub. So some of the demand sectors are always that feed more into those other sectors like foundry and refractory and chemicals seem to be doing all right. And the Chinese customers focused much more on concentrates than final product zircon. So I think I wouldn’t we’re very pleased with our price outcome.

I think we will come under a little bit of pressure for price. But at this stage, we’re certainly not seeing we are not seeing the market moving probably dramatically in either direction for next quarter or two.

Peter, Moderator/Host: So the fact now that you have so many approved customers, is that helping Yeah. With the price pressure as well at all?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. Definitely. Mean, if I if I think about a year ago, we had three customers, and those three customers have taken a lot of product and weren’t ready for more and we couldn’t sell to anyone else. So that’s a pretty, nvidious position to be in. Year on, I think we’re up to 15 now.

It’s become less important to count them every day, but we had added more permanent customers in the quarter. We’ve had more new customers take a shipment for the first time. And that just means that if one customer can’t take one might do, it’s still processing material, it just gives us more choice. And so I think it gives us a greater ability to kind of fill out the order book by talking to a number of people at once. So certainly, that has made a big difference to us as individually as not market based.

Essentially, it means we can sell to a broader range of customers in that market.

Peter, Moderator/Host: Yes. Okay. Interesting. A few questions here. One from Chris Baker.

When do you think you’ll get to a steady state on waste mining removal? Do you think the mine is ramping up a little more rapidly than previous guidance?

Bruce, CEO/Managing Director, Sheffield Resources: No. I mean, I think thanks, Chris. But as I said in my commentary, we were expecting that we would be progressively ramping up. I think, in terms of waste mining, it’s probably less about getting up to the capacity we need and more about getting ahead with data that hand to mouth on the ore available for mining. So maybe a quarter or so to get to allow the waste mining to get far enough ahead, and then ramping up the mine.

So fill the process plant is the key point. At some point, we’re not just going to be mining flat out. We’ll need to be mining to fit the process plant. I think to sustainably we need to the ramp up is all about sustainability. Can you do it month for month out, quarter in, quarter out?

But I do think that’s a journey. It’s not instantaneous. So we are comfortable with our guidance. Just to be clear, we’re not saying we’re saying we will achieve the high we will have the capacity to achieve the mining rate in the June next year, since we don’t expect to be able to do it for the full quarter. So we’re now less than twelve months from achieving that rate, which I think is a realistic time frame.

So certainly, at this stage, no change to our expectations about how long it takes to achieve that ramp up to the higher production level.

Peter, Moderator/Host: Okay. All right. Just another question here from Chris. The DMU, obviously, a critical part of the mine, are you pleased with its performance?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. I mean, we have to be. It’s performing better than it was. Yes, again, the journey, not an event. What you found is that you move to the you find new things, and that’s a process of working with that’s not a piece of equipment we own.

We that’s provided by a mining contractor, working with them on how do you work to continue to enhance both throughput and availability. It does make we are mining at a relatively high rate. So being able to mine every day when you’re not every day when you’re not doing DMU moves is a key part of how you sustain that high mining rate. So again, that’s there’s a process there about continuous improvement around that. But the DMU is on that journey, but we’re not we’re definitely not there yet.

It’s going to take time. The SWE optimization, for example, which we talked about before, we haven’t done that yet. We are doing the work, but performing the new screens is probably still a quarter yeah. Probably last quarter of this year is is the soonest that will happen. So there are still things happening that that will need to happen to, to fully get that ability to mine at that 4,000,000 tonnes a quarter equivalent rate when we need to.

Peter, Moderator/Host: Okay. Another question here from anonymous, but basically asking whether or not there’s an opportunity here for cost reductions moving forward?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. I think the simple answer is yes. I think probably the focus we’ve had has been we’ve been very focused on making sure we deliver the production. I think the reality is we need that. We need to be at or near design throughput is what gives us the sort of most sustainable business model.

And then the focus I mean, it’s not that there’s no focus on costs, but as you get more at steady state, you have a greater ability to understand the cost and look for the opportunities. Inevitably, in any new operation, particularly when you’re chasing production to start with, do build some inefficiencies into what you do. And we’re certainly looking for the opportunity to reduce not just to have unit cost savings through increased production, but also to actually look for opportunities to reduce our overall cost. And that is a big part of what we’ll be looking for going forward. I think we see that as, again, we we’ve mold and designed and we’re working on the business as if there’s no magic bullets here.

We need to make it work with this cost base and these prices and cost savings and so on would be upside from what we currently are anticipating. But certainly, I do believe there’s opportunity to reduce costs over time. It will reduce I mean, as we produce more, total costs will go up, but that we’ll have the opportunity for cost reductions irrespective of what our production rate is.

Peter, Moderator/Host: Yes. Okay. Alright. So especially

Bruce, CEO/Managing Director, Sheffield Resources: Correct. Yes. So the per tonne will come down because volume goes up, but we will also be looking to try and compress the costs where we can as well. So a combination of the two and definitely targeting The idea is as we’re ramping up and growing revenues, we’re definitely looking for, and I think I’ve said it before, we have a 50% cost more or less 50% fixed cost base. So as you increase production, you are looking for sort of circa half of that to sort of flow through as as as margin.

Peter, Moderator/Host: Yep. No. Good. Just going back on to the zircon market. Obviously, when we were first when you were first setting up the mine and and a lot a lot of the narrative around the zircon market was obviously we have JA that’s come to.

There there seems to be this deficit forming. Did you still have that view looking forward a couple of years? Is there still a supply crunch coming?

Bruce, CEO/Managing Director, Sheffield Resources: Well, I mean, I think, yes, there’s kind of there’s probably two I think the thesis about there are some significant sources of zircon that have been in the market now for an extended period of time and nearing the end of their mine life and are going to be difficult to replace remains true. So JA, a couple of years out, is definitely into the it’s going to close. And I think Iluka themselves, I think it was in the previous quarter, or I can’t remember, there was an update where they talked about it, that they are focused on a couple of life extensions associated with it. But those are very, very different deposits. If you actually look at a grade sort of zircon grade, heavy mineral grade, they just look like ordinary mineral sands deposits.

They’re not JA with the very, very high zircon content. So I think they might provide some life extension, but they’re not going to provide the volume that came out of there. We still haven’t seen a decision to proceed with Zorti South at Richards Bay Minerals, which means that RBM continues to probably slowly decline through the end of the decade. Trudox is maintaining production. So if you look at the traditional Big Tree, there’s a reasonable amount of production to come out probably on a two-, three year view, not to that the capacity is there today.

Probably the other component, which is sort of interesting, is that we have seen concentrates flowing from places that people didn’t traditionally associate with. So there is more HMC shift from Mozambique today than there was previously into China. While it doesn’t contain a huge amount of zircon, it does contain zircon. And so that’s sort of incremental zircon. We’ve seen a bit more out of Brazil.

We’ve seen out of places like Nigeria, which traditionally did not export a lot Sierra Leone. So I think there’s been in the short term, there has been a little bit of I mean, I think this is a little bit away, but there is probably a bit more flex capacity than people imagine. And certainly, with China very focused on concentrates, we had seen sort of new interesting sources of supply for concentrates, which add up to a reasonable amount of zircon, but I don’t replace JI, for example. It’s very difficult to replace an asset like that.

Peter, Moderator/Host: Yes. Sorry to be flipping around, but we’re going back to cost again, Bruce. Someone here is just asking if you could just explain why we had seen a bit of a jump from in the last two quarters in cost. Was there anything in particular that may have caused that?

Bruce, CEO/Managing Director, Sheffield Resources: A lot of it is the transition costs from in the business morning is a big part of it. So in the March, we did have we were starting drill and blast. We still there was a transition from the previous mining method to that, and we were demodeling the previous last mining contractor. Then in the June, we had said that someone we had a temporary contractor, a local contractor who kept waste mining going in the interim. We had mobilization associated with the new mining contractor.

So there was a bit of one offs associated with that transition. Certainly, we are comfortable that the underlying cost base is what it was. It’s not we don’t at a given product, I think previously, we’d said, if we were sustaining that 2,500,000 to 3,000,000 tonnes a quarter of production, we expected 55,000,000 to 65,000,000 a quarter of CO2 costs. So that’s still our expectation that that’s where our true cost base is. Obviously, as we ramp up, that cost is going go up by definition.

We are going move more material, but we expect that to result in the unit cost rise. So we certainly don’t believe that the last couple of quarters reflect a permanent change in underlying cost.

Peter, Moderator/Host: Okay. Good. Just moving on to capital metals. Obviously, followed your mind, keep the 10%. I think you mentioned in there that you that also kept your rights.

You mind just explain a little bit around, I guess, what the attraction is to the deposit and what the rights are that you’ve kept as well?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. I mean, the second part is the rights. I mean, in essence, have an anti dilution right, which allows us to maintain the 10%. If we drop below that, while you might reach an agreement with the company to do so, we don’t have a right to maintain our share. And we have a build seat and some things like that.

So it’s that’s those are our rights. I think that’s if we didn’t like the project, wouldn’t have followed our money, that we wouldn’t have done it in the first place. I think what we like about that project, I mean, I think fundamentally, and we’ve seen this in the current quarter that we’re drilling there. I’ve always said this, Shrek is a very high grade. They’re small deposit, but very, very high grade.

And when I say very high grade, if institutes could be 60%, 70% like at parts and averaging well into the 10s to 20s type range. I also found a deeper layer, which we always expect because the historical drilling was quite shallow. So the resources would be for size, but because of the grade, it enables a low capital development. You don’t need to move a lot of tonnes to get a reasonable amount of production. And because of that, you can actually operate at a relatively small scale and have a good business.

So the expectation is that business can that volume can get into production to sort of, I think it’s in that US20 million to US30 million dollars range, which is pretty rare. So we think that’s quite an attractive proposition overall. And interestingly, the development in the quarter, local partner who sees that, that is the kind of funding that could actually be provided within Sri Lanka from not probably not the only within Sri Lanka, but the people we buy Sri Lanka, which is sort of interesting. So then you have that alignment between the development and local interests and so on. So I think we like the project anyway.

The deal with Sri Lankan Group, I think, just enhances the likelihood of that happening and probably a clearer path to funding and potentially funding based on view of value in the underlying entity rather than Capital Metals current market cap.

Peter, Moderator/Host: Okay. All right. So it sounds like all goes well. That could add some pretty good value to Sheffield. What I guess, what’s the plan moving forward?

So as I go into production or, like, it will say, it becomes a bit more valuable. Is the plan to become more involved in that project? Or is it just to remain an increase in value than what you already have?

Bruce, CEO/Managing Director, Sheffield Resources: Look, I think, yes, both cases, we retain what we’ve gotten as increases in value. I think we need to be I mean, everybody understands this, but we’re very focused on Thunderbird. We Thunderbird is not generating cash for us. So we I think if we had a if I had a magic money tree, would we be interested being would that be an attractive investment for us to be more involved to that project? Yes.

But we don’t have a magic money tree. So we’re very happy with the 10% stake. We see that should grow in value as they progress the project. And we’ll keep monitoring it. We’ll see what happens.

But it’s not something that we’re going to be we’re not in a position to make any sort of material investment in there in the short term. A little bit of money to follow our money and protect our position is not that kind of cost is not really it’s not material from what’s happening at Thunderbird perspective, but going and spending millions of dollars on a third party project is not what we should be doing at the moment. Okay. Cool.

Peter, Moderator/Host: Moving on to the other project in Brazil, South Atlantic, maybe we could just do a quick update on that for those interested?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. Like I said in the intro remarks, a result of the drilling, we’ve now got a resource over the whole over the two main deposits, Rutiro and Boujirou, very much along with the exploration target, which isn’t surprising. They had a lot of historical drilling. The quality of that, we didn’t it certainly wasn’t draw compare back to QA, QC, etcetera. But I think overall, generally showed pretty good correlation with historical, so we were able to validate that.

But more importantly, we’ve basically got an up to date resource. We had a good understanding of that deposit now. So I think it’s a large deposit. It’s very low. It’s relatively thin.

It’s not a deep deposit. No stripping, it sits at surface, definitely a dredge mine. But there’s a ways to go there. We’ve only got effectively an environmental permit on the Southern deposit. We have a mining or installation losses for a subset of that, that’s the joint venture.

So I think there’s a few steps required before that project is really ready to proceed into full production. And I think I also sort of I look at current market dynamics and so on and say, now is probably not the time to be rushing to bring a new large mine into production. But very good quality product. It sits out it sits in it’s certainly well positioned to supply both local and western markets with high quality zircon. And there’s a lot of optionality in that.

But we’re certainly not in any particular rush to be moving into execution. We don’t think the time is right and the project is not actually ready in our view. And so we’re working with the partner there. The idea would be to probably continue on the path we had, which is that there’s a sort of slow burn to get the project ready for an execution decision. And when that’s the case, we look to move it forward.

But I think in the short term, it’s more about expanding the approvals to get more of the project able to be included in the initial mine plan to support the economics of that. And that’s probably aligned with where we are in the market at the moment, and we are a couple of years away from that from that squeeze on zircon.

Peter, Moderator/Host: Yeah. Okay. So low cost, but high value, de riskier?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. It’s optionality. A lot of the old options, you you you you wanna spend money to, a, retain the option and b, maximize the value of the optionality, but you don’t want to be you want to get ahead of yourself. You’re not trying to pre exercise. So we don’t see it again.

We don’t see that as a significant cash burn for Sheffield in the short term. But we do that. We’d like to retain the optionality of it.

Peter, Moderator/Host: Okay. Brilliant. Well, look, I think we’re out of questions from the audience. Bruce, I’ll leave it to you. Any final thoughts?

And what are you most looking forward to in the next quarter or two?

Bruce, CEO/Managing Director, Sheffield Resources: Yes. Think probably final thoughts, what we’ve been talking about, I think very strong quarter production wise sales. I think we’re on that path to the new business plan. We need to continue on that. But ultimately, feels like we’ve started that journey and we can build on it from here.

So all in all, very pleased with that quarter and sort of onwards and upwards.

Peter, Moderator/Host: Perfect. Okay. Well, look, we are recording. We’ll send out the recorded link to those who have registered and anyone who may have missed it, and

Bruce, CEO/Managing Director, Sheffield Resources: it will also be on the Sheffield

Peter, Moderator/Host: Resources YouTube channel and website. And, obviously, feel free. There’s contact details out there on the screen. They’ll be on the website as well. Feel free to reach out to the team.

I’m sure they’ll get back to you with any questions. Bruce, thank you very much for your time, and thank you, everyone, for joining.

Bruce, CEO/Managing Director, Sheffield Resources: Thanks, Peter. Thanks, everyone.

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