Sheffield Resources (ASX:SFX) provided an operational and corporate update focused on its Kimberley Mineral Sands (KMS) operation and the Thunderbird mine, while also outlining steps taken to preserve cash through changes to other investments.
Cash preservation moves: South Atlantic funding pause and Taprobane sale
Management said it has taken actions to reduce near-term cash outflows outside of KMS. On the South Atlantic Project, the company reached an agreement with the project’s shareholders to stop funding activities “for now,” with the other shareholders providing any required funding. In return, Sheffield said it has retained an option to acquire a 20% interest if it completes an effective total “pay-in” of $15 million, inclusive of amounts already contributed.
Kimberley Mineral Sands: mining plan and wet season conditions
The update reiterated that the company’s “main focus continues to be on Kimberley Mineral Sands and the Thunderbird mine.” Management described site conditions typical of the wet season and noted a visible amount of water on the ground as part of normal operations. It also said construction work continues on an in-pit tailings wall, using predominantly oversize material from the back of the mining unit.
Management referenced a revised business plan introduced in March last year, centered on increasing the mining rate to 16 million tonnes by the first quarter of the next financial year (which it described as the September quarter of the current year in calendar 2026 terms). The plan’s core elements included increasing drill-and-blast capacity to lift mining rates and support concentrate production at or above original design levels.
The company said waste mining enabled by drill-and-blast and a new fleet has delivered “very good productivity,” and management expressed comfort that waste mining “will not be a constraint” on mining activities. The near-term focus has shifted to improving productivity and availability of mining equipment, including ongoing changes to the mining unit (DMU) and reliability initiatives.
Quarterly performance: production impacted by equipment availability and weather
Management said the December quarter pulled back after prior quarters of performance build-up. It attributed the quarter-on-quarter decline to a mix of mining equipment availability issues and seasonal weather impacts later in the quarter. The company also noted the first tropical cyclone occurred in late December, and it mined some lower-grade zones that partially reduced rougher head feed production.
On process plant performance, management described recoveries for zircon and ilmenite as “fairly steady” in recent periods amid relatively steady production. It said plant performance is affected by variability in mining feed and emphasized the goal of delivering steadier feed to support the plant. It also reported consistent product quality for zircon concentrate (ZrO2) and ilmenite concentrate (TiO2).
Ore mined in the December quarter was described as similar to the June quarter of last year and down from September, driven mainly by reduced availability and reliability of mining equipment. Management maintained it believes there is “no reason” the operation cannot mine at an equivalent of up to 4 million tonnes per quarter as needed, while adding it does not expect to require that level every quarter to keep the plant full. It said demonstrating capability over the next couple of quarters remains important.
Zircon and ilmenite: sales timing, weather-related shipment delays, and cost focus
For zircon concentrate, management said second-quarter production was down slightly due to lower rougher head feed throughput. It nevertheless characterized shipments as reasonable, citing a carryover shipment from the prior quarter and sales catch-up efforts. The company also shipped zircon and ilmenite to its partner Yan Steel during the quarter. Management noted variability in shipments, including a portion of a shipment delayed at the end of December.
Looking to the current quarter, management expects zircon production to be similar or higher, but cautioned that this part of the year can bring the largest annual weather impacts, affecting both production and shipping. It said the company generally expects to sell “pretty much what we produce,” with timing differences depending on shipment scheduling. Management reiterated it is building toward approximately 55,000 tonnes per quarter of zircon production, targeting the first quarter of the next financial year.
Ilmenite results followed a “fairly similar story.” Production was down due to lower ore mining, and sales were affected by a larger weather-related deferral of an ilmenite shipment at year-end. Management said it expects to catch up the shipment in the current quarter and is building toward approximately 220,000 tonnes per quarter of ilmenite production from the first quarter of the next financial year.
On costs, management said cash costs increased slightly in the second quarter, partly due to lower volumes, but it also indicated higher production rates and cost-saving initiatives are reducing the overall cost base. The company said additional cost-saving opportunities have been identified, with some delivered and others pending, and noted that timing can affect when improvements are reflected in reported costs.
The company reported negative operating cash flow for the quarter, attributing it in part to the timing of shipments and payments. The operating deficit, along with capex and lease-related interest payments (management specified these were not interest to debt holders), was supported by a combination of prepayments and a shareholder equity injection in November totaling about AUD 6.5 million. Management said inventory ended the quarter at “reasonable” levels, with ilmenite inventory higher due to the deferred shipment; it added that inventory would have been closer to normal levels if the ship had departed on time.
Debt update and market conditions: price stabilization signs, restructure talks ongoing
Management addressed debt developments, stating that Sheng Feng, a related party within the Yan Steel Group, acquired the Orion loan note. It said debt restructure discussions are continuing with NAIF and the new debt counterparty, Sheng Feng, but remain incomplete. Management and the moderator both emphasized that the company could not provide additional detail until an agreement is finalized.
When asked how the novation affects the debt, management said the loan was novated “in its entirety” and none of the terms changed. It added that the change primarily affects the parties negotiating a potential renegotiation and does not, by itself, change the debt situation at KMS.
On zircon pricing, management said it and others have seen signs prices stabilized toward the fourth quarter, and referenced similar observations it said had been made by Iluka. It described the market as stable around current levels, with uncertainty about the next move. Management said it expects no rapid price recovery through the first half of the year, anticipating prices may remain around current levels with some variation. It also discussed the impact of Chinese New Year, noting restocking ahead of the holiday appeared less evident than last year, while post-holiday activity may influence shipping and production.
In discussing reported price differences, management said a comparative price on a CIF basis would be around $500 per tonne if all sales were made on that basis, estimating somewhere between $500 and $510 depending on cargo quality, and suggested about half of a cited difference was due to selling mix rather than underlying price movement.
Management also commented on whether another DMU could help operations. It said a second DMU could increase uptime but would require significant capital. The current view is that a second DMU may be more relevant later in mine life to offset grade decline by increasing mining rates, rather than as a near-term fix for availability. Management said it does not believe there is anything inherent in the current DMU that prevents operating at targeted levels, while noting ongoing learning and maintenance improvements.
On investor metrics, management said it personally focuses on C1 costs excluding inventory movements, arguing it is the most meaningful measure of production cost in shorter time periods, since inventory movements can distort quarter-to-quarter comparisons.
In closing comments, management said it appreciated the opportunity to provide an update and expressed hope for “a better 2026.”
About Sheffield Resources (ASX:SFX)
Sheffield Resources Limited explores for and develops mineral properties in Australia. The company explores for zircon, rutile, ilmenite, leucoxene, rutile, anatase, and titanium minerals. Its flagship project is the Thunderbird mineral sands property located in the Canning Basin in northern Western Australia. The company was incorporated in 2007 and is based in West Perth, Australia.
