Sheffield Resources Ltd. - Capital/Financing Update 2012

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ASX and Media Release

30 March 2012

POSITIVE SCOPING STUDY RESULTS FOR ENEABBA HMS PROJECT Highly robust project for early cashflow

KEY POINTS

Mine life estimate of 16 years
Very positive financial outcomes from scoping study
Strong results allow Sheffield to commit to pre-feasibility study

Mineral sands explorer, Sheffield Resources (“Sheffield”, “the Company”) (ASX:SFX) toda y announc e d positive results fro m scoping s tudies co m pleted o n its Eneab b a Project in the Mid - West regi o n of West e rn Australi a .

Sheffield’s Eneabba Project c o ntains six advance d explorati o n prospe c ts: West M ine North , Ellengail, Y andanoo k a, Durack, Drummo n d Crossin g and Irwin (Figure 1). Sheffield’s strategy i s to develo p multiple H MS depo s its capabl e of suppo r ting a flexi b le mobile mining op e ration.

The scopi n g study, undertaken by leadin g mineral s a nds cons u ltancy gr o up TZMI, c o nfirms th e technical and robust financi a l viability o f the En e abba Project. The E neabba P roject wil l position Sheffield e x ceptionall y well to t ake adv a ntage of strong mi n eral sand s prices t o secure e a rly cashfl o w as the C ompany seeks to p rogress its world-scal e Dampie r Project i n parallel. Sheffield will com m it to pre-feasibility study work immedi a tely and launch a thoroug h exploration drilling c a mpaign t o unlock fu r ther upsid e at the Eneabba Pr o ject. Sensitivity analysis shows the E n eabba pr o ject eco n omics improve signif i cantly wit h increase s in produc t prices as s hown in T a ble 1. Table 1: Sensitivity analysis using various pricing scenarios

		Scen (Appro price ra ario 1 x. current nge ‐ low)	Scen (Appro price ra ario 1 x. current nge ‐ low)	( p Scenario 2 Approx. current rice range ‐ high)	Scenari (circa 42 current mid o 3 % < price)	Sce (cir curren nario 4 ca 39% < t midprice)	Sce (cir curren nario 4 ca 39% < t midprice)	Scenario 5
								(circa 23% <
								c urrent midprice )
Prices (US$/t FOB)
Zircon		2, 400		2,700	1,715		1,800	2,100
Rutile		2, 200		2,500	1,000		1,200	1,700
Le ucoxene		1, 100		1,300	747		750	925
Chlor ide ilmenite			300	350	190		200	250

Projec t financials
Weighteda verage R/C	r atio		2.42	2.76	1. 53		1.64	2.03
Averagep cas re‐tax operat hflow p.a. ing		US$ 60m			US$21 m	U S$26m		US$43m
				US$74m

Payb ack period		2 .2 years		1.9 years	4.4y ears	3.8 years		2.7 years
After‐ta x NPV (10%)		US$ 257m		US$336m	US$54 m	U S$78m		US$167m
Afte r‐tax IRR			51%	62%	21 %		25%	39%

By way of current pricing com p aratives, Il u ka Resou r ces Ltd (A S X:ILU) an n ounced o n 28 Marc h 2012 that it would receive pric e s in the or d er of US$ 2 ,500 per t o nne for zi r con and U S$2,500 fo r

rutile during early 2012. In relation to ilmenite pricing comparatives, Kenmare Resources Plc announced on 25 January that it had secured new ilmenite sales contracts in the range of US$300 to US$400 per tonne for the first half 2012.

Managing Director, Bruce McQuitty said: “ The scoping study results show the Eneabba project is potentially a financially attractive operation, even based on significantly lower product prices; while additional exploration discoveries of near-surface mineralisation would further improve the project economics.”

“Based on the positive results from TZMI’s scoping work which was completed with reference to Scenario 3, Sheffield will proceed to pre-feasibility on the Eneabba project, while continuing to explore for near-surface dunal style deposits to add to the development schedule.”

“Our strategy is to delineate a series of deposits at Eneabba that can underpin a 20 to 30 year mine life.”

“It is important to note that this scoping study incorporates a low cost, basic mineral separation plant and therefore it is assumed that the rutile and zircon concentrate, which would generate 67% of the revenue, would be sold at a 25% discount to prevailing prices. With further exploration success we aim to build a resource inventory that will justify a full MSP which will allow us to realise greater value still from the operation.”

Eneabba Project Scoping Study Overview

The scoping study is based on mineral resources from three deposits within the Eneabba project; Yandanooka, West Mine North and Ellengail. It is assumed that operations would commence at the largest of these, Yandanooka, before progressing to West Mine North and Ellengail. Heavy mineral concentrate (HMC) would be produced at the mine sites and transported to a basic mineral separation plant (MSP) to be constructed by Sheffield outside Geraldton.

At the proposed mining rate of around 1,000tph Sheffield deposits can be economically mined using a dozer and dozer trap arrangement. At the nominal mining rate of 7.8 million tpa, it is estimated that the average HMC production rate will be 220,000 tpa and occupy a MSP with a capacity of 30tph, to be constructed by Sheffield.

The proposed operation would produce 110,000tpa of chloride-grade ilmenite and 70,000tpa of non-magnetic concentrate (containing rutile, leucoxene and zircon). Current market analysis shows that these products will be in demand and would readily be absorbed by the market.

The total capital costs of US$75 million have been estimated by TZMI based on an assumed flow sheet, typical of similar operations in the industry. Capital costs have been minimised primarily through the use of existing infrastructure, contract mining and the construction of a basic mineral separation plant for the production of ilmenite and a non-magnetic concentrate.

Exploration Upside & Further Work

Scenario modelling by TZMI demonstrated that further exploration discoveries of shallow dunal style mineralisation would further enhance the robust project economics. Sheffield plans to drill three dunal style prospects near Eneabba commencing immediately: Durack, Drummond Crossing and Irwin; with the aim of delineating mineral resources. In addition, Sheffield will undertake further drilling at Yandanooka aimed at increasing the resource in the Indicated classification.

This drilling is scheduled for Q2 2012 and will be followed by resource estimation work during Q3 2012, subject to exploration success.

Pre-feasibility work will commence immediately, focussing on the Yandanooka deposit. Sheffield is targeting completion of the pre-feasibility by Q4 2012.

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