The federal government's Northern Australia Infrastructure Facility (NAIF) says it will investigate its support for a proposed mineral sand mine in the Kimberley after a joint venture with a privately-owned Chinese company was formed.

NAIF announced it would provide a $95 million loan to Australian company Sheffield Resources in 2018 to support development of a mine between the towns of Broome and Derby in the north-west of Australia.

In announcing the loan, NAIF said it would support the construction of roads and a power plant for the proposed Thunderbird mine, as well as "revitalise the Port of Derby".

"We are delivering on NAIF's mandate to contribute to the generation of public benefit … through the financing of game-changing infrastructure projects," then-NAIF CEO Laurie Walker said.

Sheffield struggled to raise the rest of the $500 million construction cost until 2020 when a joint venture with Chinese steel producer Yansteel completed funding and created a new 50:50 Chinese-Australian joint venture called Kimberley Mineral Sands (KMS) as the new mine developer.

But celebrations around the full funding of the project, including the port revitalisation, were cut short when the new joint venture announced last month that it would be applying for approvals to instead export all of the mine's titanium dioxide and zircon out of Broome.

NAIF declined to answer specific questions from the ABC about this change of plan, but did provide a brief statement.

"In late 2020, Sheffield announced it had secured Foreign Investment Review Board approval for Yansteel, a Chinese privately-owned steel maker, to take a 50 per cent stake in the Thunderbird mineral sands project," the statement read.

"Following the announcement, NAIF is investigating what that means for the support of the project."

Still supportive

Despite the statement that NAIF is investigating its support for the project and the move away from Derby Port upgrades, CEO of Kimberley Mineral Sands, Stuart Pether, said the Commonwealth entity remains supportive of the project.

"NAIF have represented to us that they're very supportive of the project," Mr Pether said.

"They go through a technical due diligence process, and there have been some changes to the flow sheet and changes to some of the mining assumptions, and they are diligently going through that process."

The ABC understands that far from fearing NAIF could pull their support from the project, KMS is hoping the federally-funded loan will be more than doubled from $95 million to $200 million.

"NAIF are very focussed on making sure that there are regional benefits from the project … and Kimberley Mineral Sands are very confident that those benefits will outweigh any concerns around any other aspects."

KMS will need WA government approvals to be able to export solely out of Broome instead of Derby.

Ports Minister Rita Saffioti was not available to be interviewed by the ABC, but her office provided a statement saying the decision to not export through Derby was a matter for the proponent once they have the necessary approvals.

"Our advice is that Kimberley Mineral Sands has applied to the Environmental Protection Authority for approval to export all products from their Thunderbird mine operation through Broome port," the statement said.

"The final investment decision for any bulk export project will be made by the project proponent."

The federal member for the Kimberley, Melissa Price, was also unavailable to be interviewed but provided a statement saying she was disappointed that Derby may miss out on upgrades to the port, but that it was a commercial decision.

"I would urge all parties impacted by this possible decision to keep talking and to try and find a resolution that does support a good outcome for Derby," the statement said in part.

Open to negotiate

Representatives from KMS will be travelling to Derby later this week to present their message that the town still has a lot to gain from the mine even if exports go to the Port of Broome.

Shire president Geoff Haerewa said the council will listen to what the company has to offer before deciding how to proceed.

"We've decided to wait for Kimberley Mineral Sands to come and give us that explanation or presentation to us, explaining their reasons why, and we'll move forward from there," he said.

In the meantime, Mr Haerewa said the council will be doing everything they can to hold KMS to their original plan.

"We will be advocating to state and federal governments to see how they could help convince Kimberley Mineral Sands to come through Derby and adhere to their first business plan."

Mr Pether said that while he expects that it may not be the easiest meeting he has had, he hopes he can convince the town of Derby that all is not lost.

"I understand that there will be some disappointment and there may be some anger," he said

"We need to develop a scenario which is best for the project, and there will still be local content, local employment.

"We'll still be a drive-in-drive-out business, and many opportunities will flow to the Kimberley as a whole, and I'm sure that many benefits will still flow to Derby."