Arianne Phosphate’s (TSXV: DAN) Lac à Paul phosphate rock project in Quebec can be built for about US$1.22 billion, a feasibility study shows. Of that amount, about US$982.5 million (less US$73.9 million set aside as contingency), will be spent building the mine and processing plant, and US$232.2 million (less a US$18.1 million contingency), will be spent constructing the transport system necessary to get the product to the Port of Saguenay.
The feasibility study on what the company likes to describe as “the world’s largest greenfield phosphate rock project,” about 200 km north of the Saguenay-Lac-St.-Jean region of Quebec, envisions an open pit mine that will produce about 3 million t/y of phosphate concentrate at a grade of 38.6% P2O5 over a lifetime of nearly 26 years.
Post-tax numbers were unavailable at the time this article went to press, but at an 8% discount rate the project is forecast to yield a pre-tax net present value of US$1.9 billion and a pre-tax internal rate of return of 20.7% with payback in about 4.5 years before taxes and mining duties.
Adding to the potential appeal, the company emphasizes, is that the feasibility study was based solely on the project’s Paul zone, which contains measured and indicated resources of 590.24 million tonnes averaging 7.13% P2O5 at a 4.0% cut-off grade. It does not include the 163.80 million tonnes of measured and indicated material grading 5.88% P2O5 from the Manouane zone, which if added could potentially extend the mine life another eight years, the company estimates.
Further potential upside comes from the fact that the Paul zone is open at depth, the company says, and the fact that over the last three years Arianne has identified six other mineralized sectors. None of the new areas – Lise, Lucie, Nicole, Traman, Turc and Traverse – do not yet have resource estimates.
Based on the feasibility study’s findings, annual operating costs FOB the Port of Saguenay per tonne of phosphate concentrate will be about US$93.7 per tonne over the life of the mine, which should yield an operating margin of 56%. The Lac à Paul average price over the mine’s lifespan will be US$213 per tonne based on cost data from marketing studies provided by CRU International and Integer Research, the company says.
At full production, the milling rate will be 55,000 t/d with an average 18.6 million t/y of run-of-mine ore supplied to the process plant. Tailings will be stored 2 km from the concentrator.
Power will come from Hydro Quebec through Rio Tinto Alcan’s power system from the Chute des Passes power plant, 30 km from the mine site.
Arianne filed its environmental impact assessment in June.
The results of the feasibility study were released after markets closed on Oct. 24. On Oct. 25 Arianne’s shares closed 15.20% higher at $1.44 per share and rose another 9.03% to $1.57 per share on Oct. 28.
At press time in Toronto Arianne’s shares were trading at $1.57 within a 52-week range of 84¢ and $1.69.
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