For over a year, Great Quest Metals’ (GQ-V) Tilemsi phosphate project in Mali has been in limbo, waiting for peace to return to the remote northern corner of the troubled West African nation.
The company evacuated the project near the city of Gao on the eastern bank of the Niger River, about 1200 km northeast of the capital of Bamako, for security reasons in 2012, when the combination of a Tuareg separatist insurgency in the north (Jan.-April 2012), a military coup that overthrew the country’s president (March 2012), and an Islamist insurgency (June 2012) drove the country into chaos.
The French military—which intervened in the conflict in January 2013—sent the Islamist fighters packing, but it wasn’t until earlier this week that Mali reached a ceasefire agreement with the separatist Tuareg rebel groups. Under the agreement, national presidential elections will be held on July 28 and in the meantime a United Nations peacekeeping force of 11,200 military personnel and 1,440 international police will bring further stability to the country from July 1.
“For us to know that not only is there a truce but that peace is returning and that the Mali administration is going back to northern Mali, is very significant,” Candice Font, a company spokesman, explained by phone from Vancouver. “The situation was very challenging.”
Before the violence forced Great Quest to evacuate the Tilemsi project, it had completed a preliminary economic assessment based on an inferred resource of 50 million tonnes grading 24.3% phosphate at a 10% cut-off grade. So far the company has only drilled about 2% of the project’s 1,206-sq.-km. land package
The PEA outlined a mine life of 20 years with a net present value of US$649 million at a 10% discount rate and a 33% internal rate of return.
Production would start at 200,000 tonnes a year, increasing by 100,000 tonnes a year to reach 500,000 tonnes a year by year four. In year eight, production would reach a steady rate of 1 million tonnes per year and remain at that pace for the remainder of the mine life.
The study estimated capex would come in at US$143 million, payback would come in four years time, and the project would be cash positive from its first year of operation.
The mine would produce two granulated phosphate products: a high-grade for mixture into standard blended NPK fertilizers, and a medium grade for simple, direct application. The high-grade would run 35% phosphate (P205) and the medium grade 27% P205.
Pricing used in the study incorporated a 20% discount to equivalent products currently available in the region, mainly from Morocco, which is currently the world’s largest producer.
According to the company’s statistics, demand for P205 in West Africa is projected to increase from 184,000 tonnes in 2010 to 287,000 tonnes in 2020, and to 430,000 tonnes in 2030.
To accelerate the development of Tilemsi, Great Quest plans to develop a pilot plant in Sigou, about 200 km northwest of Bamako and about 1,000 km south of the project, in an agricultural area of the country. The objective is to produce enough granulated fertilizers to supply local blenders, large-scale farmers, and agricultural development organizations and to develop the market ahead of planned full-scale operations.
“When we present our project, people love it,” Font says. “Local Malian authorities love it, as well as development agencies. US AID for examples thinks the project is great and a lot of development agencies that deal with agriculture in West Africa think it’s fabulous.”
At presstime in Toronto Great Quest was trading at 65¢ per share within a 52-week trading range of 42.5¢-$1.38 per share. The company has about 45 million shares fully diluted.