Focus Ventures’ (TSXV: FCV) Bayovar 12 phosphate project in northern Peru is shaping up quickly: the junior expects to release a maiden resource estimate in the third quarter, less than six months after announcing its first drill results from the project.
Those results, consisting of five vertical holes drilled 800 metres apart (east–west) and to up to 110 metres deep, were released in May. The drilling intersected 13 to 18 horizontal phosphate beds starting at a 28-metre depth. The 11 main beds returned an average grade of 15.1% phosphate (P2O5).
The second set of Bayovar 12 drill results, released in June, intersected the same phosphate beds in six holes drilled 800 metres south, with the main beds averaging 14.8% P2O5.
In late June, another five holes drilled 800 metres south revealed similar results. The 11 main beds averaged a slightly lower 13.6% P2O5. The phosphate beds averaged 0.52 metre wide.
“This third batch of results again emphasizes the continuity of the phosphate beds across the drill grid to date, with the mineralization wide open on all sides,” Focus president David Cass said in a release. “As in previous sections we are seeing grades of 15% P2O5 within the first five beds . . . the same as those being mined by Vale.”
The results showed that the phosphate layers at Bayovar 12 are quite regular over long distances — so far up to 4 km — which is characteristic of sedimentary phosphate deposits.
Because of the regularity, Focus expects its initial 20-hole program will suffice for an inferred resource calculation. The company’s target for a maiden resource is 100 million to 150 million tonnes grading 12–18% P2O5.
Ralph Rushton, vice-president of corporate development, says that grades so far are similar to reserve grades at Vale’s Bayovar operation, located 15 km west. That mine holds 415 million tonnes averaging 15.5% P2O5.
While not a resource calculation, Rushton says the weighted average grades in the top-five phosphate beds was 16.9% P2O5 for the first set of holes, 15.9% P2O5 for the second section and 14.7% P2O5 for the third.
The program’s last four holes have yet to be reported. One or two of the drill collars were moved from their original positions, meaning they have to be repermitted.
After its first drill program Focus can close the drill permit and apply for its next 60- to 80-hole program. The second campaign should bring a lot of the initial resource into the measured and indicated categories, and could suffice for a prefeasibility study.
Focus began acquiring phosphate prospects in Colombia and Peru in 2012 and early 2013. At that time, Cass realized gold and base-metal projects weren’t receiving any traction in the markets, and was looking for a commodity that was in demand but off the radar, Rushton recalls in a June interview.
“Phosphate ticked a lot of the boxes,” Rushton says. “The stuff we’re looking at is sedimentary, so it has potential for extremely large tonnages.”
Focus’ activities in South America caught the attention of the local Peruvian company that controlled Bayovar 12, and they contacted Focus about a potential joint venture.
Focus signed an initial letter of intent to acquire Bayovar 12 last September from the company Juan Paulo Quay S.A.C., and negotiated a definitive agreement in January. The junior can earn a 70% interest in the project through escalating cash payments totalling $4 million over four years, and up to $15 million in project spending over four years.
Focus must also complete a prefeasibility within four years.
In terms of the cash payments, Focus has already paid $250,000. A $750,000 payment is due on Aug. 26, followed by a $3-million payment in late February 2015.
The required project spending at Bayovar 12 includes $1 million on exploration in the first year, and up to $15 million in total.
As extra incentive to complete the prefeasibility study quickly, Focus would have to pay the vendor $1 million on the second anniversary after it receives drill permits for Bayovar 12 if the study is not yet completed. Further $1-million annual payments would follow until a prefeasibility study is delivered.
While the deal may strike some as expensive, Rushton says Focus doesn’t see it that way.
“Given the potential size of the system and the fact that there’s already one world-class phosphate mine in that district, we actually didn’t think it was that expensive.”
He notes that most of the cash payments were back-end loaded so that Focus can show through drilling that it has a world-class project before the big payments are due.
Although there are lots of phosphate projects out there, as with any bulk commodity, logistics and infrastructure are key.
Infrastructure happens to be excellent at Bayovar 12, which is located 70 km south of the city of Piura and only a 30-minute, 40 km drive to a port owned by Focus’ joint-venture partner.
Regarding the $3-million cash payment coming up next February, Rushton says the company is focused on proving it can meet its technical milestones so that it can raise money.
For this year, Focus has a $3.6-million budget, including the $750,000 option payment in August, drilling, assays, metallurgical work and resource calculation ($2 million to $2.3 million), and logistics permits and general and administrative expenses ($500,000).
The junior is covered for the year: it raised $1.3 million in a private placement in April, and another $2.38 through the forced exercise of outstanding warrants in late June. It has another $1.1 million in warrants expiring at the end of July.
As for advancing the project, Focus will likely need to bring in one or more partners.
“We’re not naive enough to believe that a project of this potential scope is something that we can handle on our own as a $20-million junior company,” Rushton said.
Bayovar 12 is located in the Bayovar district in the Sechura Desert, a north-trending basin with Miocene-aged rocks covered by recent sand deposits. Phosphate occurs as beds of pelletal phosphate within a diatomite-and-sandstone sequence 200 metres thick.
The geology and mineralization at Bayovar 12 is similar to that of nearby mines, including Vale’s Bayovar, one of South America’s biggest phosphate deposits. Focus notes that Vale sold minority stakes in its Bayovar mine to Mosaic and Mitsui for $660 million in 2010.
Focus shares recently traded at 30¢ in a 52-week window of 6¢ to 35¢. The company has 60.8 million shares outstanding.