With a prefeasibility study now in the bag Stonegate Agricom (ST-T) is on track to do something that no other junior has done in the phosphate space for a very long time.
“We will be the first merchant phosphate rock operation put into production in North America in a generation,” says Mark Ashcroft, the company’s president and chief executive. “Everything else that’s been built has been owned by the integrated producers.”
Stonegate’s lofty ambition is connected with its Paris Hills phosphate project in Idaho where the pre-feasibility study outlined the prospect of an underground mine extracting ore from the Lower Phosphate Zone.
That zone, Stonegate says, will supply the production of 10 million tonnes of phosphate rock.
And while a second zone, known as the Upper Phosphate Zone, is closer to surface and boast greater widths than the Lower Zone, it is the high grade of the Lower Zone that has catapulted it into a place of priority.
“When you look at phosphate production you generally need to concentrate it into a marketable form,” Ashcroft explains. “We’re fortunate that the in-situ grade at the Lower Zone is actually concentrate quality. We are able to extract it in concentrate grades and we don’t have to process it any further.”
The company does plan to have crusher on site, just to ensure that no large clumps get shipped out, but for the most part once ore is mined it will be in a small pebble sized form that is fit for shipping.
And the shipping aspect is also a big advantage for the project. Since end users in the phosphate market generally pay for the shipping, Paris Hill will enjoy an advantage with North American end users. Rather than paying for shipping from Morocco — which is the world’s second largest producer of phosphate behind China — they will have a much closer-to-home supply source.
A future mine at the site is expected to have a 14-year mine life with production reaching more than 800,000 tonnes per year in the third year and more than 1 million tonnes in the fifth year. But those numbers could shift upwards with more positive results from an ongoing drill program.
Cash operating cost are estimated to come in at US$72.99 per tonne of saleable product, which Ashcroft says, will place the project in the mid-range in terms of industry cash costs.
Those metrics helped to generate an after-tax NPV of US$179.4 million using an 8% discount rate with an internal rate of return of 27%.
The Lower Zone has proven and probable reserves of 10 million tonnes grading 29.4% P2O5 and measured and indicated resources of 22.3 million tonnes grading 20.1% P2O5.
In the near term, Stonegate plans to do more definition drilling in areas on the property that it has not yet drilled with the aim of moving inferred resources into measured and indicated and expanding the amount of proven and probable reserves.
Currently the zone has inferred resources of 8.1 million tonnes grading 29.3% P2O5.
Stonegate plans to update its resource estimate in the second half of 2012.
And while the pre-feasibility study focused on the Lower Phosphate Zone that doesn’t mean the company has forgotten about the Upper Phosphate Zone as it plans to have a resource estimate out on the zone early in second half of this year.
Ore from the Upper Zone would need to be processed to concentrate grades but, Ashcroft says it could have as much as 60 to 80 million tonnes of production potential.
“Right now, however, our focus is on getting the Lower Zone into production,” he says. “We want to break ground in 2014, with production coming in by the end of 2014 or early in 2015.”
Paris Hills hosts a sedimentary phosphate deposit that is one of the highest-grade deposits in the world and is the highest-grade deposit in the Americas.
Stonegate acquired the property in September 2009 for $4 million and began definition drilling at the property in September 2010. Ashcroft says the company has invested roughly $20 million in the project up to date.
The pre-feasibility study estimates total project life-of-mine capex of US$238.7 million, including US$24.1 million for contingency. That amount includes initial project capex of US$149.2 million, which will take it to the end of the third year of production and US$89.5 million of sustaining capital expenditures for the remaining mine life.
Stonegate currently has US$14.5 million in kitty, which Ashcroft says, will get it to the end of a feasibility study due out by the end of 2012.
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