With a prefeasibility study 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 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 officer. “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 prefeasibility 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 boasts greater widths than the Lower zone, it is the Lower zone’s high grade 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 plans to have a crusher on site to ensure that no large clumps get shipped out, but for the most part ore will be mined 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 phosphate producer, 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 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 costs are estimated 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.
These metrics help generate an after-tax net present value of US$179.4 million using an 8% discount rate, with a 27% internal rate of return.
The Lower zone has proven and probable reserves of 10 million tonnes grading 29.4% phosphate (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.
The zone has inferred resources of 8.1 million tonnes grading 29.3% P2O5.
Stonegate plans to update its resource estimate in this year’s second half.
While the prefeasibility study focused on the Lower Phosphate zone, the company has not forgotten about the Upper Phosphate zone, and plans to have a resource estimate out on the zone early in this year’s second half.
Ore from the Upper zone requires processing to reach concentrate grades, but Ashcroft says it could hold as much as 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 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 to date.
The prefeasibility study estimates total project life-of-mine capital expenditure of US$238.7 million, including US$24.1 million for contingency. This amount includes initial project capex of US$149.2 million, which could last until the end of third-year production, and US$89.5 million of sustaining capital expenditures for the remaining mine life.
Stonegate has US$14.5 million in the kitty, which Ashcroft says will carry it until the end of a feasibility study due out before 2013.