Verde Potash Files Updated Preliminary Economic Assessment
TORONTO, February 29, 2012 /PRNewswire/ --
Improved Recovery, Accelerated Expansion and 4 Mtpy Production Scenario
Verde Potash Plc (TSX-V: NPK) ("Verde" or the "Company") is pleased to report the filing on SEDAR of its Preliminary Economic Assessment ("PEA") for the production of conventional potash: potassium chloride ("KCl").
"Verde's KCl project has a capital expenditure ("Capex") lower than most proposed greenfield projects, being comparable in cost to brownfield expansions. Given its open pit nature, construction is expected to take 2 years and ramp up to full production expected to be measured in weeks, versus underground potash mines that take around a decade from construction to full production," said Cristiano Veloso, President & CEO.
During the process of final assembly of the PEA, optimizations were conducted which provided improved results to those announced on January 31, 2012. The key modifications were the reduction in time between production phases to 2 years, achievement of slightly better recoveries, use of contract mining for Phase 1 of production reducing upfront Capex and the study of an upside production scenario of 4 million tonnes per year KCl production ("Mtpy"). The PEA was prepared by SRK Consulting ("SRK") for Verde's wholly-owned Cerrado Verde Project ("Cerrado Verde" or the "Project") located in Minas Gerais State, Brazil.
Key Economic Highlights
Base Case Scenario Upside Case Scenario
Total Production: 3 Mtpy Total Production: 4 Mtpy
Phase 1: Phase 2: Phase 3: Phase 1: Phase 2: Phase 3:
0.6 Mtpy + 1.0 Mtpy + 1.4 Mtpy 1.0 Mtpy + 1.5 Mtpy + 1.5 Mtpy
Capex per Phase
(USD million) 598 732 1,008 868 1,120 1,105
Capex for Total Production
(USD million)
(excludes sustaining capital) 2,338 3,095
Operating Costs (USD/t KCl) 285 289
IRR (%) 27 27
After Tax NPV (USD million),
at 10% discount rate 3,367 4,359
The PEA was based on the following assumptions:
- Production of 100% granular fertilizer grade KCl (60% K2O).
- Base Case Scenario - Total Production of 3.0 Mtpy of granular KCl in three phases: 0.6 Mtpy (start up: 2015), 1.6 Mtpy (start up: 2017), 3.0 Mtpy (start up: 2019).
- Upside Case Scenario - Total Production of 4.0 Mtpy of granular KCl in three phases: 1.0 Mtpy (start up: 2015), 2.5 Mtpy (start up: 2017), 4.0 Mtpy (start up: 2019).
- All Capex figures are incremental to the previous phase(s).
- A total planned production life of 30 years for the 3.0 Mtpy scenario, and 28 years for the 4.0 Mtpyscenario.
- 100% equity funding.
- Exchange rate of $1 USD=$1.8 BRL.
- A 25% contingency applied to the Capex.
Improved Recovery
Process recoveries have increased consistently over the last 2 years as it advanced from laboratory to semi-commercial scale. Recovery increased from 66.8% to 70%.
Accelerated expansion
Verde, SRK and consultants have decided to change the time between production phases from 4 and 5 years to 2 years.
Contract Mining
The PEA assumes the use of contract mining for phase 1 of the operation to eliminate the upfront cost of acquiring a mining fleet.
Market study
The Company has completed a market study based on information provided by CRU International ("CRU") and AgroconsultConsultoria& Marketing on the selling price of granular KCl, taking into account the total impact of transportation costs of competitive products. On top of the price charged by the producer at mine gate, Brazilian blenders pay approximately US $173-249/tonne to import KCl from Canada to their individual facilities.
Product pricing for the market study is derived from the granular KCl CFR Brazil Price Forecast provided by CRU International Report, 2012 (in US $/tonne):
Year 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
CFR Brazil 470 470 480 495 545 590 635 700 650 620 605 605
Freight Costs
to Brazil 33 33 33 33 33 33 33 33 33 33 33 33
FOB Vancouver 437 437 447 462 512 557 602 667 617 587 572 572
FOB: Free on Board;
CFR: Product costs and freight to a port of destination, excluding insurance.
The prices of granular KCl are generally higher than standard KCl (difference of approximately US $15 per tonne) due to steeper production costs (source: Ferticon.com, 2012). In the second half of 2011, granular KCl price CFR Brazil was US $550. For greater detail on the market study, please refer to the PEA.
Resource Base
Verde's current mineral resource estimate:
Cut-off grade (% K2O) Tonnage (Mt) Average Grade (% K2O)
Total
Indicated 7.5 71.08 9.22
Total
Inferred 7.5 2,763.80 8.91
Next Steps
Verde is currently working towards a definitive feasibility study for KCl production, which is expected to be completed by the end of 2012.
Technical Report
A copy of the full NI 43-101 Technical Report reporting the PEA has been filed on SEDAR at http://www.sedar.com along with this release.
The scenarios presented in the PEA are preliminary in nature and make use of Inferred Mineral Resources that are considered too speculative geologically to have economic considerations applied to them that would enable them to be categorized as Mineral Reserves. Mineral Resources which are not mineral reserves do not have demonstrated economic viability. There is no certainty that the Preliminary Economic Assessment will be realized.
Qualified Person
All scientific and technical disclosures in this press release have been prepared under the supervision of Neal Rigby and Robert Bowell of SRK Consulting who are Qualified Persons within the meaning of National Instrument 43-101.
About SRK Consulting
SRK Consulting ("SRK") is an independent, global consulting practice that provides focused advice and solutions to clients, mainly from earth and water resource industries. For mining projects, SRK offers services from exploration through feasibility, mine planning, and production to mine closure. Formed in 1974, SRK now employs more than 1,000 professionals internationally in 38 permanent staffed offices on 6 continents.
About Verde Potash
Verde is a fertilizer exploration and development company; it was founded and is led by Brazilians. Verde is developing the Cerrado Verde project in Brazil, a source of potash-rich rock from which the Company plans to produce a potash fertilizer product. Founded as Amazon Mining Holding Plc in 2005, the Company changed its name to Verde Potash Plc in April 2011 to better reflect its core business.
About the Cerrado Verde Potash Project
Cerrado Verde is a unique project: 1) its high grade potash rock outcrops and is amenable to strip mining, allowing fast construction of a scalable operation; 2) it is located in the midst of the world's third largest and fastest growing fertilizer market; 3) it connects to Brazil's largest fertilizer distribution districts via existing and high quality infrastructure.
Cautionary Language and Forward Looking Statements
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT
TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS
RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
THIS NEWS RELEASE CONTAINS CERTAIN "FORWARD LOOKING STATEMENTS", WHICH
INCLUDE BUT ARE NOT LIMITED TO, STATEMENTS WITH RESPECT TO THE RESULTS OF
THE PEA FOR THE PRODUCTION OF CONVENTIONAL POTASH, ANTICIPATED PRODUCTION
LEVELS AND TIMING OF COMMENCEMENT OF PRODUCTION, LONG TERM KCl PRICES,
PRODUCTION LIFE, COSTS AND COMPLETION OF A FEASIBILITY STUDY FOR KCl.
FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS, UNCERTAINTIES
AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS TO BE MATERIALLY
DIFFERENT FROM ANY FUTURE RESULTS EXPRESSED OR IMPLIED BY SAID STATEMENTS.
SUCH FACTORS INCLUDE A MATERIAL CHANGE IN BRAZIL'S K2O CONSUMPTION,
GOVERNMENT REGULATIONS OF MINING OPERATIONS, ENVIRONMENTAL RISKS,
RECLAMATION EXPENSES, TITLE DISPUTES OR CLAIMS, LIMITATIONS OF INSURANCE
COVERAGE, FLUCTUATION LAB AND CONSULTANT AVAILABILITY, MATERIAL CHANGE IN
COMPANY FINANCES, FUTURE FINANCINGS AND OTHER FACTORS DISCLOSED UNDER THE
HEADING "RISK FACTORS" IN THE COMPANY'S CURRENT ANNUAL INFORMATION FORM
AVAILABLE ON SEDAR AT HTTP://WWW.SEDAR.COM. THERE CAN BE NO ASSURANCES THAT
FORWARD-LOOKING STATEMENTS WILL PROVE TO BE ACCURATE, AS ACTUAL RESULTS
AND FUTURE EVENTS COULD DIFFER MATERIALLY FROM THOSE ANTICIPATED IN SAID
STATEMENTS. ACCORDINGLY, READERS SHOULD NOT PLACE UNDUE RELIANCE ON
FORWARD-LOOKING STATEMENTS. THE COMPANY DOES NOT INTEND TO UPDATE FORWARD
LOOKING STATEMENTS UNLESS REQUIRED BY LAW.
For additional information please contact:
For further information:
Cristiano Veloso, President & Chief Executive Officer
Tel: +1-416-866-2966; Fax: +1-416-866-8829; Email: cv@verdepotash.com
Share this article