Mr. Bernard Lapointe reports
ARIANNE RESOURCES INC.: LAC-A-PAUL PHOSPHATE PROJECT PREFEASIBILITY STUDY CONFIRMS VIABILITY OF LONG-LIFE PHOSPHATE ROCK MINE
Arianne Resources Inc. has released its initial findings of the Lac-a-Paul phosphate prefeasibility study conducted by Met-Chem Canada Inc. The study, in compliance with NI 43-101, considers the principal economic factors of building and operating the Lac-a-Paul phosphate rock mining project and selling apatite concentrate for production of phosphoric acid and fertilizer products. The project is located in the Saguenay-Lac-Saint-Jean region of Quebec with easy access to rail and the deepwater Port of Saguenay. The study, which will be posted on SEDAR and the Arianne website within the next 45 days, yielded encouraging results as summarized below.
Highlights of the prefeasibility study (in U.S. dollars):
- Measured and indicated resources quadruple to 348 million tonnes of 6.50 per cent
P2O5;
- Additional inferred resources of 114 million tonnes at 5.46 per cent P2O5 are
not included in the study;
- Combined Paul and Manouane proven and probable mineral reserves now
total 307 million tonnes at an average grade of 6.59 per cent P2O5 at an average stripping
ratio of 0.83 (cut-off grade of 2.43 per cent P2O5);
- Annual production to average two million tonnes of 38 per cent P2O5 apatite
concentrate;
- Twenty-five-year mine life at 33,000 tonnes per day with average mill recovery of 89 per cent;
- Average price of $175 per tonne (comparable with 85 BPL FOB Russia which is
currently sold at $223 per tonne);
- Cash operating cost $98 per tonne concentrate (FOB rail Dolbeau-Mistassini);
- Total direct capex cost: $454-million;
- Indirect capex cost: $121-million and contingency: $74-million;
- Total initial capex: $649-million;
- Pretax internal rate of return: 19.2 per cent;
- Pretax net present value (8 per cent): $684-million;
- Pretax capital payback: 4.7 years.
"The results of the study place our Lac-a-Paul project among the most attractive of the next generation of phosphate rock mines," noted Bernard Lapointe, chief executive officer. "The all-in cost (capex plus opex) estimate of $118 per tonne demonstrates that Lac-a-Paul is a world-class phosphate rock project with robust economics. The study also confirms that, due to the significant increase in ore resources, a three-million-tonne-per-year P2O5 concentrate operation could further enhance project economics by as much as 50 per cent. And newly discovered mineralized zone nearby the proposed mill site should provide even more resource for the project. We are now evaluating an optimized production scenario which will include not only a 50-per-cent increase in annual P2O5 production, but also recovery and sale of TiO2 (titanium) concentrate."
Expanded mineral resource (complies with NI 43-101)
A new resource estimate was calculated by SGS Canada Inc.-Geostat group following the completion of the most recent drilling campaigns in the Paul and Manouane zones in December, 2010, and March, 2011, respectively. The resulting increase in measured and indicated resource is incorporated into the prefeasibility study. The updated measured and indicated resource now totals 348 million tonnes. An additional 114 million tonnes of inferred resource in zones Paul and 2 are not included in the study.
Zone
Zone Paul Manouane
(Mt) P2O5 (%) TiO2 (%) (Mt) P2O5 (%) TiO2 (%)
Measured (M) 22.1 6.82 7.89 136.9 5.93 8.77
Indicated (I) 161.8 7.1 8.21 26.9 5.64 8.46
Total (M&I) 183.9 7.06 8.17 163.8 5.88 8.72
Add'l inferred 50.3 6.61 8.25 - -
Zone 2 Total P2O5
(Mt) P2O5 (%) TiO2 (%) (i) (%)(i) TiO2 (%)
Measured (M) - - 159 6.05 8.65
Indicated (I) - - 188.7 6.89 8.24
Total (M&I) - - 347.7 6.50 8.43
Add'l inferred 64 4.55 4.57 114.3 5.46 6.19
(i) Cut-off grade of 2.43 per cent P2O5
Drilling continues on other promising zones within Lac-a-Paul's 150-square-kilometre property.
Mining/concentrating
Mining will be a conventional open pit truck and shovel operation. Zone Paul will be mined first for 14 years zone Manouane to follow. The average mining/milling rate at full production is 12.3 million tonnes per year. Metallurgical testing determined that an 89-per-cent P2O5 average recovery is feasible by conventional milling process, yielding concentrate production averaging approximately two million tonnes per year. The pit designs for the Paul and Manouane deposits resulted in combined Paul and Manouane proven and probable mineral reserves totalling 307.1 million tonnes at an average grade of 6.59 per cent P2O5 and 8.51 per cent TiO2.
Strip
Category Ore (Mt) P2O5 (%) TiO2 (%) Waste (Mt) ratio
Zone Paul
Proven 21.4 6.85 7.94
Probable 140.3 7.21 8.29
Subtotal 161.7 7.16 8.25 170.8 1.1
Zone Manouane
Proven 123.3 5.99 8.84
Probable 22.1 5.72 8.54
Subtotal 145.4 5.95 8.79 85.0 0.6
Total reserves
Proven 144.7 6.12 8.71
Probable 162.4 7.01 8.33
Grand total 307.1 6.59 8.51 255.8 0.8
Mining and concentrating costs are estimated at $2.24 per tonne mined and $8.33 per tonne milled. General and administration costs, which include costs to support the man camp, security, training, environmental and laboratory costs, have been estimated at $5.85 per tonne P2O5 concentrate.
Apatite concentrate
The table, "Apatite concentrate" shows the chemical composition of the apatite concentrate produced from an eight-tonne bulk sample of the Paul zone. The product quality is very high, with P2O5 content of 39 per cent (85 per cent BPL), very low contaminant content and a low CaO/P2O5 ratio of 1.3. High P2O5 content allows very efficient shipping (dollars per tonne P2O5 content). Low contaminant content yields non-hazardous gypsum byproducts. Low CaO/P2O5 ratio means lower sulphuric acid use/cost in production of phosphoric acid, MAP (mono-ammonium phosphate) and DAP (di-ammonium phosphate).
APATITE CONCENTRATE
Content Content
P2O5 (%)(1) 39.1 Total SiO2 (%)(1) 2.49
CaO (%)(1) 52.1 Acid insoluble SiO2 (%)(2) 1.81
MgO (%)(1) 0.96 Acid soluble SiO2 (%)(2) 0.59
Fe2O3 (%)(1) 1.67 Organic C (%)(2) 0.91
Al2O3 (%)(1) 0.84 H2O (%)(2) 0.30
CaO/P2O5 analytical
Na2O (%)(1) 0.28 Ratios (1) 1.33
K2O (%)(1) 0.15 F/soluble SiO2(1) 2.88
F (%)(1) 1.70 F/(SiO2+Al2O3+MgO)(1) 0.40
(Fe2O3+Al2O3)/P2O5(1) 0.064
(Fe2O3+Al2O3+MgO)/P2O5
Cl ppm (water soluble)(2) 108 (MER)(1) 0.089
Cl ppm (total)(1) 860
SO3 (%)(2) 0.12 Cd ppm(1) 0.5
CO2 (%)(2) 2.38 Hg ppm(1) <0.02
INSOL (%)(2) 1.75 As ppm(1) <0.05
Loss of ignition (%)(1) 0.51 U mg/L(1) <0.02
(1) Analysis from Corem
(2) Analysis from Jacobs Engineering Inc.
Phosphoric acid, MAP and DAP successfully produced
The company is also pleased to announce that phosphoric acid and derivative fertilizers MAP and DAP were successfully produced from zone Paul concentrate by a leading global phosphate rock and fertilizer testing facility. No corrosivity was found during production of 28 per cent P2O5 phosphoric acid, the standard grade feedstock for MAP and DAP production. Other features noted were high acid filtration rates, no need for froth control reagents and low gypsum byproduct production. Most notably, the fertilizers produced exceed generally recognized industry specifications for DAP (18 per cent N/46 per cent P2O5) and MAP (11 per cent N/52 per cent P2O5) The complete Jacobs Engineering Inc. report is posted on the company's website.,
Fertilizer component analysis DAP MAP
Nitrogen % N 19.3 11.4
Phosphorous % P2O5 48.9 55.3
Moisture content Crushed % H2O 1.9 1.2
Moisture content Non-crushed % H2O 0.8 0.6
Hardness Pounds 7.9 9.1
Analysis from Jacobs
Location
The Lac-a-Paul project is located in one of the most dynamic natural resource-rich areas of the Quebec province. The Saguenay-Lac-Saint-Jean is well known for its world-class aluminum, niobium, timber, genomics and low-cost hydroelectric power generation.
Access to the project is via well-maintained gravel roads (Chemin des Passes) presently used for the logging industry. The 165-tonne capacity bridges on this road will support trucks capable of transporting 115 tonne loads of P2O5 concentrate. A rail transload facility will be built at Dolbeau-Mistassini, approximately 210 kilometres from the project. Concentrate transport cost from the mine to FOB railcars in Dolbeau is estimated by Met-Chem at $10.90 per tonne. The rail access at Dolbeau-Mistassini connects with the North American Rail Network (CN) and also provides access to the year-round accessible deepwater Port of Saguenay.
Hydroelectric power is available to the project just 35 km away, from the 750-megawatt Chute Des Passes power plant owned by Rio Tinto/Alcan. The project is also only 60 km from 405-megawatt Peribonka IV plant owned by Hydro-Quebec. Both options are capable of providing sufficient power to the project.
Socio-economic
With a population of 300,000, a well-educated work force is available to the project. Discussions with the Pessamit First Nation and local authorities of MRC Fjord-du-Saguenay are currently in progress. The mine will create about 340 permanent jobs and more than 400 indirect jobs, and generate substantial direct economic benefits to the region. Environmental and socio-economic impact studies are already under way.
Potential for enhanced project economics
The company believes the project may be further enhanced by provincial government assistance to develop shared infrastructure under Quebec's Le Plan Nord economic development initiative. The power line connecting the project to the Chute des Passes power plant is located in the area eligible for consideration under this plan. At the municipal level, the City of Dolbeau-Mistassini has already commissioned and completed a prefeasibility study for the construction of the railway bridge in Dolbeau-Mistassini. Government involvement in funding of these infrastructure components may significantly reduce the capital cost of the Lac-a-Paul project.
The study identified potential enhancements to project economics through expanded production rates, now feasible given the significant increase in measured and indicated resources. The company has commissioned an initial economic assessment of these options for completion in first quarter 2012, with the goal of determining the most efficient course of action. Scaled-up production scenarios under consideration include:
-
Annual P2O5 concentrate production of 2.5 million tonnes (40,000 tonnes per day
of ore processing);
- Annual P2O5 concentrate production of 3.0 million tonnes (50,000
tonnes per day of ore processing);
- Recovery and sale of titanium (ilmenite) concentrate.
Preliminary results indicate that economics are expected to improve at these production rates, as estimates of pretax NPV8 increase to $1-billion at a production rate of 50,000 tonnes per day, with requirements of additional initial capex of about 20 per cent and mine life of about 17 years.
A feasibility study will be initiated in second quarter 2012 based on the outcome of these studies.
Sensitivity of project economics to concentrate price and operating costs
Project economics sensitivity was reviewed for concentrate price and operating costs on a pretax basis by Met-Chem. The analysis showed a break-even pretax NPV8 at $135 per tonne, a price 23 per cent below the long-term average price for 85 BPL concentrate of $175 per tonne in constant 2011 dollars. For comparative purposes, the current price of 85 BPL concentrate FOB Russia is $223 per tonne.
The sensitivity analysis showed that for each $1-per-tonne improvement in cash margin, either through higher price or lower operating cost, the pretax NPV8 increases by approximately $17-million.
Technical data of this news release have been reviewed by Mary-Jean Buchanan, Eng (Met-Chem), Claude Duplessis, Eng (SGS Geostat), and Daniel Boulianne, Geo (Arianne), who are deemed to be qualified persons under NI 43-101.
Canada Phosphate is the wholly owned subsidiary of Arianne Resources developing the Lac-a-Paul phosphate-titanium deposits. These deposits should produce a high-quality igneous apatite concentrate grading 39 per cent P2O5 with little or no contaminant.
We seek Safe Harbor.
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