1 March 2011
As announced to the market in early January, the Widespread Chatham Rise Joint Venture has jointly funded three mining concept studies with four of the largest dredging companies in the world (with two jointly undertaking one study).
The license area owned by the joint venture is located approximately 450km offshore and extensive historical research on the license area has indicated the potential for economic concentrations of rock phosphate, the primary constituent of fertiliser. The rock phosphate occurs in nodules of 2-150mm in size and rests in a 1 metre deep layer of sandy silt at the floor of the ocean in water depths of 375-425 metres.
The key purpose of the mining concept studies is to demonstrate for the joint venture that extracting rock phosphate from the license area is both technically and economically feasible. The studies propose extraction techniques for the rock phosphate with specific attention to minimising environmental impact. These studies are therefore a critical part of ensuring that proceeding with the project and ultimately seeking a mining license is viable.
The first concept study has been received and considers that extraction of rock phosphate from the license area is technically feasible and proposes a dredging technique that could be employed for extraction. Actual particulars of the technique itself are confidential at this time. In any event, the technique ultimately employed will depend upon which dredging partner is eventually chosen by the joint venture and on further physical data being obtained from the license area that does not compromise the proposed technique.
Importantly this first study adopted conservative assumptions where there are physical data uncertainties and accordingly it is considered that the finding of technical feasibility is robust and a strong endorsement of the technical viability of the project.
This first study also opines on the economics of extracting the rock phosphate in terms of extraction volumes and costs. Very pleasingly for the joint venture, these economics are consistent with the joint venture’s own models and valuations. These models and valuations will be discussed in detail in the meeting documentation that will be circulated to securityholders shortly in connection with restructuring ownership of this project.
It is considered that this first study is a strong indication that the project is economically viable.
A draft second study has been received by the joint venture as well. It does not yet consider the economic viability of extraction however it proposes a differing extraction technology to the first study and also indicates that extraction is technically feasible. The second part of this study covering economics and the third study are expected later this month.
The joint venture is very pleased with the outcome of the studies received to date and consider them a strong endorsement of the project. The directors of each of Widespread Portfolios and Widespread Energy also consider that these results reinforce the need to restructure ownership of the project and undertake a significant offshore capital raising as detailed in market announcements yesterday so that the project can be aggressively pursued.
For and on behalf of the Board
Widespread Energy Limited