Progress update for Chatham Rise 26 October

In an announcement to the Stock Exchange Managing Director Chris Castle said Widespread Energy continues to make significant progress on the project. Recent milestones include:

• Enhanced international profile of the project through speaking at an international conference in Russia
• Successful meetings in Europe with several of the world’s largest dredging companies
• Development of a dialogue with the German science establishment concerning previous research work undertaken on the Chatham Rise
• Ongoing discussions with research ship operators
• Establishment of a Chatham Rise linked university research programme
• Submission to Crown Minerals of two completed reports required as part of the year-one work programme 
• Further oceanographic and environmental research commissioned
• Initiation of a dialogue with fertiliser sector parties 

Following on from his presentation to the Underwater Mining Institute conference in Gelendzhik, Russia, Mr Castle and project principal scientist Dr Robin Falconer met in Europe with several leading dredging companies. Meetings were also held with the owners of research ships and with German science organisations.

Four of the five dredging and undersea mining companies met expressed interest in the project and in either adapting existing underwater mining technology or developing new purpose-built technology. Discussions are ongoing.

Three meetings were held with sections of the German science establishment to re-establish links with the organisations centrally involved in the Chatham Rise exploration and research projects that took place in the late 70s/early 80s. The exploration cruises of the RV Valdivia and RV Sonne, were accompanied by a sizeable contingent of New Zealand and German scientists. The recent meetings gave a much better understanding of the cruise data still held in Germany and possible ways it could better assist our knowledge of the phosphorite deposit. 

A meeting was also held with representatives of the company operating RV Sonne with a view to possible use of the ship when in New Zealand waters during 2011. Discussion on the use of this vessel and other alternatives are also ongoing.

The Widespread Joint Venture has also agreed to sponsor a university research programme related to certain properties of the phosphorite nodules and is seeking to fund other related university research.

Widespread has also recently commissioned NIWA to undertake further work to enable us to more completely understand the oceanographic and benthic characteristics of our license area in the context of the entire Chatham Rise.  

The Joint Venture is still on track to deliver its first year progress report on the Chatham Rise rock phosphate project by Christmas 2010 – two months early. 

The aim of the second year of activity will be to further define the resource and complete a bankable feasibility study following likely seabed sampling and environmental baseline monitoring.

Chatham Rise Project Background

On 25 February 2010, a consortium comprising Widespread Energy and associated company Widespread Portfolios Limited, (“the Joint Venture or JV”) was granted an offshore prospecting permit by the Crown Resources division of the Ministry of Economic Development covering an area of 4,726 km2 on the central Chatham Rise. The permit area, which is in New Zealand territorial waters, is located 600 km east of Christchurch and includes significant shallow seabed deposits of rock phosphate and other potentially valuable minerals.

The initial term of the permit is two years with further priority rights to either extend the prospecting permit or apply for a mining licence. An independent valuation of the project by Rockpoint Corporate Finance earlier this year found the project had a realistic possibility of being commercially viable.  It found that, based on conservative modelling, the project has a current value of $20.9 million and could earn net profit before tax of $40 million a year. Widespread’s own models put that figure as high as $80 to $100 million a year.
 
In addition to its financial potential, the project offers a number of benefits to New Zealand including:

• Reduced exposure to currency and commodity risk and reduced import burden
• Known, fixed costs
• Reduced carbon footprint from lower transport costs
• Possible export earnings.  

The project is also New Zealand owned and controlled. 
 
The challenges identified of extracting the resource include its sporadic distribution (it averages 66 kg/m but there is great variability).  Also extracting phosphate at 400m depth has not been achieved, though other minerals have been extracted at greater depths.  The phosphate, in nodules of 2mm to 150mm, is located in a 1m layer of sandy silt above a chalky clay sediment basement.

Environmental considerations are an important part of the work being done and the company has a wide-ranging programme of consultation with fishing, conservation, Maori and other interest groups.