NZX Announcement: CRP seeks farmer capital to support local phosphate supply

Chatham Rock Phosphate is embarking on a new round of capital-raising among the farming community to develop a local supply of phosphate. CRP is seeking to raise $766,000. 

“This is an opportunity to invest in a green local phosphate source,” according to CRP managing director Chris Castle.

“CRP is now fund-raising as part of re-applying for an environmental consent. Assuming we receive this consent, we will quickly move towards production.”  Mr Castle noted CRP has a 20-year mining permit.

Following the latest capital-raising among existing shareholders, interests associated with the directors and management are now CRP’s largest shareholders, with New Zealand farmers and hundreds of other Kiwis owning more than half the company. 

Mr Castle said the offer is being marketed as an opportunity to own part of an independent local source of rock phosphate. CRP, a New Zealand public company with 950 shareholders, proposes mining 30 km2 a year to extract 1.5 million tonnes of phosphate nodules for use in New Zealand and Asia Pacific.  The permit area on the Chatham Rise is about two-thirds of the way to the Chatham Islands, at a depth of 400m.

“Assuming CRP is granted permission to extract phosphate from the Chatham Rise, it will provide New Zealand’s rural environment with an ethical local source of phosphate with some strong environmental benefits – specifically being low run-off, low cadmium and with a low carbon footprint.”

“It would also offer a strategic security of supply, given virtually all phosphate supplies come from politically unstable areas, mainly in North Africa. CRP would be an ethical producer of farm inputs, and New Zealand wouldn’t be exporting our pollution.” 

Mr Castle criticised environmentalists for condoning New Zealand’s importation of all its phosphate requirements. “It is hypocritical to support exporting our environmental footprint to countries that mine phosphate on land, involving severe social and environmental distress in those communities.” 

A resubmission by CRP would stress the considerable environmental benefits of the local resource: 

·       Chatham Rise phosphate when spread on pastures minimises waterways pollution because unlike superphosphate it binds to the soil, so very little leaches into streams and rivers.

·       It requires less frequent application, as the fertility effect lasts three years rather than one (also a financial benefit).

·       This local product contains almost no cadmium, a heavy metal that accumulates in the soil and can become a health hazard. The current Moroccan product has among the world's highest concentrations.  CRP’s product has moderate uranium content but is high in calcium, offering attractive liming qualities.

·       CRP’s product has a much lower carbon footprint because as a local source it doesn’t need to be shipped from overseas, and is applied less often.

On 23 October 2014 we made a detailed market announcement regarding our anticipated project economics and cost structures, including detailing our underlying assumptions.

This was updated in a further market announcement on 27 January 2015. Readers are referred to both announcements for more detail and copies can be provided on request. While the assumptions remain applicable (and critically the assumption that we will obtain a marine consent) those economics are significantly influenced by prevailing foreign exchange rates. In particular, costs are largely expected to be incurred in Euros and income is largely expected to be earned in US dollars.

Based on current exchange rates and the aforementioned assumptions, CRP’s annual profit before royalties and taxation would exceed $96 million. New Zealand would benefit from CRP paying $34 million in annual taxes and royalties, plus millions in port charges. Jobs - many high value and knowledge-based - would be created in the port, on the mining ship, undertaking environmental monitoring and broader scientific research, in the agriculture and hospitality sectors and on the Chatham Islands.

The income earned by extracting phosphate would be $9,700,000 per km2 over 30km2 a year compared with only $9,000 per km2 annually from fish bottom trawling which affects 50,000 km2 a year – but requires no environmental approvals. 

The Environmental Protection Authority concluded mining would have no significant impact on fishing yields or fishing industry profitability, marine mammals or seabirds.

Mr Castle said the CRP project could enable New Zealand to become a world leader in marine technology and expertise worth billions of dollars.

“What is at stake for New Zealand is potentially a lot more than phosphate. In addition to taxes and royalties from the CRP project  our work at sea enhances the understanding and knowledge base of our marine environment to help identify marine areas most deserving of conservation.”

Mr Castle said he is confident of a successful outcome for the environmental permitting process next time, due to: 

·       An expected improvement in the Marine Consent procedure, including interpretation of the EEZ Act

·       CRP was turned down on limited and unexpected grounds that we consider erroneous and can be dealt with more robustly on resubmission, (high-profile fishing industry and Iwi concerns were mutually agreed to be groundless)

·       CRP is confident of much wider and tangibly expressed support from relevant government agencies, the farming sector, and other stakeholders

·       The company more fully understands the rules of the game and expects the Environmental Protection Authority to have learned from the CRP and earlier Trans-Tasman Resources applications.

Chris Castle +64 21 55 81 85 or chris@crpl.co.nz

Warning - Forward Looking Statements

This release contains forward looking statements. Forward-looking statements and information are not historical facts, are made as of the date of this release, and include, but are not limited to, statements regarding discussions of future plans, guidance, projections, objectives, estimates and forecasts and statements as to CRP's expectations with respect to, among other things, mineral properties and the matters described in this release. 

These forward looking statements involve numerous risks and uncertainties and actual results may vary. Important factors that may cause actual results to vary include without limitation, the timing and receipt of certain approvals, changes in commodity prices, changes in interest and currency exchange rates, risks inherent in exploration results, timing and success, inaccurate geological and metallurgical assumptions (including with respect to the size, grade and recoverability of mineral reserves and resources), changes in development or mining plans due to changes in logistical, technical or other factors, unanticipated operational difficulties (including failure of plant, equipment or processes to operate in accordance with specifications, cost escalation, unavailability of materials, equipment and third party contractors, delays in the receipt of government approvals, industrial disturbances or other job action, and unanticipated events related to health, safety and environmental matters), political risk, social unrest, and changes in general economic conditions or conditions in the financial markets.