Media Coverage: Another halted phosphate shipment highlights NZ supply risk

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Article Text: 

Another halted phosphate shipment highlights NZ supply risk

9:18 May 22, 2017

Press Release – Chatham Rock Phosphate

WELLINGTON New Zealand Chatham Rock Phosphate Limited (TSXV: NZP and NZAX: CRP or the Company”) notes the halting of a second phosphate shipment from the Western Sahara is intensifying the supply risk for New Zealand farmers. …Chatham says another halted phosphate shipment highlights NZ supply risk

WELLINGTON New Zealand – Chatham Rock Phosphate Limited (TSXV: “NZP” and NZAX: “CRP” or the “Company”) notes the halting of a second phosphate shipment from the Western Sahara is intensifying the supply risk for New Zealand farmers.

Chatham Chief Executive Chris Castle said today the need for New Zealand to secure its own low cadmium and ethical phosphate resource is highlighted by news Panama authorities have detained Moroccan phosphate shipment from the Western Sahara after the Polisario independence movement claimed the cargo had been transported illegally.

The detention of the vessel carrying phosphate rock cargo from Morocco’s OCP for Canada’s Agrium is the second tanker stopped this month by a Polisario legal challenge, a new tactic the independence movement has been using in its conflict with Morocco. The first shipment was detained in South Africa.

Western Sahara has been disputed since 1975, when Morocco claimed it as part of the kingdom and the Polisario fought a guerrilla war for the Sahrawi people’s independence.

Both New Zealand fertiliser manufacturers source a large part of their phosphate rock supply from that area, so the implications for farmers and the economically important agriculture sector are serious.

Mr Castle said the company’s Chatham Rise resource is not only an ethical source but it also has among the lowest known levels of cadmium.

“New Zealand needs to use its own source of ethically-produced, environmentally-friendly phosphate rock rather than importing product from a disputed territory.

“Phosphate is essential for the production of food and we can’t afford supply disruptions. This underlines the strategic value of our deposit.

Mr Castle said Chatham’s product is also better for the environment as it binds to the soil and dramatically reduces run-off to waterways.

He said the rock from Morocco is used to make New Zealand’s predominant fertiliser superphosphate, which results in high levels of run-off with resulting pollution to our waterways and can also be detrimental to soil health over the long term.

“The solution to supply and environmental problems is the use of Chatham rock phosphate as an organic direct application fertiliser not processed with chemicals.

“We can deliver a secure and sustainable local supply of low-cadmium phosphate that will also reduce fertiliser run-off into waterways, produce healthier soils and shrink fertiliser needs over time,” Mr Castle said.

The Chatham Rise resource represents one of New Zealand’s more valuable mineral assets and is of huge strategic significance because phosphate is essential to maintain high agricultural productivity.

Chatham proposes to extract up to 1.5 million tonnes a year of phosphate nodules from the top half metre of sand on identified parts of an 820km2 area on the Chatham Rise, 450km off the west coast of New Zealand, in waters of 400m.

“Our environmental consenting process has established and independently verified that extraction would have no material impact on fishing yields or profitability, marine mammals or seabirds.”

ends

Media Coverage: Going to the ends of the Earth for phosphate

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ARTICLE TEXT:

Going to the ends of the Earth for phosphate

18TH MAY 2017

ANDREW LOCKLEY

Today, we’re focusing on commodities again – because they’re an essential investment story. But, before you read the article, please do check out our special commodities report. It won’t be appearing in Exponential Investor – so you’ll have to read it online. It’s all about “white diesel”, and you can get it here.

Today, we’re talking about a commodity we’ve covered before in Exponential Investor: phosphate. It’s a crucial story – both for investment, and for the future of humanity. Phosphate is different from the other major fertilisers, as it’s in limited supply. More worryingly, this supply is highly concentrated in just a few countries – such as Western Sahara. This gives producer countries the opportunity to form a cartel – enabling them to cut supply, to spike prices. This was the trick Opec pulled in the 1970s, and it lead to the oil crisis. If that happened with phosphate, we’d be in the grip of a new global oligarchy. That new world order would bring a global famine – one which would likely kill millions.

You might think that’s a far-off prospect – but there are already signs of trouble. Recently, Western Sahara seized a phosphate-carrying ship in South Africa. This was because of a legal dispute over the mineral rights.

We desperately need new sources of phosphate – ideally large ones, in politically-stable countries. Today, we’re talking to a man with access to just such resources. His mine is in quite an unexpected place. Not only is it as far as you can get from the UK (it’s in New Zealand) – but it’s also in a surprisingly-inaccessible location.

As regular readers of Exponential Investor may already have guessed, it’s at the bottom of the sea. Without further ado, I’ll hand you over to Chris Castle, chief executive of Chatham Rock Phosphate. He’ll be telling you how we’ll keep food on your children’s plates, in coming decades.

AL: Hi Chris. Can you start off by giving me some initial idea of the scope of seabed mining?

CC: Extraction of seabed phosphate is planned in places as diverse as offshore New Zealand, Mexico and Namibia.

These projects are currently undergoing permitting. In future, they will have the ability to help offset the vulnerability to economic and political events in the six countries controlling 98% of the world’s phosphate reserves. 85% of this total is in Morocco.

AL: Why are these resources being developed?

CC: Undeniably these are attractive investments. As an example, we can consider the Chatham Rise project being developed by Chatham Rock Phosphate – that’s a firm I’m a founder of.

A key reason for the strong profitability is the location of the resource close to New Zealand – meaning no incoming freight costs. Extraction costs equate to that of shipping phosphate from the other side of the world, so the international price has to collapse to near zero before the company can’t compete. Companies are therefore obviously looking for new sources of phosphate closer to home, that don’t involve such huge transport costs.

Furthermore, everyone’s mindful of the potential for supply disruption – so having control over resources is important. Additionally, companies need material which is clean, in terms of toxicity. The Pacific has limited supplies of phosphate and New Zealand imports all of its requirements – mostly from Morocco.

Investors have other areas of focus as well. Some are excited by the “frontier” concept of deep-sea mining. Some like the fact that Chatham’s product offers environmental benefits – something not usually associated with mining projects.

Others see the importance of reducing the reliance on such a heavy domination of resources by a few countries in politically-unstable areas. It is worth noting other countries with their own resources, such as the United States and China, have restricted exports – recognising the strategic nature of phosphate.

AL: Tell me about the ship carrying rock phosphate that was seized recently in South Africa.

CC: This is really quite interesting! It relates to rock phosphate shipments, by the Moroccan company OCP. These come from its mines in the Western Sahara. The Western Sahara has been under armed occupation by Morocco since 1975. Despite this, the trade has continued – despite the 1991 commitment of the United Nations to ensure Western Sahara benefits from self-determination.

In early May, the Western Sahara liberation movement announced the interception and detention of a shipment of phosphate rock exported from Western Sahara. This was done through legal means, in South Africa. The ship had been destined for a New Zealand importer. As both New Zealand fertiliser manufacturers source most of their phosphate rock from the same source, the implications for New Zealand farmers and the agriculture sector (the backbone of our economy) are potentially serious.

This is just the sort of supply disruption that we thought might happen. It underlines the strategic value of our deposit. Additionally, our mineral also has significantly lower levels of cadmium than the rock phosphate coming from the mines in the Western Sahara. To put it in a nutshell, Chatham offers a secure, ultra-low cadmium alternative supply of rock phosphate – with no associated ethical baggage.

AL: How important is seabed mining for the future of the world’s resource dependency?

CC: While there are significant land-based phosphate resources, they are controlled by a small number of countries, including disputed territories. So there is a strong motivation to develop alternative sources. Phosphate is also a bulky product to transport, so if resources can be located closer to where they will be used, that vastly improves the financials of such projects.

Other ocean resource projects include copper, gold and other minerals. These are contained in massive sulphides in the mid-Pacific, alluvial gold reserves that have washed into New Zealand harbours, and iron ore in seabed sands off the west coast of New Zealand.

Just as sustainable fish farming is becoming an important alternative to harvesting wild fish, untapped mineral resources within the world’s seas will rapidly become important. It will play a part in meeting the demands of a world whose population is forecast to reach 9.6 billion by 2050, with an increasing proportion achieving a 21st century lifestyle.

The amount of arable land available to grow food for the increased world population is dramatically reducing due to urban spread and the loss of soil into stream and rivers. At the same time global food production will need to increase over the next 35 years by 70%. So the remaining land needs to become more productive. At the same time, more intensive land use is causing deforestation and reduced biodiversity, soil erosion, depletion and pollution, flooding and water pollution, and food contamination.

As land-based resources become harder to extract, seabed mining becomes more attractive. For example the economics of the Chatham Rise phosphate resource stack up well ahead of remote on-land resources, which are usually located well away from road or rail facilities. This means they require extensive infrastructure to bring them to market.

One of the key attractions of seabed activities is the infrastructure is portable (on ships) and so once the extraction is complete, it sails away, with no physical evidence remaining. That also benefits the financials, as the infrastructure can be repurposed for other projects. In addition, seabed mining projects are generally well away from human populations.

Marine technology is rapidly advancing. Over centuries, Europe’s lowland countries have developed expertise to protect their borders from sea encroachment. They are using that technology and knowledge for projects as diverse as building islands in the Middle East, removing toxic waste from US river soils, and widening canals to improve access to some of the world’s most famous shipping channels.

AL: Will marine mining solve resource shortages in the long term?

CC: No resource is endless and few are fully sustainable. Resources need to be carefully extracted and managed. But human endeavour continues to source and repurpose resources. For example, a generation after the 1970s oil shocks, the world has found large new oil reserves. These include shale oil, and undersea reserves. Furthermore, industry is now finding alternative sustainable energy sources, to reduce dependence on traditional sources.

AL: Returning to the particular resource we discussed earlier, can you talk in more detail about what you’re planning on mining?

CC: The phosphate deposit was formed in nodules on the Chatham Rise. It’s about 450km east of New Zealand, and lies in a half-metre layer on the seabed. It’s in water that’s 400m deep. This was laid down millions of years ago, and discovered in 1952 by New Zealand scientists.

Over the following four decades, public and private sector experts identified the potential for decades of supply of phosphate to nourish New Zealand farms.

Chatham became the current custodian of this resource when world phosphate prices soared in the mid-2000s. The Chatham business case is based on a resource with an estimated worth of $5 to $7 billion, making it one of New Zealand’s most valuable mineral assets and of huge strategic significance because of the country’s heavy reliance on agriculture.

Three people closely associated with the project (a director, our COO and a key adviser) were involved in scientific research for the project in the 1970s and 80s. As founder, I want to see a natural product from the ocean used to environmentally benefit New Zealand’s most important industry. I think the project has tremendous financial potential, but I’m also excited by the prospect of seeing technical innovation in action.

My background is in investment and capital raising, primarily in the mining sector, but my main motivation with this project is in being able to harness that environmental, technical and financial potential.

In 2013, after a detailed evaluation, Chatham gained a 20-year mining permit covering 820km2. It is now developing plans to renew its application for an environmental consent in 2017. Iron ore seabed miner Trans-Tasman Resources has just resubmitted its environmental consent application under the same legislative framework.

Chatham also has applied for prospecting licences for offshore Namibian phosphate resources.

AL: Has any company mined seabed deposits at that depth before?

CC: There has been considerable ocean mining since the 1970s, including some at much greater depths. Chatham is proposing to use conventional dredging techniques using a leading marine services company. The extraction technique uses a modified dredging vessel equipped with a suction device on the seabed to vacuum up the nodules and associated sand, bring the material up on to the ship, separate the nodules (screening by size) and gently deposit the unwanted sand back on to the seabed from where it came.

The mining process will impact on bottom-dwelling organisms in the area being mined; however, detailed modelling of the plume generated by material being returned to the seafloor has established that the plume stays within the area being mined.

AL: How does Chatham rock phosphate differ from other sources?

CC: The rock is a very effective form of fertiliser, in that it binds to the soil. When applied directly, it reduces phosphate leaching into waterways by factor of ten.

As you may know, cadmium is a key contaminant of phosphate resources. It’s toxic, it accumulates in plants, and it’s very expensive to remove. The cadmium levels in Chatham Rise rock phosphate are among the lowest in the world, with an average of 2.2 parts per million. This compares with the voluntary limit of 280 parts per million, which New Zealand fertiliser companies achieve for manufactured superphosphate.

Cadmium is a naturally occurring heavy metal. New Zealand has heightened levels of cadmium in some of its soils from using previous sources of phosphate. High levels of cadmium can cause kidney failure and bone damage and has been statistically associated with an increased risk of cancer. Food is the dominant source of human exposure in the non-smoking population.

Excessive levels of cadmium in soils can restrict land use. New Zealand’s Ministry for Primary Industries (MPI) is managing the gradual build-up of cadmium in New Zealand soils through the cadmium contained in imported phosphate. The build-up of cadmium levels in sheep has caused MPI to ban the export of some offal from animals older than two and an half years.

AL: What other benefits do alternative phosphate sources have?

CC: Using this local source of rock phosphate would also reduce New Zealand’s carbon footprint by avoiding transporting the product from the other side of the world and benefit the country’s balance of payments and foreign exchange exposure.

It will provide New Zealand with a secure long-term sustainable local supply of rock phosphate and avoid exporting our environmental footprint to countries where mining phosphate involves severe social and environmental distress in disrupted territories. For example: dust generated by terrestrial phosphate mining regularly severely impacts local villages.

There are some wider benefits for New Zealand as well – such as high-value jobs in the selected port, and on the mining ship. In addition, there will be roles undertaking environmental monitoring and broader scientific research. Looking after the ship and crew means that there will be opportunities in a diverse range of support industries – particularly on the Chatham Islands, which is the nearest land mass to the resource. There will also be an economic boost in the agricultural sector. All this can occur without any significant impact on fishing yields or profitability, and without affecting marine mammals or seabirds.

In addition this project would enable New Zealand to become a world leader in this particular marine technology and expertise. This could potentially be worth billions of dollars. Furthermore, there’s a knowledge benefits, too – enhancing understanding of New Zealand’s marine environment. This will help identify priority conservation areas.

AL: Why was Chatham’s initial application turned down?

CC: Chatham’s application was turned down on limited, unexpected and relatively minor issues we are confident can be dealt with robustly on resubmission.

The application was only the second under new legislation, which was still “coming up to speed”. Since then the two main applicants and the Environmental Protection Authority, which assessed the applications, have learned a lot. It is expected this will be translated into improved application and hearing processes. Once Chatham has reapplied, the process is limited by statute to six months. There are no other significant hurdles to be negotiated.

Well, that’s certainly food for thought – and hopefully for your plate, too. I’m always one to keep an eye out for the unforeseen. Not only does it make Exponential Investor a bit more interesting, but it helps me plan my investments – and my survival. You can’t really get a more important story than this. Please do send your thoughts – andrew@southbankresearch.com.

Finally, don’t forget to check out our “white diesel” report. You can get it here.

Best,

Andrew Lockley
Exponential Investor

Media Coverage: NZ company to resubmit East Coast phosphate mining application

Radio New Zealand released the following article. To read in its original form click here.

ARTICLE TEXT:

NZ company to resubmit East Coast phosphate mining application

11:53 am on 10 May 2017 

A New Zealand company denied the right to mine phosphate from the ocean floor says the detention of a shipment of phosphate in South Africa shows it was right all along.

Chatham Rock Phosphate lost an application before the Environmental Protection Authority (EPA) to mine phosphate from the seabed off the east coast of the South Island.

Since then, 55,000 tonnes of phosphate have been seized in South Africa, en route for New Zealand, and political activists are promising more such actions.

They said the phosphate was mined in the Western Sahara, which was illegally occupied by neighbouring Morocco, making its export unlawful.

The shipment is one eighth of New Zealand's total annual needs.

Chatham Rock Phosphate chief executive Chris Castle said this development underlined the strategic value of New Zealand's own deposits.

His company sought to extract up to 1.5 million tonnes a year of phosphate from Chatham Rise, 450km off the East Coast of New Zealand, at a depth of 400m.

The company plans to re-submit its application to the EPA for reconsideration.

In the meantime it is closely watching a similar application by Trans Tasman Resources (TTR) which wants to mine ironsands from the sea floor off the coast of South Taranaki.

TTR was also turned down first time around but has come back with a second attempt to win approval.

Mr Castle added New Zealand phosphate would be low in cadmium, a poisonous metal often found in phosphate deposits.

Media Coverage: Secure, low cadmium and ethical phosphate resource option

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Article Text: 

Secure, low cadmium and ethical phosphate resource option

Tuesday, 9 May 2017, 11:46 am
Press Release: Chatham Rock Phosphate

NEWS RELEASE 17-10 May 8, 2017

Chatham offers secure, low cadmium and ethical phosphate resource option to NZ farmers

WELLINGTON New Zealand – Chatham Rock Phosphate Limited (TSXV: “NZP” and NZAX: “CRP” or the “Company") wishes to reconfirm that it offers a secure, low cadmium and ethical phosphate resource option to NZ farmers.

New Zealand needs to use its own source of ethically-produced, environmentally-friendly phosphate rock rather than importing product from a disputed territory, Chatham Rock Phosphate Chief Executive Chris Castle said today.

He was commenting on the interception and detention, by the Western Sahara liberation movement, of a shipment of phosphate rock on route for New Zealand

“This is the sort of supply disruption which we have been signalling for years.

“As both New Zealand fertiliser manufacturers source a large part of their phosphate rock from that area, the implications for farmers and the agriculture sector (the backbone of our economy) are serious.

“It underlines the strategic value of our deposit.

“Most of the rock phosphate imported into New Zealand comes from mines in the Western Sahara which has been under armed occupation by Morocco since 1975. The trade has continued despite this – and the 1991 commitment of the United Nations (and subsequent sanctions) to ensure Western Sahara benefits from self-determination.”

Mr Castle said the Chatham Rise resource is not only an ethical source but it also has among the lowest known levels of cadmium.

“To put it in a nut shell, Chatham offers a secure, ultra-low cadmium supply of rock phosphate – with no associated ethical baggage.

Mr Castle said the current issue is also a good time to consider more environmentally sustainable alternatives to current fertiliser products.

“The rock coming (or not coming) from Morocco is used to make superphosphate, the predominant fertiliser used in New Zealand to apply phosphorus to soils.

“It’s well established this results in high levels of run off with resulting detrimental effects to our waterways. Research indicates it can also be detrimental to soil health over the long term.

“The solution to both problems is the use of Chatham rock phosphate as a direct application fertiliser.

“We can deliver a secure and sustainable local supply of low-cadmium phosphate that will also reduce fertiliser run-off into waterways, produce healthier soils and shrink fertiliser needs over time,” Mr Castle said.

The resource, with an estimated worth of $5 to $7 billion, represents one of New Zealand’s most valuable mineral assets and is of huge strategic significance because phosphate is essential to maintain New Zealand’s high agricultural productivity.

Chatham proposes to extract up to 1.5 million tonnes a year of phosphate nodules from the top half metre of sand on identified parts of an 820km2 area on the Chatham Rise, 450km off the west coast of New Zealand, in waters of 400m.

“Our environmental consenting process has established extraction would have no material impact on fishing yields or profitability, marine mammals or seabirds.”

Mr Castle said Chatham is also seeking other sustainable rock phosphate sources, to move from being a single project company and take more control of our destiny.

Recent approval of a Namibian environmental consent for a marine phosphate mining resource also opens the door for Chatham to advance its own Namibian permit applications. Chatham applied in 2012 for prospecting permits over five distinct areas well offshore Namibia, some not far from the area held by the successful applicant. These 2012 applications were lodged with the confidence that based on research undertaken to date, this area of the seabed likely contains substantial quantities of rock phosphate.

Media Coverage: Govt watchdog to investigate EPA charges

The following article appeared in the news outlet insideresources.co.nz to read in it's original form click here.

Article text: 

The Environmental Protection Authority (EPA)’s cost recovery practices will be investigated by an independent government watchdog following complaints from a seabed mining company.

The Office of the Ombudsman will formally investigate Chatham Rock Phosphate’s complaint that it was unlawfully charged $800,000 by the EPA during hearings for its marine consent application.

Chatham Rock is refusing to pay the fees on the grounds they do not meet the 'reasonable' standard required under the Exclusive Economic Zone and Continental Shelf Act. It also believes it has grounds for a judicial review.

In early December the EPA launched legal action to recover the money in the form of a summary judgment of costs. At the time Chatham Rock advised it will challenge the action and subsequently requested the Ombudsman formally investigate the charges.

The requested scope of the Ombudsman’s investigation is to examine the EPA's cost recovery practices for its marine consent process. This includes the withholding of information from Chatham Rock which the company says was relevant to whether some of the charges were legal.

 

After providing further information and clarifying other matters the Ombudsman is satisfied there are grounds for an investigation. Chatham Rock has welcomed the decision.

Dispute

The announcement of an investigation comes as affidavits are being filed for the summary judgment, with the first hearing set to begin in the first week of March.

On 3 February EPA chief executive Allan Freeth told a Parliamentary select committee the authority is confident in the court action it is taking and the legitimacy of its costs regime.

Chatham Rock has already paid $1.86 million in costs invoiced to it by the EPA for processing its failed marine consent application.

However it says the remaining $800,000 includes things that should come from the EPA’s own overheads. This includes travel costs for EPA staff and decision making committee members to attend hearings. Hiring audio visual equipment, and paying for callout and repairs when it broke down, are also among the disputed charges. Chatham Rock says for others the EPA simply failed to provide justifying information, even when requested. These range from incorrect expense claims, hotel charges for contractors that included alcohol, and the EPA continuing to pass on costs to Chatham Rock after exceeding its own budget forecasts.

Similar frustrations have been expressed by Trans-Tasman Resources, which had its application to mine for ironsands in the South Taranaki Bight rejected, though the company declined to take legal action.

Media Coverage: Ombudsman to investigate EPA's charging in Chatham Rock application

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Article Text: 

Chatham Rock Phosphate has succeeded in persuading the Office of the Ombudsman to investigate the Environmental Protection Authority's charging regime for marine consent applications as it battles over its rejected plans to mine phosphate from the ocean floor.

The EPA is seeking summary judgment against CRP for payment of some $800,000 of invoiced costs that CRP is contesting, from total billings of about $2.7 million.

CRP's managing director, Chris Castle, said the Ombudsman had confirmed it "will be conducting an investigation into the matters we have raised."

"The requested scope of the investigation was first to examine the EPA's costs recovery practices for its marine consent process - including the withholding of information from CRP which was relevant to whether some of the charges were authorised by law," he said.  

CRP's was the second application for seabed mining to be rejected under the new regime regulating economic activity in New Zealand's vast offshore Exclusive Economic Zone. Its application was to take phosphate nodules from the Chatham Rise, some hundreds of kilometres to the east of Christchurch. A decision-making committee appointed by the EPA concluded there was too much uncertainty about the environmental impacts of the proposal.

CRP says it intends to reapply.

The EPA also turned down an application from Trans Tasman Resources to mine ironsands off the coast of Whanganui in 2014. TTR is also planning to reapply.

Minerals sector lobbying seeking significant changes to the EEZ regime after the rejections were largely unsuccessful, although legislation is before a select committee that would see ministers rather than the EPA appoint members of decision-making committees in future. Ministers already appoint commissioners for boards of inquiry convened under fast-track provisions of the Resource Management Act, which is used for resource consents for onshore and inshore coastal economic development.

CRP shares plunged from around 14 cents at the time of the EPA's rejection of the application a year ago, and most recently traded at 7 cents. CRP is merging with another Castle-related vehicle, Antipodes Gold, to gain dual-listing on the NZAX and Toronto Stock Exchange.

According to a January shareholder update, the company is also seeking a refund of fees it says it was overcharged by the mining licence permit issuer, New Zealand Petroleum & Minerals.

BusinessDesk.co.nz