Media Coverage: Inside Resources - Chatham Rock looking at overseas phosphate

See below for coverage from Inside Resources:

Chatham Rock looking at overseas phosphate while it waits to consent Chatham Rise

Eamon Rood - Wed, 21 Oct 2015

Chatham Rock Phosphate (CRP) is looking at overseas phosphate ventures while its Chatham Rise project remains on hold.

CRP’s focus is to supply direct application phosphate to agricultural users in local and overseas markets. It says this is proven to be significantly more environmentally friendly and sells at a premium in some markets despite lower production costs.

It says that getting the Chatham Rise project fully consented remains its main objective.

Chief executive Chris Castle says the company “is still very keen on the project.” However a decision has not been made whether to re-apply to the Environmental Projection Authority (EPA) for a marine consent to mine the Chatham Rise.

CRP is currently reviewing its previous application to the EPA. It has commissioned “a 360 degree review” from key players involved in the last application.

Castle says the company is watching closely how Trans-Tasman Resources does with its re-application bid in the Taranaki Bight.

A decision is expected to be made by March next year. If a re-application does go ahead, the company hopes to lodge the application the following June, with a view to commencing trial mining in September 2019.

Resolving disputes over costs with the EPA, and royalties with New Zealand Petroleum & Minerals, also remains an objective for the company.

Offshore resources

In the interim CRP is looking to diversify to include onshore phosphate resources overseas.

The company is not disclosing where these resources are located or exactly how many are being looked at as negotiations are ongoing. Castle told Inside Resources there are a number located in three different countries.

He says the company is working to lessen its dependence on the Chatham Rise project and “broaden our portfolio to make it more attractive to investors.”

The company describes the deposits as small, well located, low capital cost, “boutique” phosphate resources that it may take an ownership stake in.

If successful, developing the onshore resources can be achieved at lower capital costs and in a shorter timeframe, the company says. Target markets for the deposits are localised, making freight costs less of an issue. CRP may potentially take an ownership stake in the resources.

Capital raising

The company is pursuing capital raisings in New Zealand, Canada and Europe and aiming to complete its backdoor listing on the Toronto Stock Exchange (TSX). It estimates the funding required to list on the TSX -  “while maintaining prudent yet sustainable forward momentum”  - to be about NZD$1 million - about $1000 for each existing shareholder.

Listing on the TSX is contingent on the company completing a merger with Antipodes Gold, which is already listed. CRP expects this to be approved by a meeting of Antipodes shareholders to be held in November. 

Letter to the Editor - Inside Resources

Chris Castle - Thu, 04 Jun 2015

 The biggest irony with the Environmental Protection Authority declining Chatham Rock Phosphate’s marine consent application is that the project offers such valuable environmental benefits. 

The decision has far wider implications than for one company.  It has also:

1. Turned foreign investors off New Zealand resource projects.

2. Stopped a huge opportunity for farming to become far more environmentally sustainable.

3. Reinforced the view among business that Government continues to find ways to prevent rather than enable development.

Quite a lot has happened since the EPA’s February decision to reject CRP’s application to extract environmentally friendly rock phosphate from depths of 400 metres on the Chatham Rise seabed, two thirds of the way to the Chatham Islands.

The Government is taking (at this stage faltering) steps looking at how the Exclusive Economic Zone consent process can work so New Zealand benefits from projects such as ours while ensuring the environment is protected. 

CRP is regrouping – evolving from its single project focus into a more diversified company, principally involving other phosphate projects, both on and offshore. 

The fact virtually all of CRP’s overseas shareholders (representing about half the capital before the latest capital raising) failed to stump up with any cash speaks volumes.  They simply lost faith with New Zealand as an investment option. 

CRP’s decision to explore other opportunities recognises financing a re-application will be easier if investors don’t face the same binary EPA decision risk.  Acquiring and developing new projects will be significantly easier by listing on a more recognised and liquid overseas stock exchange; Toronto is a leading market for mining and fertiliser stocks.  Directors decided the most cost effective way is listing through a reverse takeover of TSX.V stock Antipodes Gold.

Meanwhile, looming large is the irony of EPA failing to consider the project’s huge environmental benefits, given few mining projects can make that claim.

CRP’s project to mine phosphate, an essential mineral for plant growth, is critical for our agricultural future. Annual supply of 1.5 million tonnes of phosphate could replace a large chunk of less environmentally desirable imports.  It will also improve our security of supply - virtually all phosphate supplies now come from politically unstable regions, mainly in North Africa.

Farmers are criticised for their environmental footprint – especially causing fertiliser run-off into waterways.  A key benefit of Chatham Rise phosphate (New Zealand’s only source) is that little leaches into streams because the product binds to the soil.  That enables the fertility effect to last three years so both high country and fertiliser-saturated dairy land require less-frequent application, also reducing costs.

It also contains almost no cadmium, a heavy metal accumulating in our soil that can become a health hazard.  The current Moroccan-sourced product has among the world’s highest concentrations. As a local product involving less transport and applied less often, it also has a much lower carbon footprint.

The EPA’s assessment of only modest economic benefits was unintelligible considering CRP is forecasting annual profits approaching $100 million before $34 million of royalties and tax - among New Zealand’s top profit earners. Expected dividends and capital growth would reward 950 shareholders who have so far invested $33.5 million.

Other economic benefits include the many jobs created in the port, on the mining ship, in the agriculture and hospitality sectors, on the Chatham Islands and undertaking environmental monitoring and scientific research.

Before we commit to a new application we want the EPA and the government to figure out how we can make the grade with appropriate safeguards – not setting an impossibly high bar. Permanently available people competent in relevant science, finance and economics would be a start - our decision-making committee’s skills in these areas were inadequate.

Our proposed area of operation must be put in context; we’re planning to mine 30 square kilometres a year, or 450 sq km over 15 years.  Fishing damages 50,000 sq km a year through bottom trawling.  Agriculture covers around 120,000 sq km.

The EPA had concerns around uncertain effects of our operations in the broader EEZ - particularly about where else stony corals might be - yet ignored the widespread damage to corals by fish trawling.  We provided information about likely locations, and suggested how we could avoid coral communities, but uncertainty reigned, along with multiple counting of precaution. 

The materiality of risk and uncertainty must relate to the 4 million sq km EEZ. That involves assessing how risks can be controlled, such as applying adaptive management as it works all over the world – by learning and adapting during the life of a project.

Most importantly, the government needs to deliver on the purpose of the Act - promoting sustainable management of the EEZ’s natural resources to enable resource development rather than only focusing on protection.

Chris Castle is Managing Director of Chatham Rock Phosphate

NZ Herald - Chris Castle and Linda Sanders: Phosphate mining rejection hypocritical

Dear Chatham Rock Phosphate shareholder or stakeholder,

 

This article was published earlier this week in the NZ Herald. I include both hard copy and the link.

 

Best regards,

 

Chris Castle

Chief Executive Officer

Chatham Rock Phosphate Limited

Email: chris@crpl.co.nz

Cell: +64 21 558 185

Skype: phosphateking

www.rockphosphate.co.nz

  

http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=11418191

Chris Castle and Linda Sanders: Phosphate mining rejection hypocritical

On pastures, Chatham Rise phosphate minimises waterways pollution because, unlike superphosphate, it binds to the soil so very little leaches into waterways. Photo / NZME.

Phosphate is crucial to plant growth and there are no local land-based sources. For the sake of our farms and waterways, and our economy, New Zealand needs this product's strong environmental benefits.

Yet a decision-making committee of the Environmental Protection Authority last month rejected Chatham Rock Phosphate's mining application, primarily because of perceived uncertainty over environmental effects.

The misguided decision shows the law needs revising to focus on risks associated with uncertainty and how environmental effects can be monitored and managed. After all, crossing the road has uncertainty, but the risks can be managed.

Chatham Rock Phosphate (CRP), a New Zealand public company, proposes mining 30sq km a year to extract 1.5 million tonnes of phosphate nodules for use in New Zealand and Asia-Pacific. The area is on the Chatham Rise, about two-thirds of the way to the Chatham Islands, at a depth of 400m.

The committee focused on potential environmental effects, but gave no weight to what we believe are considerable environmental benefits:

On pastures, Chatham Rise phosphate minimises waterways pollution because, unlike superphosphate, it binds to the soil so very little leaches into waterways.

It needs less frequent application as the fertility effect lasts three years, not one.

The local product has almost no cadmium, a heavy metal that stores in the soil and can be a health hazard. The current Moroccan product has among the world's highest concentrations.

CRP's product has a much lower carbon footprint because it doesn't need to be shipped from overseas.

It also offers a strategic security of supply. Almost 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 its pollution. Importing all our phosphate requirements shows the hypocrisy of wanting the benefits of highly productive farming while exporting our environmental footprint to countries that mine phosphate on land, which involves severe social and environmental distress in communities.

The committee discounted the project's economic benefits by focusing on a World Bank nominal phosphate price, a figure with no relevance to how the phosphate market operates.

Why would CRP pursue a marginally profitable project? We advised NZX in January that based on current exchange rates our annual profit before royalties and taxation would be almost $100 million. Only a few New Zealand companies generate profits that high.

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, in 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 $9.7 million per sq km, compared with $9000 per sq km annually from bottom trawling.

The committee concluded mining would have no significant impact on fishing yields or fishing industry profitability, marine mammals or seabirds. Despite this, they worried about our mining being in a Benthic Protection Area. These are areas where bottom trawling of fish is banned under the Fisheries Act.

The committee ignored CRP's proposed no-mining areas that would maintain comparable environmental protection on the Chatham Rise until marine protected areas can be enacted.

Ninety-six per cent of New Zealand is under water and development and environmental effects already take place there, particularly commercial fishing. Why is it okay for bottom trawling to be environmentally unregulated and damage 50,000sq km of seafloor every year, yet CRP's 30sq km is a greater threat?

Chris Castle and Linda Sanders are directors of Chatham Rock Phosphate.


NZX Announcement: Update: Thank you - and we need just a little bit more please

5 November 2014 

Thank you - and we need just a little bit more please….

There’s been a great response to our latest tranche of capital-raising. Habitual investors (including existing shareholders) contributed more than $900,000 towards the rights issue shortfall, and we’ve had continuing interest since we closed off the latest allotment last week. We ‘ve reached this position (effectively in sight of the finish line in a marathon) with your continuing support. Thank you for your ongoing faith in the project.

We still need another $1 million to complete this Marine Consent application process.  This a bit more than we were initially expecting, partly because we’ve done some additional research to ensure we’ve covered all of the bases. Budgeted costs charged by the EPA have also increased.

The offer, for habitual investors, is priced at the same level as the recent rights issue, i.e. 12 cents with an entitlement to a 68.8 cent option and compares attractively with recent share price trading at up to 23c. (Note these options have been extended for a year). The price rose in response to profit guidance that reinforced the robust financial basis of the project and then fell again - normal market behaviour given share placements being offered at a market discount.

We will seek to raise only the funds we really need to achieve the Marine Consent.   This opportunity is not without risk but in my view has significantly greater upside than downside.  So if you’re up for another contribution, I’d love to hear from you.

Marine Consent hearings on track

We’re now nearing the end of the Marine Consent hearings. This week we’ve heard from the fishing industry, we’re completing the presentation of some scientific evidence that could not be scheduled earlier and next week we’re heading to the Chathams for a rescheduled visit after the first planned hearing was postponed due to a death on the island.

In the week starting 17 November our final two witnesses, from environmental consultants Golders, will summarise our environmental impact assessment and present our proposed consent conditions.  Then there will be closing statements with legal counsel James Winchester from Simpson Grierson presenting on 19 November.  If you have the opportunity to attend this session at the RA Vance Stand at Wellington’s Basin Reserve it will be a comprehensive overview of why this project is so compelling.

The hearings are panning out pretty much as we expected. We were pleased the decision-making committee agreed to our request for the supplementary staff report not to include any recommendations. The report authors appeared at the hearing but offered very little in terms of additional information or insight and we continue to believe the report is an expensive waste of resources and inappropriate to the process.

Our scientific experts have met to caucus with those hired by the opposition and are mostly reaching a consensus. This includes common ground on all the major elements of our proposal including the plume, sedimentation deposition, effect on fishing, uranium (non) effects, etc. As a result, it appears that these perceived issues are unlikely to have a significant influence on whether or not the DMC will grant consent.

Thanks to shareholders Mac Beggs and Paul Martin who appeared at the hearings, putting a lot of effort into well-researched professional presentations. 

Remember every word of what happens is on the EPA website.  Each day’s proceedings appear the day after.  Check out: http://www.epa.govt.nz/EEZ/chatham_rock_phosphate/Pages/default.aspx

Profit guide enthuses investors

Issuing guidance on our expected business plan and financials had a (at least temporary) positive effect on our share price. We issued the guidance because of confusion among some witnesses at the hearings regarding our financials.  It was a good opportunity to clarify to the decision-making committee and financial markets the significant economic benefits our project offers for New Zealand and the attractive profitability.  

Environmental benefits - As we’ve commented before, we’re also proud our project offers new environmental benefits for New Zealand’s farming industry, in terms of using a low cadmium, low carbon footprint, low run off, potentially organic product.  This project will create a new industry with strong ties to agriculture, our most important export earner.  Our product will enhance New Zealand’s security of supply and reduce our exposure to politically risky sources of a critical input to this country’s biggest industry.

Over the past few years our marketing vice president Najib Moutia has undertaken extensive market research and sales development in international and local rock phosphate markets. The factors potential buyers consider in assessing the attractiveness of the different phosphate rock available on international markets include the level of phosphorus and other minerals and ease of handling. CRP rock phosphate can be used to make either medium or high grade superphosphate, direct application fertiliser, or even dicalcic phosphate.

We’ve identified buyers in eight Australasian and Asian countries and expect to export 1.15 million tonnes annually and for 350,000 tonnes to be used within New Zealand, with two thirds of the total used to make single super phosphate and one third sold for direct application use. 

Big potential - Rock sold for direct application use sells at a substantial premium in some markets so we’ll focus on maximising direct application use. We believe the market for direct application rock phosphate in New Zealand is 100,000 to 200,000 tonnes a year, but  with potential for significant expansion, given:

·       this product has not been readily available from a local source

·       there is a desire or likely requirement to reduce leaching run-off effects, and

·       our product is the ideal for high country use and for maintenance in dairy farm application. 

We are undertaking pot trials to validate the work done in earlier years proving the strong performance of our product on New Zealand soils, and evaluating the market potential for RPR on home garden use in New Zealand and internationally.

Price confusion - There’s also been some confusion at the hearing about the use of the World Bank quoted spot price, which is simply a reference point and often bears little resemblance to the contract prices with individual buyers that are the industry norm. 

We expect an average revenue per tonne of USD 125 (NZD 158) yielding annual project revenues of USD 187.5 million (NZD 237 million). These revenues are net of export freight costs.

One of the key financial strengths of the project is the cost of transport of imported rock phosphate to New Zealand is about equivalent to Chatham’s current estimated mining costs, which gives the project a significant financial advantage.

After deducting expected contract dredging costs, incoming port charges, environmental monitoring costs, community contributions, biodiversity offset costs and business overheads, the annual profit before royalties is estimated to be USD 54 million (NZD 68 million).  From this Chatham estimates paying USD 5.4 million (NZD 6.8 m) in royalties and USD 13.6 million (NZD 17.2m) in income tax.

Benefits for NZ - There are also significant economic and employment benefits for New Zealand including:

·       Port charges to the port where the operations and product stockpiles will be based of several million dollars a year

·       Port support services relating to product handling

·       Overseas phosphate export vessels provisioning support services ( 30+ ships)

·       Survey vessel services

·       Portside engineering services

·       Jobs on the mining vessel

·       Other jobs relating to environmental monitoring services

·       Maritime training opportunities

·       Ongoing scientific research and data gathering

·       Mining vessel provisioning and bunkering

·       Jobs arising from increasing farming outputs where CRP rock is used on marginal land.

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

 

Boskalis defends track record at Chatham Rock hearings

Thursday 2nd October 2014

Royal Boskalis, one of the world's biggest dredging companies, defended its track record in making the case for a proposed phosphate mining project on the Chatham Rise, and is confident the measures it would take to protect the environment would aid recolonisation of the area by marine life.

The Rotterdam, Netherlands-based company is the proposed partner with NZAX-listed Chatham Rock Phosphate to mine phosphate nodules from the seabed on the Chatham Rise, some 450 kilometres offshore to the east of Christchurch, providing the engineering expertise to undertake the project. While the two companies haven't formally entered into a contract, Boskalis is an investor in and an integral part of Chatham Rock's application to mine the area, and three of the Dutch firm's representatives gave evidence to the five-member decision-making committee hearing submissions on the project in Wellington yesterday.

"It is important to note both CRP and Boskalis have committed to work together on this project," development dredging manager Sander Steenbrink told the committee. "We have come a long way and it would very difficult for another company to come and step into the project and do that work."

If another company was successful in winning the bid to undertake the project, it would have to negotiate the use of Boskalis's intellectual property, which was part of the Chatham Rock application.

Steenbrink said Boskalis has a strong track record around the world in managing these types of projects, and that he considered measures to mitigate the impact of mining on the environment by leaving areas to aid recolonisation of the marine ecosystem met the firm's corporate social responsibility goal of 'building with nature'.

He didn't think there were any technical concerns that would limit monitoring the project, which would be the deepest underwater mining project the firm has undertaken, at 450 metres. Rather, it would come down to issues of cost, Steenbrink said.

Duncan Currie, counsel for environmental lobbies Greenpeace, Kiwis Against Seabed Mining and Deep Sea Conservation Coalition, put several critical reports over Boskalis's environmental record to Steenbrink, which the Dutch executive said either hadn't come to his attention or had since been rectified.

Boskalis senior engineer Jamie Lescinski told the committee the modelling used to determine the impact of the plume of discharged sediment from the mining operation took a conservative approach. The plume is expected to be at an average of 10 metres above the sea bed during a mining cycle, but Lescinski said it could probably go as high as 20 metres without any substantial variation.

The impact of the plume and how it disperses the sediment is a key point of contention in the project. Boskalis plans to blast jets of water into the ocean floor to loosen the seabed and suck up sand for separation and extraction of the phosphate, before dispersing it through a hose. Among concerns is whether clay, referred to as chalk ooze and which typically lies below the proposed layer of sand to be mined, would be sucked up into the suction system, 

CRP wants to initially mine an 820 square kilometre area for five years before widening its activity to a 5,207 sq km area for up to a further 30 years.

Lescinski said lessons and samples from the initial mining stage would be used to model the potential impacts in expanded areas if the project proceeds to those later stages.

"I would advise that, before mining in a new area, a condition should be imposed that seabed samples need to be collected and analysed and that information should be used in the model as inputs to rerun operational predictions before moving into new mining," she said. "My expectation is it would be similar, but that's an expectation. I would want to see that sediment first and see if there are any similarities to the area that's already known."

Gerard van Raalte, who has been overseeing the project for Boskalis, told the hearing the Chatham Rise project would draw on existing techniques and equipment, but would also need its own bespoke solutions to deal with unique issues.

"What we have developed so far is complex, but in fact it's a combination of state of the art techniques that are applied in a new context," van Raalte said. "We are convinced we have chosen the best available technology with the best environmental practices to mitigate as much as possible what we can do in the design stage."

He said the project will need extensive monitoring in the early stages to ensure it would be able to cope with any unexpected problems that arise.

The hearings are continuing.

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