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

Exponential Investor released the following article. To read it in its original form, click here.


Going to the ends of the Earth for phosphate

18TH MAY 2017


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 –

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


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.


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 released the following article. To read in it's original form click here

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 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.


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 released the following article. To read in it's original form click here

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.

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


Cell: +64 21 558 185

Skype: phosphateking

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:

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 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.