Widespread Energy advises additional mining concept study with dredging industry giant Jan de Nul

Widespread Energy Limited, as operator of the Chatham Rise Rock Phosphate Project, recently announced that it had reached agreement with three of the world’s largest dredging companies (Royal Boskalis, IHC Merwede and D.E.M.E.) to carry out two jointly funded mining concept studies.

We are now able to advise that a further jointly funded mining concept study will be undertaken by Belgian dredging company Jan de Nul. Jan de Nul senior executives have shown significant interest in the Chatham Rise Project since mid 2010 and this development is particularly good news. Jan De Nul had already provided a preliminary mining report for Chatham Rise phosphate, and will now provide a more detailed study of the mining and riser systems based on its earlier engineering for similar projects and additional studies on the most critical items. The work will be performed around the use of Jan De Nul’s large DP2 vessel Simon Stevin

As previously advised, after the three mining concept studies have been completed, Widespread Energy will review them and then (with the assistance of suitably qualified industry experts) select an exclusive partner for detailed concept design, production testing and, ultimately the mining/dredging operation. Detailed concept design and production testing are expected to take at least 12-18 months.

This process enables Widespread to tap, at a manageable cost, the expertise of the world leaders in the dredging industry without the necessity to make what could be a premature decision on a preferred partner. Each of the dredging companies will also benefit from being able to undertake a jointly funded pre-feasibility study before being required to commit significant resources towards detailed concept design and production testing.

The directors of Widespread Energy and the Chatham Rise Project team are gratified that this project has attracted so much interest from these leading dredging industry companies.

Jan de Nul

Jan De Nul Group is a family-owned Belgian company that provides services relating to the construction and maintenance of maritime infrastructure on an international basis. Its main focus is dredging (including other forms of marine engineering), which accounts for 85% of the turnover. Other areas include civil engineering and environmental technology.

Originally founded in 1938, in Hofstade near Aalst, Belgian Jan De Nul started as a construction company specialised in civil works and maritime construction. It was only in 1951 that the company entered into the dredging business.

Jan De Nul has 5,000 employees and a yearly turnover of 1.9 billion euro. One of the four largest dredging companies in the world,  Jan De Nul has a fleet of over 80 ships, including 14  cutter suction dredgers, 26 trailing suction hopper dredgers, 20 split barges, 5 backhoe dredgers, and 17 rock transport barges.

Major projects recently undertaken by Jan De Nul include the Panama Canal expansion, the Port Botany expansion, the Palm Jebel Ali artificial island in Dubai and the nearby Dubai Waterfront project.

Chatham Rise Project Background

On 25 February 2010, a consortium comprising Widespread Energy and associated company Widespread Portfolios Limited, (“the Joint Venture or JV”) was granted an offshore prospecting permit by the Crown Resources division of the Ministry of Economic Development covering an area of 4,726 km2 on the central Chatham Rise. The permit area, which is in New Zealand territorial waters, is located 450 km east of Christchurch and includes significant shallow seabed deposits of rock phosphate and other potentially valuable minerals.

The initial term of the permit is two years with further priority rights to either extend the prospecting permit or apply for a mining licence.

An independent valuation of the project by Rockpoint Corporate Finance in May 2010 found the project had a realistic possibility of being commercially viable.  It found that, based on conservative modelling, the project could earn net profit before tax of $40 million a year. Widespread’s own models put that figure as high as $80 to $100 million a year.

In addition to its financial potential, the project offers a number of benefits to New Zealand including:

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

The project is also New Zealand owned and controlled.

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

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

On behalf of the Board

Chris Castle

Onekaka, 24 January 2011

Widespread Energy advises mining concept studies with dredging industry giants

New Zealand Exchange Limited
P.O. Box 2959
Wellington

5 January 2011

Dear Sir,

Widespread Energy advises mining concept studies with dredging industry giants

Widespread Energy Limited, as operator of the Chatham Rise Rock Phosphate Project, has reached agreement with three of the world’s largest dredging companies to carry out two jointly funded mining concept studies.

One study is being undertaken by Dutch dredging company Royal Boskalis Westminster N.V., the other by a consortium of Rotterdam based IHC Merwede and Belgium headquartered D.E.M.E. (Dredging, Environmental & Marine Engineering).  

The mining concept studies, which are expected to be completed within eight weeks, are effectively engineering pre-feasibility studies. They are being funded 50/50 by Widespread Energy and the dredging companies.

The requested studies will provide:
 

• A mining concept with an assessment of the technical feasibility of the mining  concept. 
• Considerations as to how to minimise environmental impact.  
• Production estimates and a preliminary indication of capital and  operational costs.

After the two studies have been completed, Widespread Energy will review them and then (with the assistance of suitably qualified industry experts) select an exclusive partner for detailed concept design, production testing and, ultimately the mining/dredging operation. Detailed concept design and production testing are expected to take at least 12-18 months.

This process, as outlined, allows Widespread to tap, at a manageable cost, the expertise of several world leaders in the dredging industry without the necessity to make what could be a premature decision on a preferred partner. Each of the dredging companies will also benefit from being able to undertake a jointly funded pre-feasibility study before being required to commit significant resources towards detailed concept design and production testing.

The directors of Widespread Energy and the Chatham Rise Project team are gratified that this project has attracted so much interest from these and other leading dredging industry companies.

Royal Boskalis Westminster N.V.

Royal Boskalis Westminster N.V. is a leading global services provider operating in the dredging, maritime infrastructure and maritime services sectors. It provides creative and innovative all-round solutions to infrastructural challenges in the maritime, coastal and delta regions of the world. Its operations are broadly spread across all continents and three market segments, giving the company a stable foundation, the flexibility to capture a wide range of projects and excellent prospects for balanced growth.

Its main product segment is Dredging & Earthmoving, which includes port development, pipeline intervention activities, land reclamation, and coastal and riverbank protection.
Its second product segment is Maritime Infrastructure, which Boskalis is involved in through its strategic partnership with Archirodon, a leading contractor in this sector.
The third product segment is Maritime & Terminal Services, through its strategic partnership with Lamnalco, one of the world’s leading suppliers of maritime terminal services to the oil and gas industry.

Boskalis continually invests in its versatile fleet, which currently consists of over 1,100 vessels and equipment. Including its share in partnerships, Boskalis has around 14,000 employees and operates in 65 countries across six continents.

IHC Merwede

IHC Merwede is focussed on the continuous development of design and construction activities for the specialist maritime sector. It is the global market leader for efficient dredging and mining vessels and equipment – with vast experience accumulated over decades – and a reliable supplier of custom-built ships and supplies for offshore construction.

IHC Merwede has in-house expertise for engineering and manufacturing innovative vessels and advanced equipment, as well as providing life-cycle support.. Its integrated systematic approach has helped to develop optimum product performance and long-term business partnerships.

The company’s broad customer base includes dredging operators, oil and gas corporations, offshore contractors and government authorities.

IHC Merwede has over 3,000 employees based at various locations in The Netherlands, China, Croatia, France, India, the Middle East, Nigeria, Russia, Serbia, Singapore, Slovakia, South Africa, the United Kingdom and the United States.

Technological innovation is, and will remain, the company's underlying strength: IHC Merwede, the technology innovator.

D.E.M.E.

D.E.M.E. was established as a holding company in April 1991, but its roots go back to well into the 19th century. The origins of D.E.M.E. are embedded in Flanders, the Dutch-speaking region of Belgium. The capital of Europe, Brussels, is also the capital of Flanders. Its unique location at the crossroads of Europe historically created great prosperity. But the prerequisite for that prosperity has been hydraulic engineering competence in dike construction, the fight against flooding, deepening maritime access, and port construction.

As a Belgian dredging and hydraulic engineering group, D.E.M.E. has won a prominent position on the world market in a highly specialised and complex discipline. The company fosters a strong innovative approach and has indeed been a trendsetter and a pioneer in technical innovation throughout its history. The Group can look back on nearly 150 years of experience in its core dredging and land reclamation activities and hydraulic engineering. At present D.E.M.E. has a permanent workforce of 3,500 persons.

The D.E.M.E. Group is a group of international marine engineering specialists and contractors with multi-disciplinary capabilities such as:

Traditional core business: deepening and maintaining navigation channels, dredging for major port infrastructure development, sand winning and reclamation of new industrial or residential areas, artificial islands, beaches and coast development.

Marine & civil engineering: Offshore related services, such as trenching and backfilling and landfall constructions for pipeline installation, precise stone dumping for protection of pipelines at 2,000m, marine drilling or monopil installation, breakwater and harbour dam construction; marine heavy lifting and salvage operations.

Environmental techniques: Environmental dredging, cleaning and treatment of contaminated sludge and polluted soils: brown field rehabilitation   

Chatham Rise Project Background

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

The initial term of the permit is two years with further priority rights to either extend the prospecting permit or apply for a mining licence.

An independent valuation of the project by Rockpoint Corporate Finance in May 2010 found the project had a realistic possibility of being commercially viable.  It found that, based on conservative modelling, the project could earn net profit before tax of $40 million a year. Widespread’s own models put that figure as high as $80 to $100 million a year.

In addition to its financial potential, the project offers a number of benefits to New Zealand including:

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

The project is also New Zealand owned and controlled.

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

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

22 December 2010 Chatham Rise progress update

Widespread Energy has fast-tracked the year-one work programme on the Chatham Rise rock phosphate project.  It has filed the year-one progress report with the Crown Minerals division of the Ministry of Economic Development two months ahead of its due date.

During the last ten months Widespread has developed a New Zealand-based project team with a broad range of experience, as well as making connections with international research and other institutes.

This team includes:

Chris Castle, Project leader
Robin Falconer & Associates, Technical Lead & Chief Scientist
Kenex Ltd, Database management and project support
REM Ltd, Environmental Lead
GNS, Project Support and advice
NIWA, Project consultant
Rockpoint Finance, Financial advisors
University of Waikato, Widespread supporting MSc research

In addition, international research connections have been made with German research institutes who were heavily involved with previous activities on the Chatham Rise. These contacts include Dr Ulrich von Rad, the chief scientist on the RV Sonne cruise in 1981 and Dr Herman Kudrass, chief scientist on the 1978 RV Valdivia cruise.

Both have connections to Bundesanstalt Fur Geowissenschaften und Rohstoffe (BGR) – the German government scientific research organisation. Research work conducted in the late 1970s and early 1980s was done jointly between NZ and German organisations under “the West German – New Zealand Agreement for Scientific and Technological Cooperation”.

Planning for ongoing work in 2011 is well advanced and will focus on further enhancing the knowledge of the deposit, the understanding of the environmental setting and initiating scoping work regarding mining solutions.

Widespread continues fast track work on Chatham Rise rock phosphate

Widespread Energy Ltd is aiming to deliver its first year progress report on the Chatham Rise rock phosphate project by Christmas – two months early –managing director Chris Castle told a Russian conference today.
 

Mr Castle is currently in Gelendzhik, Russia, presenting a paper on “the technical and environmental challenges and economic opportunities of marine phosphate extraction in New Zealand” to an international Underwater Mining Institute conference.
 

In February Widespread was granted MPL 50270, covering 4726 square km on the central Chatham Rise, east of Christchurch.  It has been working to fast track the prospect’s evaluation so directors can make a decision on whether to apply for a mining licence at the end of 2011.  This would reduce the normal four-year time frame to two.
 

As well as preparing the first year report to Crown Minerals Mr Castle said the project team is planning an exploration programme for 2011, including environmental data collection and seabed sampling, establishing fertiliser market linkages and a university research programme.
 

While in Europe Mr Castle is meeting with potential suppliers of research ships and equipment and companies specialising in a range of extraction techniques.
 

This year the project team has reviewed historical data gathered in earlier exploration cruises, undertaken environmental studies, completed a pre-feasibility study and project valuation and evaluated underwater radiometric and seismic surveys.
 

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

A study by Rockpoint Corporate Finance earlier this year found the project had a realistic possibility of being commercially viable.  It found that, based on conservative modeling, the project has a current value of $20.9 million and could earn net profit before tax of $40 million a year.

Widespread’s own models put that figure as high as $80 to $100 million a year.
 
In addition to its financial potential, the project offers a number of benefits to New Zealand including:

• Reduced exposure to currency and commodity risk and reduced import burden
• Known, fixed costs
• Reduced carbon footprint from lower transport costs
• Possible export earnings.  The project is also New Zealand owned and controlled.

The challenges identified of extracting the resource include its sporadic distribution (it averages 66 kg/m but there is great variability).  Also extracting phosphate at 400m depth has not been done, though other minerals have been extracted at greater depths.  The phosphate, in nodules of 2mm to 150mm is located in a 1m layer of the soft, chalky clay sediment.  Mr Castle said extraction techniques were still being researched.  
 

He also said environmental considerations were a very important part of the work being done and the company has a wide-ranging programme of consultation with fishing, conservation, Maori and other interest groups.

On behalf of the Board

Chris Castle

Gelendzhik, Russia, 7 October 2010

To download and view the original release please click here.

Progress update for Chatham Rise 26 October

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

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

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

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

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

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

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

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

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

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

Chatham Rise Project Background

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

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

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

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

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

Widespread Energy plans overseas listing for Chatham Rise Project

An interim $1.2 to $1.5 million fundraising is planned for the Chatham Rise project as a prelude to listing it on an offshore stock exchange.

The interim financing involves private placements to suitably qualified investors, and a share purchase plan with any shortfall tendered for. Further details will be announced by Friday 29 October. 

The funds will be used for working capital, to finance the initial steps of the year-two work programme and fund costs relating to the overseas stock exchange listing. The listing process is expected to take six months with a present target date of early May 2011.

The two companies that hold the Chatham Rise Joint Venture are listed in New Zealand. Widespread Energy Limited (with a 90% interest) is listed on the smaller NZAX market and Widespread Portfolios Limited (with a 10% interest) on the main board NZSX market. Both are thinly traded, because they are small and operate in a sector (mining and mineral exploration) that is scarcely researched and attracts few local investors.

Further, there are no NZX listed fertiliser companies, therefore no comparable stocks, and therefore little point (despite its present $20.9 million independent valuation) in listing the project on the local market.

On overseas markets the activities of minerals and fertiliser sector companies are better understood, regularly researched and form a legitimate part of many investor’s portfolios.

These factors have lead the Boards of Widespread Energy and Widespread Portfolios to conclude the interests of both groups of shareholders would be far better served if the Chatham Rise project were to be restructured with a view to a new listing in an overseas share market.

The markets under consideration are the ASX (Australia), HKEx (Hong Kong) and TSX.V (Canada). No final decision has been made but it appears the lack of local depth and investor interest in projects of this nature has made the decision to list offshore inevitable.

The current thinking of the two Boards is Widespread Energy could become a dedicated vehicle for the Chatham Rise Project prior to an offshore listing occurring. This would likely mean transferring other Widespread Energy investments and issuing shares to Widespread Portfolios so Widespread Energy then holds 100% of the Chatham Rise Project. The benefits from this approach are Widespread Energy would be singularly focussed for taking to an offshore market to raise capital and a New Zealand domiciled and listed company would remain a significant shareholder.

If a restructuring did occur in the above manner a number of approvals would be required under the Takeovers Code, NZX Listing Rules and from Crown Minerals. Independent adviser reports would also be necessary. Therefore all shareholders would receive significant information and the opportunity to express their views before any such restructuring was implemented.

What's new as at October 7 2010

It’s full steam ahead on the Chatham Rise project with project leader Chris Castle coordinating technical advisers who are expanding the knowledge base while he raises the profile of the project both in New Zealand and overseas and continues talking with stakeholders.

Project status: Chris and the project’s principal scientist Dr Robin Falconer are visiting a number of companies in Europe during the first half of October to explore potential extraction techniques and meet with representatives of the German organisations involved in the research undertaken in the early 1980s. Meanwhile the team of experts - technical, environmental, scientific and financial – are all progressing various streams of the project.

Profile raising: Chris is one of more than 30 international speakers, including five from New Zealand at a conference on undersea mining in Russia from 4 to 7 October. Click here to download the presentation he gave. Chris also attended the national oil industry conference in Auckland on 20 September and made contact with a number of industry players.

The six page fold-out marketing brochure we’ve produced can be downloaded here.  We’ve also produced some business cards using the photograph from our website, which is receiving a great reaction because it is something a bit different.  Click here to see a mock-up of the card.

Options issued: The Widespread Energy board has agreed to issue 50c options to the project’s principal scientist Dr Robin Falconer, a marine geophysicist, who worked on an exploration programme of the central Chatham Rise in the early 1980s and who has agreed to provide consultancy services. As an incentive, and to align Dr Falconer’s interests with shareholders, Widespread has allotted 500,000 unlisted 50c options to him. The exercise price is a substantial premium to the prevailing share price, but reflects the significant value of the Chatham Rise resource as demonstrated in the Rockpoint Corporate Finance project valuation, announced to the market in May.

Backgrounder: For an interesting article on the phenomenon known as “peak phosphorus” read: "Landmark: Peak Phosphorus"

What's new

The Chatham Rise rock phosphate project is making significant progress in determining the viability of its undersea reserves.

Project status: The joint venture has established a team of key technical, environmental, financial and other experts to bring together and evaluate existing data who are advancing a number of work streams. A group  of technical advisers and Widespread directors met in Wellington in late July for a two day workshop to share knowledge, identify information gaps and plan the next steps in the years one and two work programmes for the project. Further work is also being undertaken with several undersea mining organisations to evaluate the optimal approach to extraction of our seabed rock phosphate resource. A dialogue has also been initiated with representatives of the German organisations that played a central role in the exploration role in the early 1980s.

Data analysed: The data gathered in the exploration voyages of RV Valdivia and RV Sonne in the late 1970s and early 1980s has been digitised and is now being analysed.  

Profile raising: Chris Castle attended the Australian fertiliser industry annual conference and while there met representatives of a number of  fertiliser manufacturers and users. Click here to find out more about the conference. Chris will also be presenting a paper at a conference on undersea mining in Russia in October. A six page fold-out marketing brochure has been produced and is available to view and download here.

Shareholder presentation: Click here for a link to the presentation Chris Castle gave to Widespread Energy shareholders on 29 June.

Click here to read this article by Australian journalist Robin Bromby on the future of phosphate.

Chatham seabed phosphate worth $6.7 billion

NZPA | Tuesday May 25, 2010 - 08:52pm

A preliminary feasibility study of mining the phosphate nodules scattered over the seabed on the Chatham Rise east of New Zealand suggests reserves of 30 million tonnes would be worth about $6.7 billion, or $156m a year at an annual recovery rate of 700,000 tonnes.

That would be enough to provide about half the phosphate the nation's two big fertiliser companies import -- mostly from Morocco -- to sell to farmers, according to the Widespread joint venture which wants to mine the phosphate from the seabed.

"Commercial development of the resource is a realistic possibility," the companies involved said today.

But further scientific studies of the extent and distribution of the resource, engineering and environmental studies to develop and refine a recovery system, and market studies were required, they said.

Two mining entrepreneurs, Widespread Energy and Widespread Portfolios, jointly applied in August 2007 for prospecting rights over a 3048km area, 600km east of Christchurch, which includes seabed deposits of rock phosphate, and now has mining rights over 4726km.

The deposits, also known as phosphorite, are at depths of about 400m.

In the 1980s, Fletcher Challenge investigated mining some of the 100 million tonnes of phosphorite deposits spread along 400km of seabed on the Chatham Rise -- variously valued at between $10 billion and $50 billion -- as a potential substitute for imported rock-phosphate used in fertiliser.

The area covered by the Widespread consortium's licence application was later reported to have been surrounded by a subsequent application for 71,750sq km by Auckland company Chatham Phosphate.

Widespread Portfolios, which said it has been approached by major fertiliser companies, holds 10 percent of the joint venture, and the rest is held by Widespread Energy, but as Widespread Portfolios also holds 20 percent of its joint venture partner, it effectively has an 18 percent interest in the project.

The phosphate nodules are found in layers up to 700mm thick. Their phosphorus content is 9.4 percent, higher than manufactured super-phosphate, but lower than most of the million tonnes of phosphate rock imported annually.

Rockpoint Corporate Finance has valued the project at $20.9 million, but an appraisal programme including the require scientific, engineering, environmental and market studies could take four years and cost over $30 million, it said.

There is a realistic probability about 20 percent of the project going ahead, Rockport said.

An initial financial model prices the phosphate at $223/tonne, with reserves of 30m tonnes and annual recovery rates of 700,000 tonnes giving the project a 40 year life.

It would require capital costs of $65m for specialist dredging and annual operating costs of $117 million, which the company said implied annual tax paid earnings of approximately $30 million throughout the 40 years.

If the Rockpoint independent valuation of the project was adopted as the carrying value, Widespread Energy's net assets would increase by $18.75m to $19.9m, and Widespread Portfolio's net assets would rise by $5.84m to $10.68m.

Widespread Portfolios Ltd today reported a $336,000 loss for the year to March 31, compared to a $6.66 million loss in the same period last year.

Disregarding unrealised losses and non-cash provisions, the company reported a pre-tax loss of $269,000 compared to a loss of $776,000 last year. No dividend was declared.

"Apart from our associate company, Widespread Energy, which had quite an active year that saw its market capitalisation double, most of our portfolio was in a walking-wounded state," the company said in a statement to NZX. Asian Minerals, Glass Earth, King Solomon Mines and Golden Phoenix had all reined in their activity.

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Chatham Rise Rock Phosphate Project Valuation

Rockpoint Corporate Finance has undertaken a preliminary feasibility study of the Chatham Rise phosphate resource contained within Mineral Prospecting Licence 50270 recently granted to the Widespread Energy/Widespread Portfolios joint venture. 

This preliminary study confirms that commercial development of the resource is a realistic possibility. 

However, further scientific studies are required to satisfactorily establish the extent and distribution of the resource, engineering and environmental studies to develop and refine the recovery system, and market studies to assess supply to both domestic and export markets. 

The Widespread Joint Venture and Rockpoint have considered the appraisal work programme required to address outstanding issues leading up to an investment decision. Rockpoint has advised the Joint Venture that, based on its central assumptions and the risk parameters leading up to an investment decision, the current valuation of the project is $20.9 million. This valuation is effectively the present value of the prospecting licence that the Widespread Joint Venture now holds.  

The project valuation comprises two parts, the appraisal programme to point of investment decision, and then the value of the development project.  The appraisal programme involves several stages, presenting numerous decision points, including:

• scientific studies, including further sampling and testing, to satisfactorily establish the extent and distribution of the resource;
• engineering studies to review, design and test recovery and separation systems;
• environmental studies to assess existing ecosystems and the impact of recovery operations;
• market studies to assess supply opportunities in both domestic and export markets; and
• financial modelling to establish project feasibility. 

This appraisal programme could take up to four years, could cost over $30 million, and given the uncertainties being addressed, offers a realistic probability of a final investment decision to proceed of some 20%. 

A financial model has been developed starting at the point of final investment decision and is based on initial estimates of all input parameters, estimates that will be progressively refined through the appraisal programme. The key elements of the model are:

• phosphate prices, derived from current market price ex- Morocco, and current shipping costs, assuming $223/tonne;
• reserves of 30 million tonnes based on existing estimates (Cullen Report), with recovery rates of 700,000 tonnes annually (implying half of domestic market), giving a 40 year project life;
• capital costs of $65 million, based on specialist equipment to be provided by global dredging company Jan De Nul, in addition to development of land-based port receival, separation and storage facilities;
• operating costs of $117 million annually, based on estimates provided by Jan De Nul Group combined with port, separation, storage and marketing costs; and
• these assumptions imply annual tax paid earnings of approximately $30 million throughout the 40 year project life.

The project, from final investment decision, is considered to be viable across a wide range of likely scenarios. While the base case assumptions are considered conservative, the $20.9 million current valuation (derived by discounting the project to reflect the uncertainties to be overcome before the final investment decision) should be considered speculative given the appraisal programme is addressing material uncertainties spanning scientific, engineering, environmental and market issues.

Effect of Project Valuation on Widespread Energy (WEN) and Widespread Portfolios (WID) Balance Sheets

The Chatham Rise Rock Phosphate Joint Venture is held by WEN (90%) and WID (10%). As 20% of WEN is held 20% by WID, WID has a further indirect interest of 18% in the Joint Venture. 

The Rockpoint independent valuation of the project has not yet been adopted as the carrying value of this asset in the financial statements of WEN and WID, but if it were that would have the following effects on the balance sheets of the two companies:

• WEN’s reported net assets (as at 31 March 2010) would increase by $18.75 million to $19.9 million
• WID’s reported net assets (as at 31 March 2010) would increase by $5.84 million to $10.68 million

On behalf of the Board
Chris Castle

Onekaka, 25 May 2010