Widespread wins Chatham Rise permit

Widespread Energy and its associate Widespread Portfolios have been granted a prospecting permit on the Chatham Rise, allowing them to test whether the area contains an estimated 100 million tonnes of rock phosphate, which could be worth $28 billion.

The estimates come from 30-year-old data derived from exploration work carried out by the government and companies such as Fletcher Challenge in the 1970s and 1980s. Widespread director Chris Castle says current market prices for phosphate, used by the fertiliser industry, could make extraction feasible, replacing imports from Morocco that amount to about 1 million tones a year.

Shares of Widespread Energy, which owns 90% of the joint venture, fell 17% to 10 cents yesterday.

Six investors have agreed to stump up $200,000 to help fund preliminary work on the permit, having already subscribed for similar sum at 12 cents apiece.

The venture is highly speculative and Castle acknowledges on his website that investors require plenty of “intestinal fortitude” to go along for the ride.
Based on the company’s assumptions of costs and an extraction rate of 500,000 tonnes a year, the project could generate pretax earnings of US$55 million a year, Widespread Portfolios said in a statement yesterday.

Alternatively, the joint venture could on-sell the resource on-situ, which could be worth US$10 million, or $2.12 per Widespread Portfolios share, it said.

Widespread aims to review data for the 4,726 square kilometre permit area over 12 months then work up a “full bankable feasibility study” and gather seabed samples in year two.

“The broad expressions of interest in this project from investors, the fertiliser sector and other mineral exploration companies indicate that funding of this later phase will be achievable,” the company said.

The rock phosphate is in the form of phosphorite, in pebble-like form sitting in the top third of a metre of ocean floor. The estimated size of the resource was suggested in a 1987 report by David Cullen called ‘The Submarine Phophate Resource on Central Chatham Rise.’

View original article on Scoop

Stocks to watch: Contact, Nuplex, POT, SLG, WID

Themes of the day: Statistics New Zealand will release data for the current account, which is expected to show the deficit shrank in the fourth quarter, while figures tomorrow are forecast to show the economy accelerated in the final three months of 2009. Stocks rose on Wall Street and in Europe after U.S. figures showed sales of existing homes fell less than expected in February. The European Union continued to haggle over support for Greece, with German Chancellor Angela Merkel saying Europe’s largest economy would only agree to financial aid as a last resort, and when done in tandem with the International Monetary Fund.

Contact Energy Ltd. (CEN): Environment Minister Nick Smith yesterday announced that the company’s 240MW Tauhara 2 geothermal generation proposal has become the first to have a power station proposal referred to an independent board of inquiry under the fledgling Environmental Protection Authority. The new rules ensure a speedy hearing for the consent, with reduced rights of appeal from other parties for projects of national significance. The shares fell 0.2% to $6.10 yesterday.

Nuplex Industries (NPX): The specialty chemicals manufacturer today said it agreed to buy the ingredients business of Med-Chem group, saying the purchase will lift earnings for its Specialties unit in the next 12 months. It didn’t disclose the purchase price. The shares rose 1 cent to $3.32 yesterday.

Port of Tauranga (POT): The port’s $15 million acquisition of Auckland-based Tapper Transport will improve its supply chain links and its ability to grow container movements at Ports of Auckland’s expense, said Craigs Investment Partners analyst Geoff Zame, according to the ShareChat website. The acquisition is part of Port of Tauranga’s building-blocks approach to develop a more complete supply-chain for its inland Metroport, to compete for import volumes that are currently going through Ports of Auckland. The shares fell 3 cents to $6.97 yesterday.

Sealegs Corp. (SLG): The designer and manufacturer of amphibious boats said it will move to a larger factory at the end of the month. The new facility will combine hull fabrication, assembly, service, development, sales and marketing into one building “which will result in savings and productivity benefits, said chief executive David McKee Wright. The company has rolled out new models including a concept cabin boat and an all-wheel drive option. The shares surged 17% to 17.5 cents yesterday.

Telecom Corp. (TEL): The phone company’s XT network crashed again yesterday, disrupting customers’ phone calls, text messaging and data use. The shares are trading near their lowest levels since the early 1990s. “It’s difficult to see it as being a compelling investment at the moment,” despite the low values, said Craig Brown, who helps manage $3.3 billion at ING New Zealand. “I think investors are holding off getting comfort before they invest.” The shares remained unchanged at $2.14 yesterday.

Warehouse Group Ltd. (WHS): The discount retailer announced the bookbuild for its 5-year bond being two-times oversubscribed, removing the need for a public pool. The $100 million bond will have a minimum interest rate of 7.3% per annum. The funds are planned to help the company expand its product range and open new stores. The shares climbed 1.3% to $3.98 yesterday.

Widespread Portfolios (WID): The company managed by Chris Castle yesterday announced a share purchase plan to raise about $960,000 at 15 cents apiece to help fund its share of study of exploration data on the Chatham Rise prior to developing a feasibility study for mining phosphates from the sea floor. The funds will also top up the company’s interest in affiliate and Chatham Rise partner Widespread Energy (WEN), which is currently 22% and is being diluted by WEN’s own capital arising. WID fell 5.3% to 18 cents yesterday and WEN was unchanged at 12 cents.

View original article on Scoop

Widespread companies may need financial clout for Chatham Rise

McDouall Stuart stockbrokers consider that the linked companies Widespread Portfolios Ltd (NZX: WID) and Widespread Energy Ltd (NZAX: WEN) will not be able to “go it alone” in developing the Chatham Rise marine phosphate deposits.
The broker’s Market Weekly said the two companies have only one employee, in executive director Chris Castle.
It was likely the two companies would sell down their interest to a party with the capability and capital needed to progress the venture.
It was estimated the project would need $300 million.
WID and WEN had indicated there would need to be a two years work programme that will include a full bankable feasibility study and the gathering of seabed samples to define a mineable resource.
McDouall Stuart said exploration in the Chatham Rise area, near Chatham Island and 600 kilometres east of Christchurch, in the 1970s and 1980s indicated a significant potential seafloor resource of rock phosphate.
“Those studies have assessed proved reserves of 30 million tonnes but with a total resource estimate of 100 Mt,” the broker said.
Rock phosphate is a core input to fertiliser manufacture. Currently, NZ imports more than 1 Mt of phosphate annually from Morocco, mostly by heavyweights Ravensdown and Balance AgriNutrients.
At current prices of about $US200/tonne, the commodity value of imported phosphate adds to around $300 M per annum. Cost of freight from Morocco adds a further $170 M to that bill.

Ross Louthean — 5 March 2010