NZX Announcement: Update on Mining Concept Studies for Chatham Rise Project

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1 March 2011

As announced to the market in early January, the Widespread Chatham Rise Joint Venture has jointly funded three mining concept studies with four of the largest dredging companies in the world (with two jointly undertaking one study).

The license area owned by the joint venture is located approximately 450km offshore and extensive historical research on the license area has indicated the potential for economic concentrations of rock phosphate, the primary constituent of fertiliser. The rock phosphate occurs in nodules of 2-150mm in size and rests in a 1 metre deep layer of sandy silt at the floor of the ocean in water depths of 375-425 metres.

The key purpose of the mining concept studies is to demonstrate for the joint venture that extracting rock phosphate from the license area is both technically and economically feasible. The studies propose extraction techniques for the rock phosphate with specific attention to minimising environmental impact. These studies are therefore a critical part of ensuring that proceeding with the project and ultimately seeking a mining license is viable.

The first concept study has been received and considers that extraction of rock phosphate from the license area is technically feasible and proposes a dredging technique that could be employed for extraction. Actual particulars of the technique itself are confidential at this time. In any event, the technique ultimately employed will depend upon which dredging partner is eventually chosen by the joint venture and on further physical data being obtained from the license area that does not compromise the proposed technique.

Importantly this first study adopted conservative assumptions where there are physical data uncertainties and accordingly it is considered that the finding of technical feasibility is robust and a strong endorsement of the technical viability of the project.

This first study also opines on the economics of extracting the rock phosphate in terms of extraction volumes and costs. Very pleasingly for the joint venture, these economics are consistent with the joint venture’s own models and valuations. These models and valuations will be discussed in detail in the meeting documentation that will be circulated to securityholders shortly in connection with restructuring ownership of this project.

It is considered that this first study is a strong indication that the project is economically viable.

A draft second study has been received by the joint venture as well. It does not yet consider the economic viability of extraction however it proposes a differing extraction technology to the first study and also indicates that extraction is technically feasible. The second part of this study covering economics and the third study are expected later this month.

The joint venture is very pleased with the outcome of the studies received to date and consider them a strong endorsement of the project. The directors of each of Widespread Portfolios and Widespread Energy also consider that these results reinforce the need to restructure ownership of the project and undertake a significant offshore capital raising as detailed in market announcements yesterday so that the project can be aggressively pursued.

For and on behalf of the Board
Widespread Energy Limited

Chris Castle
Managing Director
chris@widespread.co.nz

Download a printable pdf of this announcement

 

News Update

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Updated at 7:39 am 16 February 2011

Widespread Energy is meeting with brokers in Canada to try to raise money to fund the mining of phosphate on the seabed of the Chatham Rise.

The energy exploration company was granted a two-year prospecting permit in February 2010 to explore an area 450 km east of Christchurch.

Phosphate is used to make fertiliser and the resource is potentially worth $6.7 billion.

The company says it has raised about $1.5 million over the last 15 months from its own shareholders.

Managing director Chris Castle says it is now trying to attract Canadian shareholders to raise about $34 million.

Chris Castle says the money will be spent on trial mining and further exploration of the resource, with mining possibly beginning in 2013.

He says the mining will be carried out by European dredging companies.

Mr Castle says developing the resource would also have environmental benefits, as the local reserve appears to have much lower levels of toxic chemical cadmium than imported phosphate.

 

Likely low cadmium rock phosphate source available in NZ

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Developing a New Zealand source of phosphate could minimise the health risks associated with cadmium, according to Widespread Energy Ltd.

Widespread is evaluating the economic potential of developing a reserve of 30 to 100 million tonnes of rock phosphate, which has tested low levels of cadmium.  The reserve is located on the seabed in shallow waters of New Zealand’s Chatham Rise.

The Ministry of Agriculture and Forestry announced on Friday it is planning to manage the gradual build up of cadmium in New Zealand soils through the cadmium contained in imported phosphate.

Tests of samples of the Chatham Rise rock phosphate by the local industry shows it has minimal cadmium levels.

“While those tests are not conclusive, they are encouraging,” Chris Castle, Widespread managing director said.

“We have been aware of the cadmium issue and we see our potentially low cadmium levels as one of the environmental benefits of developing a local phosphate resource.

Widespread is currently planning an international initial public offering to finance the development of the resource.  A local resource will also reduce New Zealand’s carbon footprint through lower transport costs, and benefit the country’s balance of payments and foreign exchange exposure.

A key part of extracting the resource will focus on environmental impacts by minimising seafloor disturbance and extracting the resource from less than 1/1000th of the Chatham Rise.

“This project potentially offers major environmental and economic benefits for New Zealand, especially because rock phosphate can be applied directly as a slow release fertiliser, with none of the nitrogen run-off problems caused by super phosphate,” Mr. Castle said.

The MAF cadmium control programme follows research that shows cadmium levels have gradually increased over decades. The strategy recommends farmers and growers work closely with their fertiliser representatives to determine the most cost effective, efficient and appropriate fertiliser application and land management options.

An NZPA report says the main concerns raised by cadmium are that chronic exposure can lead to kidney damage, bone disease and may be a risk factor in breast cancer.  The build-up of cadmium levels in sheep made MAF ban the export of some offal from animals older than 2-1/2 years. 

Testing showed up to 28 percent of sheep kidneys and 20 percent of cattle kidneys sampled between 1989 and 1991 exceeded the maximum residue levels allowed in New Zealand meat of 1 mg per kg. Health guidelines for soil contamination at the time had a maximum level of 3mg/kg of soil.

The natural average level of cadmium in NZ soils is 0.16mg/kg, but when farmland is taken into account, the average is more than double that, 0.35mg/kg, and soils on farms which have had a lot of super phosphate, such as dairy farms, can have as much as 2.52mg/kg.
Dairying areas with high fertiliser use tend to have the highest average contamination, including Taranaki (0.66mgkg), Waikato (0.60mg/kg) and the Bay of Plenty (0.52mg/kg).

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.

For further information please call Chris Castle on 021 55 81 85 or email chris@widespread.co.nz

 

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

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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

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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

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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.