ARIANNE PHOSPHATE ANNOUNCES POSITIVE RESULTS FROM ITS PURIFIED PHOSPHORIC ACID PREFEASIBILITY STUDY
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-favourable internal economics surrounding a downstream facility with a pre-tax NPV (8) of
SAGUENAY, QC,
As studied, the downstream facility would be capable of producing 350,000 tonnes (100% P2O5 basis) annually of PPA, making the plant the largest producer outside of
In addition, Arianne's facility would produce 220,000 tonnes (100% P2O5 basis) annually of a secondary phosphoric acid used in the production of specialty fertilizers and animal feeds. The market for this product will also be facing severe restrictions as current producers of this product are limiting their output due to operating constraints.
"Opportunities like this don't come along often," said
Economics
Capex
The full downstream operation is projected to have an initial Capex of roughly
Opex
The primary determinant in the operating costs for the PPA facility is the input cost of the phosphate concentrate (79%), the cost of sulphur used in the production of sulphuric acid (14%) and other miscellaneous operational costs such as maintenance, staffing and consumables (7%).
For the purposes of the economic model, internally built based on the Company's PFS, Arianne used an input cost of
As well, the 220,000 tonnes of secondary acid would be a byproduct of the PPA production process and thus, would not have an additional production cost associated with it. Revenue derived from the sale of this acid would be a direct credit adding to the PPA facility's bottom-line profitability.
Table 1: Sensitivity analysis related to phosphate concentrate (~40% P2O5) input cost (pre-tax basis)
$US (at 1:1.35) |
-30 % |
-20 % |
-10 % |
Base Case |
+10 % |
+20 % |
+30 % |
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|
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NPV (8) M's |
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|
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|
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|
|
IRR |
37.1 % |
35.7 % |
34.2 % |
32.8 % |
31.3 % |
29.8 % |
28.3 % |
Payback (yrs.) |
2.69 |
2.79 |
2.91 |
3.03 |
3.17 |
3.32 |
3.50 |
Opex (cash cost) M's |
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Gross annual Profit M's |
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Revenue
The PPA facility would generate revenue through the sale of its finished products. These products include 350,000 tonnes of PPA at
Prices sensitivity |
-30 % |
-20 % |
-10 % |
Base Case |
+10 % |
+20 % |
+30 % |
Purified Phosphoric Acid |
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|
Merchant Grade Acid |
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|
|
|
|
Gypsum |
|
|
|
|
|
|
|
NPV (8) – pre-tax basis |
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|
|
|
|
|
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Environmental Factors
According to the study, the downstream PPA facility would be able to take advantage of numerous operational benefits designed to mitigate its environmental impact. By having access to a high-quality, low-contaminant phosphate concentrate, the facility would require less input material thus requiring less transport and handling of the feedstock versus other facilities. As well, by using an igneous-based phosphate concentrate, the facility's output of PPA would be at a much higher ratio than most other operations allowing for a smaller operational footprint for its production size and superior economics.
The facility would also consist of a sulphuric acid production plant. The study shows that by choosing to construct its own plant to produce sulphuric acid, the operation would substantially reduce the environmental risk associated with transporting material in acid form and, greatly reduce the needs from a transportation infrastructure by moving three times less the material.
Further, by producing sulphuric acid through the direct input of sulphur, the facility would be able to be a net producer of electricity through the capture of steam through turbines that will generate electricity. This power would allow the facility to run without the requirement of external energy sources and allow the facility to sell its excess electricity into the electrical grid for the benefit of the regional community.
Lastly, a byproduct in the production of phosphoric acid is gypsum. As most phosphate concentrates contain radioactive contaminants, the gypsum produced is a hazardous material that needs to be stored, creating a legacy environmental issue and operating expense. As per the PFS, in the case of the Arianne facility, the use of a high-purity, low-contaminant phosphate concentrate would allow the production of a marketable gypsum, generating revenue for the operation where many other operations incur a legacy cost. Further, the environmental footprint and impact would be greatly reduced as the gypsum would not have to be stacked and maintained on the property.
Operational and Economic Benefits
In addition to the significant environmental benefits that would be provided by Arianne's downstream facility, the study highlights operational and economic benefits as well. By using high-purity igneous phosphate concentrate, the downstream product mix will be targeted towards specialty markets projected to be in significant shortages in coming years allowing less competition and higher margins. The production of additional marketable products such as gypsum and electricity, would also allow for revenue streams beyond traditional phosphate-based products. Input of higher purity concentrate also allows for greatly improved operating margins as lower input volumes [and costs] will generate higher revenues.
Geographically, the project has numerous advantages. By situating the downstream project in Saguenay,
"A lot of factors have come together that allow for this opportunity," said
Geopolitical
Phosphate has been known primarily as an agricultural commodity necessary to enhance crop yields and provide the food we need. Many jurisdictions, including North &
Understanding the necessity of phosphate in both food production and technologies required for the transition away from fossil fuels, several jurisdictions have placed phosphate on their critical mineral lists. Most recently
The Lithium-Iron-Phosphate Battery ("LFP")
The LFP battery was originally developed in the mid-1990s and today is one of the more prominent battery chemistries. Last year, the LFP accounted for roughly 35% of all batteries and, as more Western car companies (Tesla,
As well, beyond the EV, the LFP's attributes have made it the premiere battery for use in Energy Storage Systems ("ESS"). Analysts such as
A significant challenge for the West is Chinese dominance in LFP battery production. Today,
The LFP battery requires PPA, a product that
Arianne's Opportunity
Situated in
- the PPA plant would be a safe, reliable Western source of battery-grade acid
- the facility is geographically close to its end markets (Western gigafactories)
- the Company would be able to benefit from attractive economic incentives provided for critical mineral projects
Facility will have access to high-quality [igneous] phosphate concentrate in the region (possibly including Arianne's Lac à Paul project)
- Allows for a favorable phosphate product mix targeting high margin products
- Allows for easy access to necessary inputs for the facility
- Allows for additional revenue sources beyond phosphate-based products
Strong [Base Case] Economics (Pre-tax)
- Low Opex cash cost
- NPV (8) of US
$4.5B - IRR of 32.8%
- Payback of roughly 3 years
In closing,
Source Information
Capex/Opex estimate:
PPA-MGA Plant by
SAP by
Logistics and integration by CIMA+
Macro:
CRU, Benchmark Mineral Intelligence,
Economics/Pricing:
Israel Chemical (2023 Annual Report)
Benchmark Mineral Intelligence (Phosphoric Acid Market Outlook Q1 2024)
CRU (weekly phosphate product pricing)
Statista (Average Price of Crude Gypsum 2010-2023)
About
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Cautionary Statements Regarding Forward Looking Information
This news release contains "forward-looking statements" and "forward-looking information" within the meaning of applicable securities regulations in
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