Cabinda - Phosphate in Angola
Minbos holds a 50% interest in the Cabinda Phosphate Project (the Project), which incorporates a 2000km2 exploration permit covering all the known phosphate occurrences in the Cabinda Province, in the Republic of Angola. The Project contains one development project - Cacata and four advanced exploration projects; Mongo Tando, Chibuete, Ueca and Chivovo. Importantly, all of these projects lie within 50km of the coast and within 5km of the established road infrastructure providing an excellent economic basis for the project.
Geology and Resource Overview
The Project consists of sediments from the cretaceous and tertiary periods deposited in a large basin situated in the southern part of the Republic of Congo, north western part of Angola and the western part of the DRC.
Utilizing historical drill data, as well as results from Minbos' drilling program, the Company has delineated a total resource of 304.1Mt @ 11.5% P2O5.
Figure 1: JORC Resource Table
Minbos' focus is now the development of the high grade Cacata project. The Company has completed a scoping study on Cacata, which produced positive results.
THE CACATA PROJECT
The objective of the scoping study was to evaluate the technical and economic viability of establishing a high grade operation at Cacata to produce 0.8mtpa of phosphate rock concentrate over a 10 year life of mine (LOM).
The scoping study has delivered the following positive results:
- Operating cost US$57.23 per tonne of phosphate rock (FOB);
- Capital cost estimate of US$157m, based on owner operated mining, road haulage and ship loading;
- Strong opportunity to further reduce capital and operating costs during the bankable feasibility study (BFS);
- IRR of 40.2 % (pre tax) and
- NPV of US$311m (pre-tax) at a 10% discount rate.
The scoping study clearly demonstrates the robust nature of the Cacata high grade project and as a result the joint venture partners are planning to immediately commence with the BFS.
The scoping study is based on the JORC high grade indicated resource of the Central and Southern sections of the Cacata ore body. Minbos anticipate the release of an upgraded resource for Cacata by the end of 2012, including a JORC measured resource over a portion of the ore body, which will provide the basis for the BFS.
Coffey Mining (“Coffey”) was commissioned to conduct an evaluation of the viability of mining, the high grade portion of the Cacata ore body. The Coffey report concluded that using a truck and shovel approach the high grade portion of the Cacata ore body could be mined at a 1.2mtpa of Run of Mine (ROM) at a strip ratio of 1.74:1 (waste to ROM) and a ROM bench height of 3.7m.
The economical evaluation was based on the mining equipment being purchased and operated by the Owner and a conservative allowance for availability and utilization. Coffey have also made allowances for replacement capital during the 10 year LOM.
Coffey have derived costs from first principles and their experience in West Africa mining projects that:
- The initial capex would be US$9.5m and
- The average mining cost of US$5.72/t phosphate rock produced.
DRA Minerals Projects (“DRA”) was commissioned to conduct a technical and financial evaluation of the viability of processing the high grade portion of the Cacata ore body. The focus for the evaluation was a metallurgical test work campaign carried out by Mintek Laboratories on a sample supplied by MTL from the recent diamond drilling campaign.
DRA concluded that the preferred processing route for the high grade portion of the Cacata ore body is a basic washing and selective screening operation which by its nature is a low energy consumer and operator friendly. The processing route is shown in Figure 2 below:
- The ROM is attrition scrubbed to remove lumps and clay agglomerates;
- The attrition scrubber discharges over a de-sliming screen;
- The screen undersize (-2.36mm) is further de-slimed and the oversize (+2.36mm) is discarded;
- The - 2.36mm + 106 micron phosphate rock is de-watered in a vacuum belt filter and then passed through a rotary drier to produce a 2 - 3% moisture content phosphate rock; and
- The concentrate grade is expected, based on the Mintek test work, to be relatively high grade i.e. at or above the Moroccan benchmark grade of 32 - 33% P2O5.
Figure 2: Process Flow Diagram
DRA has derived costs based on their internal database and experience in West Africa mining projects and has estimated that for a plant producing 0.8mtpa:
- The capex would be US$54.8m
- The operating cost would be US$25.12/t of phosphate rock recovered.
Tailings Storage Facility
SRK Consulting (“SRK”) was commissioned to conduct a technical and financial evaluation of establishing a Tailings Storage Facility (“TSF”) at Cacata. SRK has derived costs based on their internal database and experience in West Africa mining projects and concluded that:
- The capex would be US$6.8m and
- The operating cost would be US$0.50/t of phosphate rock recovered.
Phosphate Rock Transport and Ship Loading
Ports of Africa (“POA”) was commissioned to conduct a technical and economic evaluation of the viability of the logistics of transport by road and ship loading of 1.0mtpa of phosphate rock from the Cacata processing plant to a new ship loading site located 7km from the town of Cacongo. The additional 0.2mtpa capacity is being built in to allow for the potential production from Chivovo.
As part of the Scoping Study, POA carried out a data collection exercise, made a site visit to review potential port sites and assessed existing infrastructure. Based on this and their experience in Africa POA identified that:
- A 20kt phosphate rock covered bulk storage and truck loading facility will be required at the processing plant site, as shown in figure 3 below;
Figure 3: Bulk Storage & Bulk Loading Facility
- The phosphate rock product will be transported on existing tarred roads to a new port site just north of the coastal port town of Cacongo, 90km from the Cacata deposit, as shown in figure 4
Figure 4: Transport Route from Cacatahigh grade Project to New Loading Site
- At the new port site a 50kt covered bulk storage and loading facility to load low draught 5,000t barges will be required and these barges will load bulk vessels (e.g. Panamax) anchored offshore (as shown in figure 5);
Figure 5: Bulk Storage and Barge Loading PFD
POA has derived costs from their internal database of projects and experience in Africa mining projects that:
- The capex would be US$22.5m for the construction of the product handling, storage and loading equipment at the Cacata mine site and the purchase of road trucks,
- The capex would be US$57.5m for the construction of the new port area, loading equipment and the purchase of marine fleet,
- The operating cost would be US$13.63/t for road transport of phosphate rock from Cacata mine site to new port area.
- The operating cost would be UD$3.25/t for ship loading of phosphate rock
The following infrastructure has been allowed for in the capex:
- Power generation (5mw) by diesel generators;
- 7km of new tarred road and internal haul roads;
- Water reticulation;
- Housing recreation and messing facilities;
- Workshops for mining, processing, phosphate rock, transport and ship loading;
- Security and fencing;
- Fire fighting;
- Change houses;
- Sewerage disposal;
- Communications, IT; and
- Fuel storage.
The total capital cost has been estimated at US$157m (including EPCM and contingency) as detailed below:
The capital cost estimate includes the purchase of the mining fleet and the road haulage fleet, this could be reduced by approximately US$18m utilising a contract mining and road haulage fleet approach. A further possible capital cost saving could be achieved by outsourcing the Marine operation; this will be investigated in the BFS.
The direct cash operating cost has been estimated at US$57.23/t FOB Cabinda of phosphate rock as follows:
The operating cost is based on owner operator road transport derived from first principles. Based on an initial estimate from a transport contractor, a saving is expected in utilising the contractor approach and this will be investigated during the BFS.
The operating cost is based on diesel on site power generation. A 35Mw power station is currently being constructed in Cabinda during the BFS this option will be investigated and could also provide an operating cost saving.
Marketing and Product Pricing
At the target production rate of 0.8mtpa of phosphate rock product, the Cacata project will have a minimum 10 year life of mine. Current market analysis shows that this product will be in demand and readily absorbed by the market. Our base case analysis has assumed a selling price of US$180/t FOB Cabinda as follows:
- CRU has developed a model for estimating the likely pricing of a new phosphate rock product entering the market, which has taken into consideration the phosphate rock grade, chemical characteristics, as well as CRU's knowledge of actual phosphate rock contract provisions; and
- This analysis has determined that the Cacata rock phosphate is likely to trade at an approximately 9% premium to the Moroccan benchmark price which has had an average price in 2012 of US$193.90 (US$211.35 with 9% premium) compared to the revenue per tonne used of US$180 in the cash flow model.
The results of cash flow model developed from the scoping study are as follows:
- The cash flow model is a base case scenario and does not take into account the potential upside as a result of contracting out all or part of operations.
- The cash flow model has been prepared on a pre-debt funding and before tax and duties basis.
When compared to the previously published CRU report that investigated a cost curve positioning, the projects have the following characteristics:
- An operating cost of US$57.23/t will place the project in the lower half of the cost curve
- The capex cost of US$157m, places the project in the lower half of the capital intensity cost curve (capital/production per annum) with an enhanced possibility of reducing this to a bottom quartile capital intensity project during the BFS.