10 August 2016
Harvest Minerals Limited
("Harvest" or the "Company")
SCOPING STUDY FOR ARAPUÁ FERTILIZER PROJECT CONFIRMS LOW COST PRODUCTION OF DIRECT APPLICATION
NATURAL FERTILISER AT MAXIMUS TARGET
Harvest Minerals Limited (AIM:HMI) is pleased to announce that that an independent Scoping Study
(the "Study") has been completed for its Maximus Direct Application Natural Fertilizer (DANF) Project, highlighting the robust
economics of the project and the simple low cost mining and processing required to support the initial trial mining permit.
Maximus is part of the Arapua Fertilizer Project and is located in the Brazilian state of Minas Gerais.
The Study was conducted by consultants GE21 Consultoria Mineral (GE21) and includes pit
optimization and design, mine scheduling, capital expenditure (CAPEX), operational expenditure (OPEX) estimates and a preliminary
economic assessment based on the current initial resource, which represents only ~3% of the estimated mineralisation.
The study highlights are:
· Production of 100ktpa for 7 years, based on initial
883Kt Indicated JORC (2012) resource
· Open pit with very low strip ratio of 0.38:1 and
amenable to contract mining
· Very simple dry processing, including only crushing
and milling
· Low operating costs of US$4.77/t mined and processed
and US$ 7.34/t including selling costs and general and administrative expenses (G&A)
· Initial Capital expenditure of US$800k for own
equipment
· Scenarios with sales prices of US$50/t and US$65/t
generated NPV's of US$15.0m and US$21.0m post tax, with a 10% WACC, and IRRs of 408.8% and 562.8% respectively
· Pricing scenarios between US$15/t to US$120/t
generated NPVs of between US$1.1m to US$42.8m with IRRs of between 44% and 1,129% demonstrating the economic robustness of the
project when stress tested
· Entire project can be funded from existing cash
reserves, with first production expected later this year.
Commenting on the scoping study, Executive Chairman of Harvest, Brian McMaster
stated:
"Completion of this study demonstrates the robust economics of the project and
brings us one step closer to our objective of designing a simple and efficient project that delivers significant value for
Harvest and its shareholders. There is significant upside to the project both in terms of the current resource and potential to
expand the planned initial production with the project ideally located in the prime agricultural Cerrado region where fertilizer
demand is high. We expect to be able to refine and improve on the numbers presented in the scoping study and we are in the
process of appointing contractors to carry out the mining and processing, which could significantly reduce the initial CAPEX
requirements and potentially reduce these already low OPEX costs even further. We are busy working towards first production later
this year and whilst our trial mining permit application is being processed, our technical team and consultants continue to
conduct further test work including an agronomic study, the initial results of which we expect to receive during the current
quarter."
Enquiries:
Harvest Minerals Limited
|
Brian McMaster, Chairman
|
Tel: +61 8 9200 1847
|
Strand Hanson Limited (Nominated & Financial Adviser)
|
Rory Murphy
James Spinney
Ritchie Balmer
|
Tel: +44 20 7409 3494
|
Mirabaud Securities LLP (Broker)
Beaufort Securities Ltd
(Joint Broker)
Buchanan
(Financial PR)
|
Rory Scott
Jon Bellis
Bobby Morse
Anna Michniewicz
|
Tel: + 44 20 7878 3360
Tel: + 44 20 73828300
Tel: +44 20 7466 5000
|
Background
The Arapua Fertilizer Project is strategically located in the Brazilian Cerrado, 360km NW from
Belo Horizonte, the capital of Minas Gerais State. The project consists of seven granted exploration licences covering a total
area of 12,997.6 hectares, divided across both the Arapuá and Maximus targets.
Previous geological mapping at Maximus has identified a continuous kamafugite rock layer
containing both phosphate and potassium, over an area of approximately 1.691 km2.
The initial resource estimate, based on an air core drilling programme of only the weathered
kamafugite over only ~3% of the estimated mineralisation, identified a JORC (2012) compliant total
Indicated resource of 883Kt at 4.21% K2O and 3.53% P2O5 at a 3.5% K2O cut-off, with
additional exploration potential within the drilled area of between 3.0 to 3.5Mt with average grades from 2.7 to 3.5%
K2O at a 1% cut-off.
In addition to the phosphate and potassium oxide mineralization, grades of CaO (ranging from 0.80%
to 15.60%), MgO (ranging from 3.21% to 17.90%), MnO (ranging from 0.18% to 0.55%) and silicon dioxide (SiO2) (ranging
from 27.70% to 41.00%) were detected in the kamafugite weathered rocks. The kamafugite is therefore being studied as a
multi-nutrient silicate agro-mineral which could produce a direct application natural fertilizer (DANF) and/ or soil
conditioner.
Infrastructure
The project benefits greatly from being located in the Brazilian Cerrado, the most robust and
expanding agricultural region in Brazil. Combined with good existing infrastructure at and in the vicinity of the Project,
including easy road access to established regional towns of Patos de Minas, São Gotardo, Araxá and Uberlândia, transportation
costs for the product are significantly reduced.
The total infrastructure capital costs at Maximus are estimated to be US$85.7k to support 100ktpa
production and include an administration office, maintenance workshops, refectory, weighing scale for trucks, area for ore
stockpiles, fences and ordinance.
Mining and Processing
The kamafugite will be extracted from an open pit at a proposed rate of 100ktpa run-of-mine (ROM).
In order to reduce ore loss and reduce the transport distance for ROM ore, the open pit shell was optimized using strategic mine
planning software, Geovia Whittle 4.3 and has a life of mine strip ratio of just 0.38. The
final pit design for 100ktpa is shown in figure 1.
FOR FIG. 1 CLICK HERE: http://www.rns-pdf.londonstockexchange.com/rns/7252G_1-2016-8-9.pdf
Mined ore will be trucked to the stockpile area where a loader will be used to feed the processing
plant. The processing plant will work on a dry basis and include a primary crusher and a hammer or ball mill which should produce
no tailings.
Capital Costs
The capital cost estimate of US$800k for the 100 ktpa process plant and associated site
infrastructure includes the purchase of mining equipment including a loader and bulldozer. The estimated cost of the mining
equipment was US$428k with the remaining US$372k being for the processing plant, stockpile area, environmental licensing and
general infrastructure.
Table 1 - CAPEX Summary
|
Description
|
Cost
|
US$k
|
Mining
|
428.6
|
Processing
|
142.9
|
Stockpile
|
57.1
|
Environmental Licensing
|
85.7
|
Infrastructure
|
85.7
|
Total
|
800.0
|
Operating Costs
The operating costs were estimated based on the cost of similar projects in the GE21 database. The
operating costs include mining, processing, labour, general and administrative expenses (G&A) and selling cost. The total
operating cost (OPEX) for producing 1 tonne of product is US$7.34/t. This includes G&A and marketing/ selling costs as shown
in table 2.
Table 2 - OPEX
Summary
|
Description
|
Cost
|
US$/t ROM
|
Mining
|
1.79
|
Processing
|
1.29
|
Labour
|
1.69
|
G&A
|
1.43
|
Selling Cost
|
1.14
|
Total
|
7.34
|
Project Economics
The financial assessment of the project was based on 100ktpa production over a 7 year mine life.
For the Maximus project, GE21 based the product price on the market price of chemically concentrated potash fertilizers. As the
price estimate for DANF is based on the overall efficiency of the product, which will require further test work, GE21 produced an
economic assessment stress testing the project against a product sales price ranging from US$15/t to US$120/t and specifically
for prices of US$50/t and US$65/t.
Table 3: Economic Assessment of the project
(post tax and 10% WACC)
|
Price (US$/t)
|
NPV 10% (US$m)
|
IRR (%)
|
Payback (Years)
|
15
|
1.050
|
44.0
|
2.3
|
120
|
42.808
|
1,129.0
|
0.1
|
50
|
14.971
|
408.4
|
0.3
|
65
|
20.936
|
562.8
|
0.2
|
At the lowest price estimate of US$15/t, a post-tax IRR is 44% with an NPV10% of
US$1.05m, whereas at the US$120/t price point the IRR rose to 1,129% with an NPV10% of US$42.8m. Given the wide spread
of prices, the results demonstrate the inherent robustness of the project and gives the Company a lot of
flexibility over how it develops the project and product(s).
Next steps
The Company has already applied for the trial mining permit and is in discussions with the
landowner over leasing the property covered by the planned mine and associated infrastructure. Meanwhile the Company has already
contracted Campo Agricultural and Environmental Analyses in Paracatu to conduct the initial chemical and physical tests,
following the Brazilian Ministry of Agriculture, Livestock and Food Supply (MAPA) guidelines. This will be followed by an
agronomic study as part of the process of registering the product as a "stonemeal soil conditioner" fertilizer with
MAPA.
COMPETENT PERSON STATEMENT
The information in this statement which relates to the Mineral Resource and Exploration Target is
based on information compiled by Mr. Bernardo H C Viana, a geologist and full time director and owner of GE21 and is registered
as Competent Person in the AIG (Australian Institute of Geoscientists). Mr. Bernardo Viana has sufficient relevant experience to
the style of mineralization to qualify as a Competent Person as defined in the JORC Code (2012). Mr. Viana also meets the
requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies.
The information in this statement which relates to the Scoping Study is based on information
compiled by Mr. Porfirio Cabaleiro Rodriguez, a Mining Engineer and full time director and owner of GE21 and is registered as
Competent Person in the AIG (Australian Institute of Geoscientists). Mr. Rodriguez has sufficient relevant experience to the
style of mineralization to qualify as a Competent Person as defined in the JORC Code (2012). Mr. Rodriguez also meets the
requirements of a qualified person under the AIM Note for Mining, Oil and Gas Companies.
CAUTIONARY STATEMENTS
The Company's Exploration Target includes potential quantity and grade and is conceptual in
nature. There has been insufficient exploration to define these mineral resources and it is uncertain if further exploration will
result in the determination of mineral resources.
The reader is cautioned that a Mineral Resource is an estimate only and not a precise and
completely accurate calculation, being dependent on the interpretation of limited information on the location, shape, and
continuity of the occurrence and on the available sampling results. Actual mineralisation can be more or less than estimated
depending upon actual geological conditions. Mineral Resources are not Mineral Reserves and do not have demonstrated economic
viability. No Mineral Reserves are being stated.
The Scoping Study referred to in this announcement is based on low-level technical and economic
assessments, and is insufficient to support estimation of Ore Reserves or to provide assurance of an economic development case at
this stage, or to provide certainty that the conclusions of the Scoping Study will be realised.