The Pre-feasibility Study completed for the Ochoa Project shows significant positive economics, with a projected full capital cost of $706 million, a projected operating cost of $147 per ton, and an after-tax net present value of $1.286 billion using a discount rate of 10%. The internal rate of return for the project on a before-tax basis is 32% and 26% on an after-tax basis (both calculations performed on a 100% equity case).
Note: All tons are short tons, unless otherwise specified, and all dollars are in United States currency.
The National Instrument 43-101 ("NI 43-101") Compliant Prefeasibility Study projects a base case production level of 568,000 tons per year of SOP and 275,000 tons of SOPM. The plant will have operational flexibility to produce a range of product mixes. The Study assumes a 40-year mine life, although the reserves provide for a significantly longer life at anticipated production levels. The base case production information is summarized as follows:
Note: All tons are short tons, unless otherwise specified, and all dollars are in United States currency.
The National Instrument 43-101 ("NI 43-101") Compliant Prefeasibility Study projects a base case production level of 568,000 tons per year of SOP and 275,000 tons of SOPM. The plant will have operational flexibility to produce a range of product mixes. The Study assumes a 40-year mine life, although the reserves provide for a significantly longer life at anticipated production levels. The base case production information is summarized as follows:
- Annual production at full capacity of 843,000 tons composed of 568,000 tons of Sulphate of Potash ("SOP") and 275,000 tons of Sulphate of Potash Magnesia ("SOPM").
- The operating production cost is $147 per ton of SOP and SOPM.
- The projected full capacity capital cost of the project is $706 million.
- A mine life term of 40 years. However the Proven and Probable Ore Reserves in the overall mine plan are sufficient for over 90 years of production. Additional Measured and Indicated mineral resources outside the mine plan are available to potentially extend the mine life to more than 150 years.
- Construction is planned to begin upon the completion of the Environmental Impact Study expected in late 2013.
- The pre-production construction period is expected to be 24 months (completion during Q4 of 2015), with completion of a second train of crystallizers 9 months following initial production.
- Full production is to be achieved approximately 18 months after plant start-up. With production commencing Q4, 2015, production of 80% capacity will be reached Q4, 2016 and full capacity will be reached by Q2, 2017.
- The payback period from the commencement of production is 3.9 years after tax.
- Of energy costs, approximately 1/3 is for natural gas and 2/3 is for electricity. Local electricity and gas companies provided independent estimates of energy costs, which are used in the Study. Gas prices used in the forecasts averaged $3.75 per thousand cubic feet.
- The underground mining rate varies with mine grade. The average planned production rate is 3.5 million tons of ore per year with an average concentration ratio of 4.15:1.
- The average mining extraction rate is estimated at 83%. The extraction rate is 90% in areas remote from oil and gas wells, and 60 % in areas proximal to such wells. No subsidence whatsoever is forecast where mining is at 60% extraction.
- The average metallurgical recovery is estimated at 90%.
- SOP prices were forecast by CRU for the period 2015 to 2025. The forecast price was for standard SOP delivered in northwest Europe. It is currently planned however that the SOP will be distributed initially in North America, where SOP prices have been significantly higher than Northwest Europe prices. Also, the majority of the product will be granular SOP, which sells at a premium to standard SOP prices. The average CRU price per ton of SOP price adjusted for granular grade, for 2015 to 2025 was $725. For 2026 to 2055 the average per ton price for the 5 years prior to 2026 was used.
- The CRU forecasted SOPM prices per ton for 2015 to 2025 was at $238 per ton. For 2026 to 2055 the average price per ton used was $261.
- Average realized price per ton of product for the 40 year mine life is $623.
The Study considers all facilities required to mine the potash reserve and to process it into SOP and SOPM, including comminution, calcination, leaching, crystallization, drying, and granulation. Also included in the Study are the storage and load-out facilities required for product shipment.
Summary of Operating Cost
Summary of Operating Cost
|
Area of Operations |
Cost Per Ton Of
Ore |
Cost Per ton of
Product |
|
Mining
|
$6.91
|
$ 28.95
|
|
Processing
|
$24.72
|
$ 103.54
|
|
G&A
|
$ 3.53
|
$ 14.78
|
|
Total
|
$35.17
|
$ 147.28
|
Net Present Value and Internal Rate of Return Analysis
|
Operating Cost |
Capital Cost
|
Sales Price
|
NPV @ 8%
|
NPV @ 10%
|
IRR
|
|
-10%
|
0
|
0%
|
$1,887
|
$1,343
|
26.54%
|
|
0
|
0
|
0%
|
$1,816
|
$1,286
|
25.86%
|
|
10%
|
0
|
0%
|
$1,744
|
$1,230
|
25.17%
|
|
0
|
-10%
|
0%
|
$1,891
|
$1,358
|
28.16%
|
|
0
|
0
|
0%
|
$1,816
|
$1,286
|
25.86%
|
|
0
|
10%
|
0%
|
$1,740
|
$1,215
|
23.92%
|
|
0
|
0
|
-10%
|
$1,502
|
$1,043
|
23.24%
|
|
0
|
0
|
0%
|
$1,816
|
$1,286
|
25.86%
|
|
0
|
0
|
10%
|
$2,126
|
$1,528
|
28.33%
|