Centrex Metals Limited’s (ASX:CXM) scoping study for its Ardmore Phosphate Rock Project located in Queensland is the first major milestone in what will be a very active year.
A feasibility study is due to be completed in mid-2018 and management aims to commence preliminary scale operations by the end of year.
Delivery of first shipments are planned for 2019, which makes the project fairly advanced in an industry where there can be long lead times to production.
Many of the boxes ticked to pave the way for 2019 production
The fact that the company has been able to make substantial progress with its feasibility study while completing the scoping study will work in its favour.
Centrex has also made good progress in other areas such as permitting and gaining consent from landowners with the two cattle stations that cross the mining lease.
From a logistics perspective, management engaged GR Engineering (ASX:GNG) to design a processing plant capable of producing 800,000 wet tonnes of phosphorus pentoxide per annum.
Project economics point to ten year mine life
Based on the indicated production and average life of mine operating costs of $162 per tonne Centrex expects to generate annual pre-tax net cash flow of circa US$280 million.
Initial capital costs based on the scoping study are circa $60 million, and the anticipated payback period is three years with a pre-tax internal rate of return of circa 40%.
Funding news could be imminent
While funding hasn’t been secured for the project, management is in negotiations with certain parties on a confidential basis.
While management is of the view that the project economics are sufficiently robust to support the negotiation of suitable funding, this remains the key risk in 2018.
Should the company be able to secure appropriate funding, which would most likely incorporate the receipt of binding offtake agreements, this could be another catalyst in 2018.