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Verdant Minerals Ltd: THE INVESTMENT CASE
INVESTMENT OVERVIEW

Verdant Minerals revs up the engine at large NT phosphate resource

The Ammaroo Phosphate Project's million net present value (NPV10) is a nominal, ungeared after-tax $344 million
diammonium phosphate fertiliser produced from Ammaroo ore
INVESTMENT OVERVIEW: VRM The Big Picture
Diammonium phosphate fertiliser produced from Ammaroo ore

Verdant Minerals Ltd (ASX:VRM) (FRA:3RU) has switched to commercialisation mode for its flagship Ammaroo Phosphate Project in the Northern Territory after completing a feasibility study earlier this year.

The company completed environmental approvals for the 100%-owned project last month and held its annual general meeting this morning to share its focused approach with shareholders.

READ: Verdant Minerals completes environmental permitting for Ammaroo Phosphate Project

Verdant chairman James Whiteside told investors the company was confident Amaroo and its surrounding regions could meet the world’s increasing demand for phosphate fertiliser.

Whiteside said, “We remain as confident as ever that Ammaroo and its near region has the potential to be one of the next really significant global phosphate provinces.

“I am delighted to be able to report that with the completion of the feasibility study into the company’s major asset, the Ammaroo Phosphate Project, and the environmental approvals process completed, that our efforts going forward can now be firmly focused on the commercialisation of the project.”

Verdant’s phosphate deposit is considered one of Australia’s largest phosphate resources with measured, indicated and inferred resources of 1.141 billion tonnes at 14% phosphate at a 10% cut-off grade.

At a 15% cut-off grade, the resource is 333 million tonnes at 18% phosphate.

A JORC resource statement for Ammaroo Phosphate Project in the Northern Territory

A JORC resource statement for Ammaroo Phosphate Project in the Northern Territory

Financing and partnering stage

The company is focused on the implementation and financing stage of the project, hoping to attract partners and bankers and move towards a final investment decision.

The company has created four “project building blocks” or stages it wants to go through as it seeks finance. These are:

  1. Completion of Ammaroo native title agreements and grant of mineral leases;

  2. Confirming and optimising the process flowsheet design;

  3. Advancing final regulatory licences i.e. its mine management plan; and

  4. Securing project financing arrangements with the Northern Australia Infrastructure Fund, commercial debt providers and/or export credit agencies.

Verdant’s chairman confirmed partnering and financing were a priority for the company in his AGM report to shareholders.

Whiteside wrote in the report shared with the market: “As stated previously, our focus has turned to confirming and optimising the process flow sheet and to commercialisation.

“(This involves) converting offtake MOUs into bankable offtake agreements, securing commercial debt and endeavouring to secure support and equity investment from one or more global industry players or sophisticated financial investors.”

Key financials from a feasibility study for Ammaroo Phosphate Project in the Northern Territory

Key financials from a feasibility study for Ammaroo Phosphate Project in the Northern Territory

The company’s May 2018 feasibility study valued the project’s net present value (NPV10) at a nominal, ungeared after-tax $344 million with a similarly ungeared after-tax project internal rate of return (IRR) of 18.1%.

Verdant’s after-tax nominal-geared equity net present value (NPV15) is $169 million, with a geared after-tax IRR of 24.9%.

Capital expenditure (capex), including stage I and II construction of $568 million, was predicted to give way in the base case to $8.625 billion of revenues.

Verdant Minerals continues to progress Australia’s largest phosphate resource

Whiteside acknowledged the capex costs and need for partnering to fund development, saying “a downstream project will have a capital bill in excess of $1 billion but a valuation substantially higher”.

Junior company Verdant’s market capitalisation was about $20 million earlier today.

Whiteside was pragmatic, saying “Verdant Minerals, in its current form could not complete such a project without partners of substance”.

The mine was modelled for a 10-year mine life in Verdant’s May 2018 feasibility study, with an extension to a 50-year mine life being one of the company’s ambitions.

Amaroo project is near infrastructure, Port of Darwin and South-East Asian markets

Amaroo project is near infrastructure, Port of Darwin and South-East Asian markets

A better time to partner

The chairman revealed delays in approvals meant the company was meeting with potential partners at a time of increased confidence in the industry.

Whiteside said, “Whilst the delays we have experienced in finalising the environmental approvals and native title agreement have been frustrating, it has meant that we now find ourselves seeking external industry partners at a time when the phosphate market is in a more buoyant mood.

“A number of global downstream manufacturers have expressed their growing interest in securing access either to rock from new geographies or being able to produce their own rock supply to either shore up supply or as a means of investing upstream in relatively stable and secure country.”

Phosphate in a fertiliser supply chain

Phosphate in a fertiliser input supply chain

Verdant’s chairman highlighted the attention the project was gaining, given its proximity to key inputs and Asian markets.

He said, “With the potential for readily available, competitively priced natural gas in the Northern Territory, other key inputs such as sulphur available in the South-East Asian region, the very real opportunity for the development of a downstream manufacturing operation supported by the Ammaroo phosphate resource is also attracting significant interest.”

IPhosphate rock prices over the past five years

Phosphate rock prices over the past five years

Whiteside acknowledged the risks of investment in a junior company and the commitment of its board and key people.

He told investors, “Shareholders will be aware that projects such as these are not without risk and that companies with no sales revenue have to raise capital to fund these ongoing works.

“Your board is acutely aware of the support and patience of all of its shareholders, and is very focused on endeavouring to deliver as much value as possible for existing shareholders.”

 

Pipeline projects

Verdant has a number of other projects in its portfolio, including sulphate of potash projects in central Australia.

These include the Karinga Lakes and Lake Amadeus potash projects in the Nothern Territory.

Karinga Lakes is a joint venture established with Consolidated Potash Corporation and Activated Water Technologies.

The partners are testing the performance of the aMES technology on brine and salt samples sourced from the Karinga Lakes project.

Verdant Minerals receives federal government environmental approval for Ammaroo Phosphate Project

Verdant is also exploring at Dingo Hole Silica Project in the Territory which covers about 117 hectares of silica outcrop 10 kilometres from Ammaroo project.

The project could deliver high-purity quartz to the market.

A number of other territory phosphate projects are in the works, including Burge Bore, Pantella and Brunchilly.

Verdant securities added 0.3 cents, or 20%, to rest at 1.8 cents just after noon.

 with Tharun George

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