Morocco’s shift in Phosphate Strategy opens Opportunity for D’Arianne Resources
D’Arianne Resources Management (‘Arianne’, TSX.V: DAN) is one of the few phosphate mining companies operating in Canada, or North America for that matter. Arianne is developing the Lac-a-Paul phosphorous titanium property, aiming to produce high grade apatite concentrate at 39% P2O5. This level of concentration is very high and higher than Moroccan phosphate which is about 30%. Apatite is a source of phosphate and has many uses, including as a gemstone, but it is mainly processed to produce fertilizer as it is rich in phosphorus. In North America, apatite derived fertilizers are used to promote the growth of a wide variety of crops are used to supplement the nutrition of many agricultural crops by providing a valuable source of phosphate.
Apart from the high mineralization grades at the Lac-a-Paul property, Arianne could earn a significant space within the context of the North American phosphate market. While potash is abundant, North America needs to import most of the phosphate it needs. Agrium’s phosphate mine in Kapuskasing, Saskatchewan is scheduled to close while production in Florida, one of the few known phosphate sources in North America, is limited by environmental concerns. Most of the world’s phosphate is produced in North Africa (Morocco, Tunisia) and the Middle East (Jordan, Syria). Such is demand for phosphate that there are projects to develop underwater phosphate deposits off the coasts of Namibia and New Zealand. Morocco, as the world’s largest producer of phosphate, has a dominating position on the industry; therefore, its response to world demand offers valuable insights into current market conditions for this commodity.
Morocco is planning to boost production, also in response to much lower supplies from Tunisia due a longstanding labor problem. Yet, high-grade phosphate ore sources are declining, a problem that producers have so far confronted by beneficiating (washing, flotation or calcining) lower grade ores. Morocco is increasingly moving toward higher end processed phosphate fertilizer products (monoammonium phosphate-MAP and diammonium phosphate – DAP) through massive investments in beneficiation, which will use up much more of its rock phosphate. This suggests that Morocco will cut back exports of phosphate rock, notably to North America where companies like Mosaic uses it to produce its own line of DAP. Mosaic (NYSE: MOS), for instance imports lower grades of rock phosphate from Morocco for this purpose.
Morocco’s shift of phosphate focus should be idea for Arianne, leaving it a great opportunity to compensate for the projected shortfall. Populations in developing economies such as China and India are also demanding more varied and richer diets, requiring increased food production and, consequently, more fertilizer. India is the world’s largest phosphate importer while China has indigenous resources, deemed strategic by the government and therefore not – officially – exported. Arianne is therefore a very interesting prospect as it offers a high grade product without some of the risks and costs – transportation – linked to phosphate sourced in its areas where it is more typically mined.
Last summer, Arianne started working on a Bankable Feasibility Study (BFS) and its completion is a top priority this year as is divestment. Arianne expanded the drilling zone, increasing the drill holes from 48 (November 2011) to 123 in late 2012. The results of the new definition drilling will be available in the first months of this year and which will be used for the BFS. Arianne said it would divest all non-phosphate properties (including Heva, La Dauversière, Black Dog, Chico, Dulain, and Terres Rares) during 2013. The Company expects to complete the divestment process in order to become “a leading Canadian Phosphate producer” as it moves from exploration to actual mine development. Arianne Resource’s flagship 25,000 hectares project at Lac a Paul is located about 200 km. north from Saguenay. The property has convenient access along the Chute-des-Passes logging road also used by Rio Tinto and Alcan. The government of Quebec will help the project, providing assistance for additional infrastructure, including a railway that will enable the Company to transport phosphate concentrate directly from the mine to the port of Saguenay to facilitate international export.
Arianne’s field data has validated the projections, which indicates that Lac-a-Paul has even greater production capacity than expected as a result of drilling in the Lise, Nicole, La Traverse and Lucie zones. Before, the new exploration program, measured and indicated resources at the property amounted to a combined 347.7 million tons at an average 6.50% P2O5 and 8.43% TiO2 and 114.3 million tons of 5.46% P2O5 and 6.19% TiO2 inferred resources. The new findings at similar grades suggest, according to Arianne, a potential for 750 million tons.