Arianne Phosphate (DAN.V) has announced the results of the feasibility study on its fully-owned Lac à Paul Phosphate project in Québec, Canada. This is the first time the additional resources are incorporated in the mine plan and the mine life has increased from 17 years to almost 26 years.
The updated price tag for the project is $1.214B, but this includes an investment of almost $250M in the transport system for the concentrate. The payback period will be less than five years, assuming an average production rate of 3Mtpa of phosphate concentrate at an average grade of 38.6% P2O5 at a cash cost of less than $95/t FOB. As the current price of high-quality phosphate rock is higher than $200/t, this project has a very healthy operating margin.
The feasibility study was in line with our expectations and with the technical report in hand, Arianne’s next step will be to secure the nod from the First Nations and to find financing. As the USA and Canada are net importers of phosphate, we can imagine large fertilizer producers such as Mosaic (NYSE:MOS) or Agrium (AGU.TO, NYSE:AGU) might be very interested in a source of premium quality phosphate in Canada and could be willing to provide financing for the project in return for a (minority) stake in Lac à Paul.
Disclosure: The author holds a long position in Arianne Phosphate but might take sell some as the company is trading near a 24 month high. Please see our disclaimer for current positions.