AIM-listed phosphate mine development company Kropz may be looking to bring its Western Cape-based Elandsfontein operation into production early in 2020.
However, its focus beyond this is significantly larger. On the back of two new recently acquired phosphate assets, including an advanced stage project in the Republic of Congo, the company is targeting the production of 3 Mtpa of phosphate rock within the next five years, writes LAURA CORNISH.
Operational and environmental challenges at Elandsfontein, a project completed in 2017, have undoubtedly prevented Kropz from delivering on its earlier production aspirations.
Its unfortunate history is now – to a large extent – ‘water under the bridge’.
Having successfully listed on the AIM market in November 2018 where it raised US$35 million, the company has secured the necessary cash to complete essential process plant upgrades at Elandsfontein, in order to bring the operation into production early in 2020 and delivering a steady-state +850 000 tpa (and potentially closer to 1 Mtpa) production of phosphate rock towards the middle of the year.
“While this may be a primary focus and objective, we have spent recent months growing our potential production pipeline with the intention of becoming an integrated mine-to-market plant nutrient company focused on sub-Saharan African,” says Kropz CEO Ian Harebottle.
Hinda – Republic of Congo
On 1 November 2018, Kropz made an all share offer to acquire Cominco Resources, which through its wholly owned subsidiary, Cominco S.A., enabled the acquisition of its 100% owned Hinda phosphate project.
This is expected to be diluted to 90% through the participation of the Republic of Congo (RoC).
A sedimentary phosphate deposit covering more than 260 km² of the RoC’s coastal basin, Hinda has a JORC-compliant mineral resource base of 675 Mt at a grade of 10%, with 86% in the measured and indicated categories. It also has 404.9 Mt in reserves.
“It is believed to be one of the largest, undeveloped phosphate reserves in the world,” Harebottle highlights.
The acquisition of Hinda was a smart move because extensive work on the project has already been completed providing a sound understanding of the project’s potential.
In 2015, Australia-based engineering firm Ausenco completed a definitive feasibility study (DFS) on a 4 Mtpa project that delivered strong economics but also necessitated considerable capital requirements.
With the assistance of consultants SRK (UK), Kropz intends to revise the feasibility study and will initially target a 1 – 1.2 Mtpa operation to reduce capex requirements from the original $600 million to around $100 million.
“Our intention is to initiate the new feasibility study in 2020, and commence with site works soon after. This should enable us to bring Hinda online in 2022, which in combination with Elandsfontein will elevate our phosphate production to around 2 Mtpa,” Harebottle confirms.
At significantly smaller volumes than originally intended, the project’s lifespan will likely triple as well, which is always a good thing in terms of ensuring longer term job security and positive forex inflow into the company’s operating jurisdictions. Ausenco projected a 24-year lifespan producing 4 Mtpa.
“We are now looking at more than 60 years of operating life.”
In addition to its size, Hinda offers greater geological upside – it will be mined using open cast methods with a 1:1 stripping ratio. Phosphate mineralisation is hosted by a 300 m to 800 m wide corridor, within a fault-bounded graben.
Within this corridor there are two main phosphate bearing sedimentary layers, forming a contiguous series up to 65 m in width.
Importantly, the project has a 25-year renewable mining licence and all other regulatory requirements including an environmental and social impact assessment (ESIA) are in place.
It also has a mining investment agreement secured – one that offers Kropz considerable investment security and support.
Naturally, infrastructure requirements are a key consideration in ensuring Hinda’s overall viability. It has direct access to the Pointe-Noire port via a 37 km sealed road.
This is the largest deep-water port on the African West coast and strategically positions Hinda to supply the critical markets of Brazil, India, Indonesia and the whole of North America. There is also lost-cost grid power and fresh water available near site.
Elandsfontein back on track by 2020
With $120 million already spent on the development of the 74% owned Elandsfontein project (South Africa’s second largest phosphate deposit), it remains on track to become Kropz’s flagship asset in the short-term.
The fully-permitted project comprises a >1 Mtpa processing facility, open cast mine ready for operation and all supporting infrastructure already in place.
With conditional off-take agreements in place, the plant requires an additional $16 million in upgrade work to improve its longer-term performance.
Michelle Lawrence, technical director at Kropz, reveals that the processing challenges associated with the operation that prevented it from operating shortly after it was commissioned in Q1, 2017 is now understood and the necessary modifications will be implemented over the course of the year to move Elandsfontein back into operation.
“Modifications include improving the plant’s water circuit to incorporate an additional thickener, improved conditioning as a result of circuit re-design and the inclusion of attrition scrubbers in the circuit upgrade,” she outlines.
Once complete, the plant will upgrade the phosphate rock to a >31% P2O5 (phosphorous pentoxide) product of which circa 300 000 tpa of material will be sold to South Africa’s Foskor.
The company is also hoping to include additional sales contracts with other industry stakeholders including Keytrade, a Swiss fertiliser and fertiliser materials trader, and Dubai’s Kalyaan Resources.
“We are confident of concluding these agreements by the end of 2019 and in so doing will have 100% of our production accounted for,” Harebottle confirms.
The other matter affecting Elandsfontein is the issue of water as some residents in the Western Cape region and nearby to the operation believe the mine could pollute their water resource and further negatively impact the environment. Contention over Elandsfontein’s water use licence also contributed to the earlier suspension.
For now, the water issue is tied up in an appeal hearing at the Water Tribunal, but Kropz has departmental approval to continue pumping and re-charging the underground aquifer. The aquifer covers an extensive area on the West Coast, including the Elandsfontein mine.
Kropz is confident of its position as it is working with 13 government departments and organisations as part of a water monitoring committee to ensure that it does not impact negatively on the environment at all.
“With two strong projects in our near-term development pipeline, we will leverage current lows in the phosphate market and position ourselves to become one of the top 12 independent phosphate-producing companies globally.
Phosphate is essential to food production, the market is emerging from a low of more than 10 years and growth will flow from world population expansion, increased food demand and reduced arable land,” Harebottle concludes.