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Bayovar 12


Logging phosphate core at CROPS' Bayovar12 project

Updated Prefeasibility Study Results


Except where otherwise noted, all currency amounts are stated in Q1-2016 United States dollars. All production volumes are stated on a 100% basis and all mined tonnages are stated on a dry basis.

Highlights



Introduction


The 12,575 hectare Bayovar 12 phosphate project is located in the Sechura district of northern Peru, 70 km south of the city of Piura. CROPS is the majority owner of the Project through its 70% ownership of Juan Paolo Quay S.A.C.,(JPQ) - title holder of the Bayovar 12 mining concession.

In May, 2016 CROPS announced the results for its NI43-101 Updated Pre-Feasibility Study ("Updated PFS"). The Updated PFS was prepared by M3 Engineering & Technology Corp. ("M3") and Independent Mining Consultants Inc. ("IMC"), both based in Tucson, Arizona and is a change-in-scope study that replaces an earlier M3 Pre-Feasibility Study ("PFS") dated January 3, 2016. Key changes-in-scope include:
These changes-in-scope increased capital cost, decreased operating cost and in turn significantly improved the financial performance of the project.

With payback now reduced to 3.9 years and an after-tax NPV7.5 $458 million, the Updated PFS clearly demonstrates that large-scale open pit development at Bayovar 12 has the potential to deliver impressive cash margins over an initial 20 year mine life. It is CROPS' goal to become the long-term supplier of choice for the direct application fertilizer market.

Table 1 Life-of-Mine Highlights and Comparison with PFS

Item Updated PFS PFS Variance %
       
Financial Model      
After-Tax NPV7.5, $M 457.7 252.9 + 81.2
IRR, % 26.3 17.2 + 53.5
Payback, years 3.9 6.6 - 40.9
Capital Cost, $M 167.7 127.3 + 31.7
Sustaining Capital, $M 193.6 230.3 - 15.9
Undiscounted Cashflow, $M 1,150.9 846.9 + 35.9
Product Price Deck, $/t $145/$185 $145/$185 -
Open Pit Mine      
Life, years 20 20 -
Waste, Mt 422.5 367.6 + 14.6
Ore, Mt 58.8 52.3 + 12.4
Waste/Ore 7.2 7.1 -
Pre-Production Waste, Mt 23.9 12.4 + 92.7
Cash Cost Ore, $/t mined 13.92 19.51 - 24.7
Cash Cost Product, $/t 39.72 52.28 - 24.7
Process Plant      
Tonnage Processed, M 58.8 52.3 + 12.4
Tonnage Product, M 20.8 18.5 + 12.4
Tonnage Product Years 1-5, M 4.75 3.50 + 35.7
Cash Cost Product, $/t 8.01 10.49 - 23.8
Total Project      
Cash Cost Product, $/t 60.20 75.44 - 20.7
Cash Margin Product, $/t 104.80 89.56 + 17.5



Project Description


The Bayovar 12 project is a conventional truck-loader open pit mine and a process plant that is designed to produce 24% and 28% P2O5 direct application phosphate rock fertilizer (DAPR) "products". Phosphate ore will be mined at a rate of 8,000 tonnes per day from 13 overburden-covered and laterally-continuous sedimentary phosphate beds, interlayered with diatomite waste or "interburden". Overburden, interburden and phosphate ore are free-digging and do not require drilling or blasting. Ongoing back-filling of the open pit is an integral part of a mine plan that is designed for progressive closure. The average W/O ratio is 7.2/1.

The beneficiation process is simple and chemical-free using sea-water washing, scrubbing and de-sliming. Solid tailings and waste water will be stored in an adjacent tailings-evaporation pond ("TSF"). Fertilizer product will be trucked 40 km to a dedicated seaborne loading facility.


Figure 1 General Arrangement Drawing

The project is in an established phosphate mining district. At full capacity it will produce 1 million tonnes of fertilizer product per year over an initial mine life of 20 years and will supply a rapidly-growing market for natural and plant-ready DAPR products.


Mineral Resource And Reserve Estimates


A systematic and wide-spaced 62-hole, 5,971m diamond drilling program delineated a continuous 34 km2 near-surface diatomite sequence containing 13 flat-lying sedimentary phosphate beds. These beds are open to extension over the remaining 91 km2 of the concession.

In order to support the PFS Mineral Resource Estimate, IMC completed a review of the geology and resource block models. IMC then developed an independent Reserve Estimate through the construction of a 20-year open pit shell contained within the Mineral Resource model and based on DAPR prices of $145/t and $185/t for 24% and 28% P2O5 products, respectively. The reader is cautioned that Mineral Resources that are not mineral reserves have not demonstrated economic viability. In addition, the reader is reminded that the reported Mineral Resource is inclusive of the open pit-constrained Mineral Reserve.

Table 2 Bayovar 12 Mineral Resources and Reserves Estimates

Resources* Tonnes M % P2O5
Measured 17.7 13.16
Indicated 209.5 13.04
Inferred 102.2 13.11
Reserves Tonnes M % P2O5
Proven 14.4 12.74
Probable 44.4 13.00
Total Reserves 58.8 12.94
* Minimum thickness, grade cut-off and other mining parameters were not applied.


Mining Schedule


The Bayovar 12 phosphate deposit is ideally suited for large-scale open pit development. It consists of a 40m thick, laterally continuous and near-surface mineralized zone overlain by 30m of overburden. All volumes in the open pit are free-digging; drilling and blasting are not required.

The planned open pit shape is that of a progressively larger hand-fan and is divided into 13 mining phases. Each phase has multiple working faces in order to efficiently sequence overburden stripping, ore and interburden mining to ensure regular delivery of ore to the process plant. Haulage profiles and cycle times were optimized for each of the 13 mining phases. Waste volumes account for 89% of mine production tonnes. By continuously placing waste as backfill in mined-out phases of the open pit, haulage distances are minimized and the ex-open pit waste storage footprint is reduced. Excluding backfill, the open pit at its deepest point will be 76m below surface.


Figure 2 Isometric Open Pit Arrangement Year 7

The open pit will feed the process plant at a nominal rate of 8,000 tonnes per day or 2.7 million tonnes per year. An accelerated program of pre-production and Year 1 waste stripping, totaling 46.8 million tonnes, is designed to maintain a balanced Life-of-Mine ("LOM") W/O ratio at 7.2/1. Low specific gravity of the mined volumes allows for the use of over-sized loading and hauling equipment of the kind often used in coal mining. Overburden and thicker interburden beds will be mined with 31 m3 front-end loaders and loaded into 110 m3 capacity haul trucks. Individual phosphate beds and thin interburden layers will be mined with GPS-controlled continuous surface miners. Over the initial 20 year mine life the open pit will deliver 58.8 million tonnes of ore to the process plant and 424 million tonnes of waste, of which 111 million tonnes will be placed in surface storage, 308 million tonnes as in-pit backfill and 5 million tonnes as construction material for the TSF embankments.


Ore Processing


The process plant, operating at 85% of nominal capacity and without the use of chemical additives, will process on an annual basis 2.7 million tonnes of ore and produce 1 million tonnes of natural DAPR fertilizer products. The beneficiation process is simple and consists of drum washing with seawater and recycled process water, size classification, attrition scrubbing, hydraulic classification, filtering and rotary drying. By adjusting the cut point for fines in the tertiary classifying hydrosizer, the process plant is designed to produce, on a batch basis, either a 24% or a 28% P2O5 product. Phosphate recoveries are forecast at 81.5% and 66.4% for each product, respectively. Infrastructure required for the process plant includes a 16 km - 138 kV transmission line and a 45 km - 32" seawater supply pipeline.



Figure 3 Open Pit Annual Production Schedule


Figure 4 Ore Processing Flow Sheet - Annual Tonnages


Capital Cost Estimate


The Capital Cost to design, permit, pre-strip, construct and commission the open pit mine, process plant and ancillary facilities and utilities is estimated at $167.7 million. Some 90% of total equipment costs were derived from vendor quotes. Working capital of $40 million is estimated separately and carried in the financial analysis.

Table 3 Capital Cost Estimate

Area $M
Direct Costs  
Pre-stripping 41.2
Deposit Lease Mining Equipment 18.2
Tailings Storage Facility 10.3
General Site Costs 2.5
Process Plant 20.6
Seawater Supply Pipeline 18.1
138kV Transmission Line 5.2
Tailings Line 2.2
Ancillaries 12.2
Total Direct Costs 130.5
Indirect Costs  
Contractor Indirects 7.7
EPCM Services & Commissioning 4.6
Vendor Reps 0.7
Freight / Duties 4.6
Spare Parts and Initial Fills 1.5
Owner’s Costs 2.5
Total Direct Costs 21.6
Subtotal 152.1
Contingency 20% 15.6
Total Project $167.7M
Contingency was not applied to Pre-stripping, Primary Mine Equipment, Tailings Storage Facility, Spare Parts and Owner's Costs


Operating Cost Estimate


LOM operating costs have been developed for mining, processing, G&A and transportation in First Quarter 2016 dollars. At a W/O ratio of 7.2/1 the LOM cost to mine 1 tonne of ore is $13.92 per tonne. Improved cash mining costs and product costs are the direct result of a larger capital investment in the project and increased productivity. These in-turn provide the opportunity for consistently strong cash operating margins over the initial 20 year mine life.

Table 4 Average LOM Cash Mining Cost per Tonne of Ore Mined

Area Tonnes $ / tonne $ / ore tonne
Ore 1.0 2.20 2.20
Overburden 3.17 1.92 6.09
Interburden 3.61 1.56 5.63
Total Cash Cost Ore     $13.92/t


Table 5 Average LOM Cash Operating Cost per Tonne of Product

Area $ / tonne product
Mining 39.72
Processing 8.01
G&A 2.38
Total Cash Cost Product $60.20



Financial Analysis


After-Tax Undiscounted Annual and Cumulative Cash Flows, based on operational plans presented in the PFS Update, are summarized in Figure 5. Working Capital of $40 million, interest payments, royalties and closure and reclamation costs have been included in the financial analysis. Key After-Tax metrics include a NPV7.5 $457.7 million, IRR 26.3% and Payback 3.9 years.


Figure 5 Undiscounted After-Tax Annual and Cumulative Cash Flows


Sensitivity


Sensitivity analyses - as measured against a systematic range of 50/50 product pricing scenarios - are presented graphically as financial outcomes in terms of forecast After-Tax Undiscounted Cash Flow, NPV7.5% and Payback Period.


Figure 6 Project Sensitivity to Average Product Price


Project Execution Plan


The forecast Project Schedule to complete a Bankable Feasibility Study, engineer, permit, pre-strip, construct and commission an open pit mine and process plant at Bayovar 12 is presented in Figure 7.


Figure 7 Forecast Project Execution Schedule


Updated PFS Qualified Persons


The scientific and technical information in the above PFS summary was prepared under the supervision of David Cass, CROPS' former president, who is a member of the Association of Professional Engineers and Geoscientists of British Columbia, and a Qualified Person in accordance with National Instrument 43-101. The Bayovar 12 resource estimation was prepared by Golder Associates under the supervision of Jerry DeWolfe, MSc, PGeo, an independent Qualified Person. The reserve estimation was prepared by Herb Welhener, Vice President of Independent Mining Consultants Inc., Both are independent Qualified Persons under National Instrument 43 101.
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