Initial Capex of US$ 654.1 million and initial Opex of US$ 263.23 per
tonne for 0.6 million tonnes per year
TORONTO, Jan. 31, 2012 /CNW/ - Verde Potash Plc (TSX-V: NPK) ("Verde" or the "Company") is pleased to announce the
results of a Preliminary Economic Assessment ("PEA") for the production
of conventional potash: potassium chloride ("KCl"). The PEA was
prepared by SRK Consulting ("SRK") on Verde's wholly-owned Cerrado
Verde project ("Cerrado Verde" or the "Project") located in Minas
Gerais State, Brazil.
The PEA evaluated the technical and financial aspects of two different
scenarios. The first scenario has an initial production of 0.6 million
tonnes per year ("mtpy") increasing to 3 mtpy of KCl, with production
growth financed largely from anticipated internal cash flow. The second
scenario has an initial production of 1 mtpy increasing to 4 mtpy, with
production growth also financed largely from anticipated internal cash
flow. Each scenario was scheduled into three phases, assuming
significant cash accumulation and anticipated construction times. This
announcement presents the results for the 3 mtpy scenario while results
for the 4 mtpy scenario are expected to be available in the coming
"We believe that the estimated operating expenses ("Opex") presented in
the PEA are competitive with the world's lowest cost potash producers
for buyers in Brazil when importation and distribution costs are
included. According to the PEA, estimated capital expenditures
("Capex") and expected time to production are lower and shorter than
most KCl greenfield projects and many brownfield expansions in the
pipeline. The proprietary production process we have developed relies
entirely on existing proven commercial processes applied successfully
to our potash rock, which we believe provides greater certainty in the
capital costs and equipment efficiencies," said Cristiano Veloso,
President & CEO.
Key Economic Highlights:
Capex for the initial 0.6 mtpy phase is estimated at US$ 654.1 million.
Capex for the 3 mtpy phase is estimated at US$ 2,369.3 million
(including Capex for the initial 0.6 mtpy plant).
Life of Mine sustaining capital is US$ 738.4 million.
Opex for the initial 5 years of operation is estimated to be US$ 273.70
per tonne KCl, starting at US$ 263.23 per tonne in 2015. The weighted
average OPEX for 3 mtpy operation is US$ 291.74 per tonne KCl.
Estimated after tax Internal Rate of Return ("IRR") of approximately
Estimated after tax Net Present Value ("NPV"), using a 10% discount
rate, of US$ 2,258.7 million for the 3 mtpy operation.
The PEA is based on the following assumptions:
Phase 1 production of 0.6 mtpy of KCl, start up 2015
Phase 2 production of 1.6 mtpy of KCl, to be achieved in 2019
Phase 3 production of 3.0 mtpy of KCl, to be achieved in 2024
A total 30 years planned production life
US Dollar-Brazilian Real exchange rate of $1USD=$1.8 BRL
A 25% Contingency applied to the Capex
The PEA assumes an average granular KCl price of US$ 539.97 per tonne
free on board ("FOB") Vancouver, Canada, based on market research done
by CRU International (2012). The net sales price per tonne realized by
Verde has been adjusted for the final costs of delivered product in the
Brazilian Cerrado, approximately US$ 120 to US$ 180 per tonne.
In 2008, the Company initiated KCl production studies and has since then
undertaken over 300 tests in order to develop a simple production flow
sheet relying on proven production technology. To such end, the Company
established a partnership with Professor Dr. Derek Fray, at the
University of Cambridge, and under the leadership of Verde's in house
engineers and its now COO, Pedro Ladeira, assembled an Engineering
Consortium focused on process scaling and economic optimization of the
Project, details of which were disclosed in a news release on November
"The PEA was focused on developing a construction and production
schedule that Verde could finance and execute as a development company
gearing towards production. As a consequence, while the PEA does not
maximize its NPV or IRR, it takes full advantage of the project's
scalability to minimize dilution and shorten timeline to cash flow,"
said Cristiano Veloso, President & CEO.
Verde will advance a definitive feasibility study for KCl production
which is expected to be completed by the end of the year.
ThermoPotash Feasibility Study
In view of the results of the PEA for KCl, Verde intends to focus its
efforts on a KCl product and has therefore decided to temporarily
suspend its ongoing feasibility study work on ThermoPotash. Verde
currently expects that it would resume the feasibility study on
ThermoPotash once it completed the proposed Phase 1 of KCl production,
anticipated to be in 2015. ThermoPotash registration with the Ministry
of Agriculture will continue and is expected to be achieved in the
A copy of the PEA will be filed on SEDAR at www.sedar.com within a maximum of 45 days of this news release.
The scenarios presented in the PEA are preliminary in nature and make
use of Inferred Mineral Resources that are considered too speculative
geologically to have economic considerations applied to them that would
enable them to be categorized as Mineral Reserves. Mineral Resources
which are not mineral reserves do not have demonstrated economic
viability. There is no certainty that the preliminary economic
assessment will be realized.
All scientific and technical disclosures in this press release have been
prepared under the supervision of Neal Rigby and Robert Bowell of SRK
Consulting who are Qualified Persons within the meaning of National
About SRK Consulting
SRK Consulting ("SRK") is an independent, global consulting practice
that provides focused advice and solutions to clients, mainly from
earth and water resource industries. For mining projects, SRK offers
services from exploration through feasibility, mine planning, and
production to mine closure. Formed in 1974, SRK now employs more than
1,000 professionals internationally in 38 permanent staffed offices on
Verde has issued a total of 45,000 stock options exercisable at $8.56
per share, expiring January 31, 2016 to consultants and staff.
About Verde Potash
Verde is a fertilizer exploration and development company; it was
founded and is led by Brazilians. Verde is developing the Cerrado Verde
project in Brazil, a source of potash-rich rock from which the Company
plans to produce a potash fertilizer product. Founded as Amazon Mining
Holding Plc in 2005, the Company changed its name to Verde Potash Plc
in April 2011 to better reflect its core business.
About the Cerrado Verde Potash Project
Cerrado Verde is a unique project: 1) its high grade potash rock
outcrops and is amenable to strip mining, allowing fast construction of
a scalable operation; 2) it is located in the midst of the world's
third largest and fastest growing fertilizer market; 3) it connects to
Brazil's largest fertilizer distribution districts via existing and
high quality infrastructure.
On behalf of the Board of Directors of Verde Potash, Cristiano Veloso, President and CEO.
Cautionary Language and Forward Looking Statements
NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS
THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE)
ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.
THIS NEWS RELEASE CONTAINS CERTAIN "FORWARD LOOKING STATEMENTS", WHICH
INCLUDE BUT ARE NOT LIMITED TO, STATEMENTS WITH RESPECT TO THE RESULTS
OF THE PEA FOR THE PRODUCTION OF CONVENTIONAL POTASH, ANTICIPATED
PRODUCTION LEVELS AND TIMING OF COMMENCEMENT OF PRODUCTION, LONG TERM
KCl PRICES, PRODUCTION LIFE, COSTS AND COMPLETION OF A FEASIBILITY
STUDY FOR KCl.
FORWARD LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS,
UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS TO
BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS EXPRESSED OR IMPLIED BY
SAID STATEMENTS. SUCH FACTORS INCLUDE A MATERIAL CHANGE IN BRAZIL'S K2O CONSUMPTION, GOVERNMENT REGULATIONS OF MINING OPERATIONS,
ENVIRONMENTAL RISKS, RECLAMATION EXPENSES, TITLE DISPUTES OR CLAIMS,
LIMITATIONS OF INSURANCE COVERAGE, FLUCTUATION LAB AND CONSULTANT
AVAILABILITY, MATERIAL CHANGE IN COMPANY FINANCES AND OTHER FACTORS
DISCLOSED UNDER THE HEADING "RISK FACTORS" IN THE COMPANY'S CURRENT
ANNUAL INFORMATION FORM AVAILABLE ON SEDAR AT WWW.SEDAR.COM. THERE CAN BE NO ASSURANCES THAT FORWARD-LOOKING STATEMENTS WILL PROVE
TO BE ACCURATE, AS ACTUAL RESULTS AND FUTURE EVENTS COULD DIFFER
MATERIALLY FROM THOSE ANTICIPATED IN SAID STATEMENTS. ACCORDINGLY,
READERS SHOULD NOT PLACE UNDUE RELIANCE ON FORWARD-LOOKING STATEMENTS.
THE COMPANY DOES NOT INTEND TO UPDATE FORWARD LOOKING STATEMENTS UNLESS
REQUIRED BY LAW.
SOURCE Verde Potash Plc
For further information:
Cristiano Veloso, President & Chief Executive Officer
Tel: (416) 866-2966; Fax: (416) 866-8829; Email: email@example.com