Chatham Rock Phosphate Ltd. has provided another of its regular quarterly updates and also reiterated the intended road map going forward.
In this issue the company covers:
Fundraising;
Road map;
Forward milestones;
Positive external developments.
- Fundraising;
- Road map;
- Forward milestones;
- Positive external developments.
Chatham has adopted twin paths toward accessing the financing required to become fully permitted.
The first objective is to continue to raise working capital, effectively the company’s lifeblood, until it becomes an operating company. This has been and will continue to be sourced through a series of international private placements, with most of the recent funds being raised from existing, New Zealand-domiciled shareholders.
The company is also working with investor relations groups in Canada endeavouring to increase its investor base in that country. Surprisingly very few shares are held by Canadian investors, notwithstanding the company’s primary listing being the TSX Venture Exchange. As a result the company’s shares are rarely traded in Canada, particularly as most of its shareholders (both there and elsewhere around the world) are in for the longer haul. The company’s goal is to raise further funds in Canada with the expectation that there will then be more active trading in its stock.
The second objective is to source the substantial funds (about $6-million) required to reapply for the marine consent (environmental permit). The company already holds a granted mining permit but needs (under New Zealand law) a separate permit in order to give effect to it.
The company’s target investors for the more substantial financing include a number of global companies in relevant sectors (shipping, dredging, fertilizer, marine mining and farming) as well as ultrahigh-net-worth investors and green/ethical investment funds. The company will continue to pursue numerous leads to these targeted investors with the confidence that past financing success will repeat.
The road map
The company’s key objective is to be granted the environmental permit on the second attempt.
It is very confident that the outcome of a second application will be successful as a lot has changed since February, 2015:
The company now has more experienced advisers to prepare and submit the application.
The Environmental Protection Authority has refined and improved its operating procedures.
There have been a number of helpful changes in the relevant act as well as supportive legal precedents.
- The company now has more experienced advisers to prepare and submit the application.
- The Environmental Protection Authority has refined and improved its operating procedures.
- There have been a number of helpful changes in the relevant act as well as supportive legal precedents.
Further, evolving farming-related environmental standards, more rigorous health and safety standards, and phosphate ethical supply issues tilt the playing field in the company’s favour.
With so many positive changes, the logic of reapplying is compelling.
The steps in the road map are:
Source $6-million;
Prepare a new consent application and all its related independent scientific reports, including some environmental data yet to be collected at sea. This is expected to take 15 months;
Submit the application and undertake the hearing process with the board of inquiry, which, by law, can take no longer that nine months;On being granted the consent, immediately negotiate a dredging contract with a services provider;
The dredging services provider is expected to take up to two years to modify and commission a special-purpose dredging ship.
- Source $6-million;
- Prepare a new consent application and all its related independent scientific reports, including some environmental data yet to be collected at sea. This is expected to take 15 months;
- Submit the application and undertake the hearing process with the board of inquiry, which, by law, can take no longer that nine months;
- On being granted the consent, immediately negotiate a dredging contract with a services provider;
- The dredging services provider is expected to take up to two years to modify and commission a special-purpose dredging ship.
In summary, the company expects to go into production four years from the time financing is secured.
Various milestones and trends along the way should focus more attention on the project during that period.
Forward milestones
These include:
The elimination of financing risk — The company’s present market value is being adversely affected by two perceived risks. These are financing risk and permitting risk. Once the company is financed one of those risks goes away.
As the company moves through the permitting process, Chatham will consult extensively with all potentially affected stakeholders, and, as a result, its profile will enjoy more notoriety in New Zealand. In the past, similar circumstances have led to increased investor interest and an increase in the company’s market capitalization to over $45-million. The company’s current market cap is $3.1-million.
In the very near term, a judgment relating to the environmental permitting of another New Zealand-based marine mining project will be released. Whatever the outcome of that judgment, Chatham will be better informed in shaping its own consent application. That judgment will not be a showstopper for the company; indeed, it will clear the air.
There are other marine phosphate mining applications currently stalled, two in Namibia and one offshore Mexico. Some of the company’s overseas shareholders also hold shares (indirectly) in the Mexican project. When one or more of these projects are permitted the company should enjoy collateral benefits.
Chatham is commissioning a New Zealand university to undertake preliminary research on the rare earths contained both within the phosphate nodules and in the seafloor muds. The results of this work should be available during 2020. To the extent they are recoverable, these rare earths could offer substantial byproduct revenues.
Other continuing trends likely to be very helpful for Chatham, particularly in a country governed by a Labour/Green/NZ First coalition, include increasing concerns about water quality, farm runoff and carbon emissions. The company’s phosphate ranks as extremely environmentally friendly in all these aspects of national concern.
More rigorous international food and safety standards relating to cadmium in rock phosphate are affecting international trading of rock phosphate very significantly. Chatham has been advised of its ultralow cadmium levels on a number of occasions.
At present, the largest percentage of rock phosphate imported by New Zealand comes from a territory which has a disputed ownership. This dispute has led to two shipments being impounded (one permanently). The issues are complex, but it is clear that both security of supply and the ethics of this trade are in some doubt. It is possible this source of supply may cease, as has been the case in respect of a number of phosphate buyers globally.The grant of the marine consent — Upon the grant Chatham will be a fully permitted guardian of a multibillion-dollar source of low-cadmium, reactive phosphate rock, relatively close to the key Asian markets. Given the strategic nature of the resource and the nil development costs required, the intrinsic value of the company will be significantly higher than at present.
- The elimination of financing risk — The company’s present market value is being adversely affected by two perceived risks. These are financing risk and permitting risk. Once the company is financed one of those risks goes away.
- As the company moves through the permitting process, Chatham will consult extensively with all potentially affected stakeholders, and, as a result, its profile will enjoy more notoriety in New Zealand. In the past, similar circumstances have led to increased investor interest and an increase in the company’s market capitalization to over $45-million. The company’s current market cap is $3.1-million.
- In the very near term, a judgment relating to the environmental permitting of another New Zealand-based marine mining project will be released. Whatever the outcome of that judgment, Chatham will be better informed in shaping its own consent application. That judgment will not be a showstopper for the company; indeed, it will clear the air.
- There are other marine phosphate mining applications currently stalled, two in Namibia and one offshore Mexico. Some of the company’s overseas shareholders also hold shares (indirectly) in the Mexican project. When one or more of these projects are permitted the company should enjoy collateral benefits.
- Chatham is commissioning a New Zealand university to undertake preliminary research on the rare earths contained both within the phosphate nodules and in the seafloor muds. The results of this work should be available during 2020. To the extent they are recoverable, these rare earths could offer substantial byproduct revenues.
- Other continuing trends likely to be very helpful for Chatham, particularly in a country governed by a Labour/Green/NZ First coalition, include increasing concerns about water quality, farm runoff and carbon emissions. The company’s phosphate ranks as extremely environmentally friendly in all these aspects of national concern.
- More rigorous international food and safety standards relating to cadmium in rock phosphate are affecting international trading of rock phosphate very significantly. Chatham has been advised of its ultralow cadmium levels on a number of occasions.
- At present, the largest percentage of rock phosphate imported by New Zealand comes from a territory which has a disputed ownership. This dispute has led to two shipments being impounded (one permanently). The issues are complex, but it is clear that both security of supply and the ethics of this trade are in some doubt. It is possible this source of supply may cease, as has been the case in respect of a number of phosphate buyers globally.
- The grant of the marine consent — Upon the grant Chatham will be a fully permitted guardian of a multibillion-dollar source of low-cadmium, reactive phosphate rock, relatively close to the key Asian markets. Given the strategic nature of the resource and the nil development costs required, the intrinsic value of the company will be significantly higher than at present.
Positive external developments
Chatham is benefiting from evolving social standards and views concerning a range of environment and health issues already referred to above. It is clear the greater likelihood of the company gaining a social licence to operate (that is, community approval) will improve its chances of being granted the marine consent.
And while the company waits to reapply, Crown Research Institute NIWA is undertaking research on the Chatham Rise (not far from the company’s mining permit area). The baseline information being gathered should be of immense benefit to those that operate in the area, including both Chatham and the fishing industry.
About Chatham Rock Phosphate Ltd.
Chatham Rock Phosphate is the custodian of New Zealand’s only material resource of ultralow-cadmium, environmentally friendly pastoral phosphate fertilizer.
