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costs of establishing mop mines

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    Muriate of potash mines are hellishly expensive to set up. Evaporative sulphate of potash operations such as Rewards are low cost to set up ...

    MagIndustries' Kouilou mine to cost $723-million (U.S.)

    2008-02-28 17:52 MT - News Release

    Mr. William Burton reports


    MagIndustries Corp.'s MagMinerals Inc., an indirect wholly owned subsidiary of MagIndustries, has received the results of a final feasibility study (FS) for the development of the Kouilou potash mine near Pointe-Noire in the Democratic Republic of Congo (DRC). MagMinerals intends to build, own and operate a stand-alone, 600,000-tonne-per-year potash mine and plant, 16 kilometres east of Pointe-Noire, West Africa's best deepwater port.

    The FS was carried out in two phases. Phase 1, completed earlier by Genivar LLP, consisted of a preliminary investigation of the quality of the resources, development of the preliminary scope of the project, and the initiation of the environmental and social impact assessment (ESIA) study. The results of phase 1 were reported in Stockwatch on March 30, 2006. SNC-Lavalin International Inc. (SLII), a company contracted in July, 2006, has now completed phase 2 of the FS and has presented the results to MagMinerals as a 19-volume final feasibility.

    The capital cost of the project has been estimated at $723-million (U.S.), excluding financing costs, for a 600,000-tonne-per-year operation producing granular K60-grade potash. Direct and indirect operating costs, with contingency, are estimated to be $83 (U.S.) per tonne. BNP Paribas, financial adviser to MagMinerals, completed the financial analysis. Based on a net realized potash price of approximately $500 (U.S.) per tonne, the first phase of the project yields an internal rate of return (IRR) of 26 per cent and a net present value (NPV) of $450-million (U.S.) (assuming a 12-per-cent discount rate). The Government of Congo will retain a 10-per-cent free-carried interest in the Kouilou potash mine.

    BNP Paribas has approached a group of international lenders that has given a strong expression of interest to finance 70 per cent of the project costs (through debt) to bring the Kouilou potash project into production. MagMinerals intends to provide the required 30-per-cent equity and to close project financing by the third quarter of 2008, with construction to begin immediately thereafter. On the basis of the acceptance of the FS, MagMinerals has now been mandated to complete all required agreements and proceed with corporate and project financing.

    The FS is based on the application of proven solution mining technology to exploit the company's 100-per-cent-owned carnallite deposits which underlie the majority of the 2,265-square-kilometre Makola licence. Solution mining produces potash-rich brine which, under the proposed plan, will be treated in a crystallization plant to produce granular-grade potash fertilizers for export. The potash plant will use commercially available technologies. One of the primary inputs for this process is natural gas, which is available locally (currently flared from the area's significant oil production with no public or industrial consumers). This gas supply will also supply an on-site, 26-megawatt, gas-fired power plant, which will be sufficient to meet all mine and plant requirements.

    MagMinerals is also pleased to report the finalization of a National Instrument 43-101-compliant technical report (TR) entitled, "Reserve Estimate for MagMinerals Makola Permit Area, Kouilou Region, Republic of Congo," which identifies proven and probable reserves available to support the Kouilou potash mine. These reserves are located in the 25-square-kilometre Mengo area, which represents only a small portion of the 2,265-square-kilometre Makola permit area. The proven reserves amount to 17.9 million tonnes of potassium chloride while the probable reserves amount to 3.1 million tonnes of potassium chloride. At a production rate of 600,000 tonnes of potassium chloride, this indicates a mine life of about 34 years. In addition, the earlier technical report (filed on SEDAR and reported in Stockwatch on Nov. 20, 2007) showed inferred resources of 1.07 billion tonnes of carnallitite, representing 185.9 million tonnes of potassium chloride. Ercosplan notes that the proven and probable reserves are open in all directions and that additional drilling will likely increase the reserve base available for future plant expansions.

    The potash deposits occur in the form of carnallitite rock, which underlies most of the Makola permit area. For the whole Congolese coastal basin, geological resources (non-NI 43-101 compliant) have been estimated at 800 billion tonnes of carnallitite by the Congolese government. The company's Makola permit covers about 20 per cent of the Congo basin. The past-producing Holle potash mine area (1,300 square kilometres), which lies within the Makola permit but 20 kilometres northeast of the Mengo area, reported 30 billion tonnes of K2O (non-NI 43-101 compliant) as sylvite and carnallite. The details of the data available for these historical resource estimates are less than that required for inferred resources according to the Canadian Institute of Mining, Metallurgy and Petroleum (CIM).

    Carnallite is a mineral best described as a magnesium-potassium-chloride or a double salt with the chemical formula KMgCl36H2O. The carnallite occurs in multiple, horizontal horizons ranging in thickness from 0.5 metre to 24 metres with an average content of about 70 per cent carnallite. Four horizons, located between 400 metres and 800 metres below the surface, have been considered for commercial development.

    The report is based on the technical results of 13 drill holes, 23 kilometres of seismic surveys and downhole geophysical surveys completed during MagMinerals' recent exploration programs. Ercosplan Ingenieurgesellschaft Geotechnik und Bergbau mbH (Ercosplan), formerly the East German Potash Consortium, author of the report, has over 50 years of experience in the potash industry. Ercosplan was responsible for supervising the drilling and core sampling programs. The authors of the report, Dr. Henry Rauche and Dr. Sebastiaan van der Klaw, are the qualified persons with respect to the technical reporting and have reviewed and approved the contents of this press release.

    MagMinerals has chosen Ameropa AG to market all exports of potash from the Kouilou project. Ameropa, with its head office in Binningen, Switzerland, is privately owned and a leading global marketer of potash and other fertilizer products. Ameropa sells important quantities of potash in Brazil, Africa and Europe. Shipments of fertilizers and grains by Ameropa total 10 million tons annually, which is expected to lead to significant economies in ocean freight.

    The Kouilou plant is based on a modular design and it is the intention of MagMinerals to double the first-phase capacity as soon as possible to reach total production of 1.2 million tonnes per year to more fully use the extensive resource base available. The capital cost required to double the capacity of the plant is expected to be significantly lower than the first phase as it will benefit from the extensive infrastructure put in place by building phase 1. A copy of the full report may be obtained under MagIndustries' profile on SEDAR or on its website.
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