Arianne Phosphate (CVE:DAN)(OTCBB:DRRSF) jumped over 10% in morning deals Friday after announcing last night the results of its feasibility study for its Lac à Paul phosphate rock project in Quebec, which showed a net present value of US$1.9 billion at an 8% discount rate.
The internal rate of return for the project was pegged at 20.7%, with a capital payback period of 4.4 years, before taxes and mining duties. Total operating cash flow from the project, which a mine of nearly 26 years, is seen at close to US$7.4 billion with gross revenue of US$16.1 billion.
The mine is expected to produce an average of 3 million tonnes per year of phosphate concentrate, with a grade of 38.6% and at an average mill recovery rate of 90%.
The mining plan outlines an open pit mine, along with a concentrator that produces an apatite product, to be delivered to a year-round deep water port on the Saguenay River.
The initial capital costs are estimated at US$1.2 billion, split between almost $1 billion for the mine, and approximately $230 million for the transport system. All-in costs should be about US$93.7 per tonne, for the life of the mine, yielding an operating margin of 56% with an average selling price of $213 per tonne at the port.
"We are extremely pleased with the results of the Feasibility Study (FS), showing Lac a Paul to truly be a world class asset," said CEO Brian Kenny in the statement announcing the results, released to market late Thursday. He added that it is important to note that the feasibility study considered only the Paul zone at the mine, as opposed to combining both the Paul and Manouane zones in the pre-feasibility study.
"As a result of subsequent drilling through 2011 and 2012, the mine life from just the Paul Zone alone stands at 25.75 years for the FS," he said, which compares to the mine life in the prefeasibility study from two zones of 17 years. This means the Manouane resource could potentially provide an additional 8 years of mine life, based on the pre-feasibility study conducted in 2012.
The chief executive said that today's announcement is a significant step forward in the development of its Lac-a-Paul project, the world's largest greenfield phosphate rock project, which has 75.7 million tonnes of saleable concentrate, grading 38.6% in proven and probable mineral reserves.
The study for the mine, which also has confirmed power from the Chute des Passes power plant just 30km away from the site, was prepared by Cegertec WorleyParsons.
Arianne said Friday that it has also been busy with permitting discussions at the project, filing its environmental impact statement in June. "Over the coming months, we plan to stay in close contact with the population, regional government agencies and other stakeholders, and continue to work closely with them to develop the project and maximise the economic benefits for the region," added COO Jean-Sebastien David in the release.
Shares of the Quebec-based mineral exploration company surged over 10% on Friday, to trade at $1.38 as of 10:22am ET. So far this year, the stock has climbed almost 23%.