Arianne resources inc.: Lac-a-Paul phosphate project prefeasibility study confirms viability of long-life phosphate rock mine

Ressources d’Arianne Inc. (the “Company” or “Arianne”) is pleased to announce the initial findings of the Lac-à-Paul phosphate prefeasibility study (the “Study”) conducted by Met-Chem Canada Inc. The Study, in compliance with NI 43-101, considers the principal economic factors of building and operating the Lac-à-Paul phosphate rock mining project (the “Project”) and selling apatite concentrate for production of phosphoric acid and fertilizer products. The Project is located in the Saguenay–Lac-Saint-Jean region of Quebec with easy access to rail and the deep water Port of Saguenay. The Study, which will be posted on SEDAR and the Arianne Website within the next 45 days, yielded encouraging results as summarized below.

Highlights of the Prefeasibility Study ($US):

  • Measured & Indicated resources quadruple to 348 million tonnes of 6.50% P2O5
  • Additional Inferred resources of 114 million tonnes at 5.46% P2O5 are not included in the Study
  • Combined Paul and Manouane proven and probable Mineral Reserves now total 307 Mt at an average grade of 6.59% P2O5 at an average stripping ratio of 0.83 (Cut-off grade of 2.43% P2O5)
  • Annual production to average 2 million tonnes of 38% P2O5 apatite concentrate
  • 25 year mine life at 33,000 tonnes/day with average mill recovery of 89%
  • Average price of $175/tonne (comparable to 85 BPL FOB Russia which is currently sold at $223/tonne)
  • Cash operating cost $98/tonne concentrate (FOB rail Dolbeau-Mistassini))
  • Total Direct CAPEX Cost: $454 M
  • Indirect CAPEX Cost: $121 M and Contingency: $74 M
  • Total Initial CAPEX: $649 M
  • Pre-tax IRR: 19.2%
  • Pre-tax NPV 8%: $684 M
  • Pre-tax Capital payback: 4.7 years

“The results of the Study place our Lac à Paul project among the most attractive of the next generation of phosphate rock mines.” noted Bernard Lapointe, C.E.O. “The all-in cost (CAPEX plus OPEX) estimate of $118 per tonne demonstrates that Lac a Paul is a world-class phosphate rock project with robust economics. The Study also confirms that, due to the significant increase in ore resources, a 3 million tonne/year P2O5 concentrate operation could further enhance project economics by as much as 50%. And newly discovered mineralized zone nearby the proposed mill-site should provide even more resource for the Project. We are now evaluating an optimized production scenario which will include not only a 50% increase in annual P2O5 production, but also recovery and sale of TiO2 (titanium) concentrate.”

Expanded Mineral Resource (complies with NI 43-101)

A new resource estimate was calculated by SGS Canada Inc.- Geostat group following the completion of the most recent drilling campaigns in the Paul and Manouane zones in December 2010 and March 2011 respectively. The resulting increase in M&I resource is incorporated into the prefeasibility study. The updated measured and indicated resource now total 348 million tonnes (see table for details). An additional 114 Mt of inferred resource in Zones Paul and 2 are not included in the Study.

  Paul Manouane Zone 2 TOTAL*
  Mt P2O5
(%)
TiO2
(%)
Mt P2O5
(%)
TiO2
(%)
Mt P2O5
(%)
TiO2
(%)
Mt P2O5
(%)*
TiO2
(%)
Measured (M) 22.1 6.82 7.89 136.9 5.93 8.77 - - - 159 6.05 8.65
Indicated (I) 161.8 7.1 8.21 26.9 5.64 8.46 - - - 188.7 6.89 8.24
Total (M&I) 183.9 7.06 8.17 163.8 5.88 8.72 - - - 347.7 6.50 8.43
Add’l Inferred 50.3 6.61 8.25 - - - 64 4.55 4.57 114.3 5.46 6.19

*Cut-off grade of 2.43% P2O5
Drilling continues on other promising zones within Lac-à-Paul’s 150 km2 property.

Mining/Concentrating

Mining will be a conventional open pit truck and shovel operation. Zone Paul will be mined first for 14 years Zone Manouane to follow. The average mining/milling rate at full production is 12.3 M tonnes/year. Metallurgical testing determined that an 89% P2O5 average recovery is feasible by conventional milling process, yielding concentrate production averaging approximately 2 Mt/y. The pit designs for the Paul and Manouane deposits resulted in combined Paul and Manouane proven and probable mineral reserves totalling 307.1 Mt at an average grade of 6.59% P2O5 and 8.51%TiO2, as indicated below.

Category Ore (Mt) P2O5 (%) TiO2 (%) Waste (Mt) Strip Ratio
Zone Paul
Proven 21.4 6.85 7.94  
Probable 140.3 7.21 8.29  
Sub-Total 161.7 7.16 8.25 170.8 1.1
Zone Manouane
Proven 123.3 5.99 8.84  
Probable 22.1 5.72 8.54  
Sub-Total 145.4 5.95 8.79 85.0 0.6
Total Reserves
Proven 144.7 6.12 8.71  
Probable 162.4 7.01 8.33  
Grand-Total 307.1 6.59 8.51 255.8 0.8

Mining and concentrating costs are estimated at $2.24/tonne mined and $8.33/tonne milled. General & Administration costs, which include costs to support the man camp, security, training, environmental and laboratory costs, have been estimated at $5.85/tonne P2O5 concentrate.

Apatite concentrate

The table below shows the chemical composition of the apatite concentrate produced from an eight-tonne bulk sample of the Paul Zone. The product quality is very high, with P2O5 content of 39% (85% BPL), very low contaminant content and a low CaO/ P2O5 ratio of 1.3. High P2O5 content allows very efficient shipping ($/tonne P2O5 content). Low contaminant content yields non-hazardous gypsum by-products. Low CaO/P2O5 ratio means lower sulphuric acid use/cost in production of phosphoric acid, MAP and DAP.

  Content   Content
P2O5 (%)1 39.1 Total SiO2 (%)1 2.49
CaO (%)1 52.1 Acid Insoluble SiO2 (%)2 1.81
MgO (%)1 0.96 Acid Soluble SiO2 (%)2 0.59
Fe2O3 (%)1 1.67 Organic C (%)2 0.91
Al2O3 (%)1 0.84 H2O (%)2 0.30
Na2O (%)1 0.28 CaO/P2O5Analytical Ratios 1 1.33
K2O (%)1 0.15 F/Soluble SiO21 2.88
F (%)1 1.70 F/(SiO2+Al2O3+MgO) 1 0.40
    (Fe2O3+Al2O3)/P2O5 1 0.064
Cl ppm (water soluble) 2 108 (Fe2O3+Al2O3+MgO)/P2O5(MER) 1 0.089
Cl ppm (total) 1 860    
SO3 (%)2 0.12 Cd ppm 1 < 0.5
CO2 (%)2 2.38 Hg ppm 1 < 0.02
INSOL (%)2 1.75 As ppm 1 < 0.05
Loss of Ignition (LOI)(%)1 0.51 U mg/L1 < 0.02

1 Analysis from Corem
2 Analysis from Jacobs Engineering Inc.

Phosphoric Acid, MAP and DAP Successfully Produced

The Company is also pleased to announce that phosphoric acid and derivative fertilizers MAP (mono-ammonium phosphate) and DAP (di-ammonium phosphate) were successfully produced from Zone Paul concentrate by a leading global phosphate rock and fertilizer testing facility. No corrosivity was found during production of 28% P2O5 phosphoric acid, the standard grade feedstock for MAP and DAP production. Other features noted were high acid filtration rates, no need for froth control reagents and low gypsum by-product production. Most notably, the fertilizers produced exceed generally recognized industry specifications for DAP (18%N/46%P2O5) and MAP (11%N/52%P2O5) (see table below). The complete Jacobs Engineering Inc. report is posted on our website, at www.arianne-inc.com

Fertilizer Component Analysis DAP MAP
Nitrogen %N 19.3 11.4
Phosphorous %P2O5 48.9 55.3
Moisture content Crushed %H2O 1.9 1.2
Moisture content Non-crushed %H2O 0.8 0.6
Hardness lbs. 7.9 9.1

Analysis from Jacobs

Location

The Lac-à-Paul project is located in one of the most dynamic natural resource-rich areas of the Quebec province. The Saguenay-Lac-Saint-Jean is well known for its world-class aluminum, niobium, timber, genomics and low-cost hydro-electric power generation.

Access to the Project is via well-maintained gravel roads (Chemin des Passes) presently used for the logging industry. The 165 tonne capacity bridges on this road will support trucks capable of transporting 115 tonne loads of P2O5 concentrate. A rail transload facility will be built at Dolbeau-Mistassini, approximately 210 km from the Project. Concentrate transport cost from the mine to FOB railcars in Dolbeau is estimated by Met-Chem at $10.90/tonne. The rail access at Dolbeau-Mistassini connects with the North American Rail Network (CN) and also provides access to the year-round accessible deep water Port of Saguenay.

Hydro-electric power is available to the Project just 35 km away, from the 750 MW Chute Des Passes Power Plant owned by Rio Tinto/Alcan. The Project is also only 60 km from 405 MW Peribonka IV plant owned by Hydro-Quebec. Both options are capable of providing sufficient power to the Project.

Socio-Economic

With a population of 300,000, a well-educated work force is available to the Project. Discussions with the First Nation of Pessamit and local authorities of MRC Fjord-du-Saguenay are currently in progress. The mine will create about 340 permanent jobs and more than 400 indirect jobs and generate substantial direct economic benefits to the region. Environmental and socio-economic impact studies are already underway.

Potential for Enhanced Project Economics

The Company believes the Project may be further enhanced by provincial government assistance to develop shared infrastructure under Quebec’s “Le Plan Nord” economic development initiative. The power line connecting the Project to the Chute des Passes power plant is located in the area eligible for consideration under this Plan. At the municipal level, the City of Dolbeau-Mistassini has already commissioned and completed a prefeasibility study for the construction of the railway bridge in Dolbeau-Mistassini. Government involvement in funding of these infrastructure components may significantly reduce the capital cost of the Lac-à-Paul Project.

The study identified potential enhancements to project economics through expanded production rates, now feasible given the significant increase in measured and indicated resources. The Company has commissioned an initial economic assessment of these options for completion in Q1 2012, with the goal of determining the most efficient course of action. Scaled up production scenarios under consideration include:

  • Annual P2O5 concentrate production of 2.5 million tonnes (40,000 tonne/day ore processing);
  • Annual P2O5 concentrate production of 3.0 million tonnes (50,000 tonne/day ore processing);
  • Recovery and sale of titanium (ilmenite) concentrate

Preliminary results indicate that economics are expected to improve at these production rates, as estimates of pre-tax NPV8 increase to $ 1 B at a production rate of 50,000 tonnes/day, with requirements of additional initial CAPEX of about 20% and mine life of about 17 years. A feasibility study will be initiated in Q2 2012 based on the outcome of these studies.

Sensitivity of Project Economics to Concentrate Price and Operating Costs

Project economics sensitivity was reviewed for concentrate price and operating costs on a pre-tax basis by Met-Chem. The analysis showed a break-even pre-tax NPV8 at $135/tonne, a price 23% below the long-term average price for 85 BPL concentrate of $175/tonne in constant 2011 $. For comparative purposes, the current price of 85 BPL concentrate FOB Russia is $223/tonne.

The sensitivity analysis showed that for each $1/tonne improvement in cash margin, either through higher price or lower operating cost, the pre-tax NPV8 increases by approximately $17 million.

Technical data of this news release has been reviewed by Mary-Jean Buchanan, Eng. (Met-Chem), Claude Duplessis, Eng. (SGS Geostat) and Daniel Boulianne, Geo. (Arianne), who are deemed to be Qualified Persons under NI 43-101.

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