CRP
17/08/2015 12:29
GENERAL
NOT PRICE SENSITIVE
REL: 1229 HRS Chatham Rock Phosphate Limited
GENERAL: CRP: Chatham issues August update
Update
17 August 2015
We're pleased to be getting traction on a number of fronts and so we thought
we'd update you on progress with our game plan.
Mostly pleasingly, we've continued to raise the money we need for the coming
year and have announced further placements in the last couple of weeks
totalling more than $300,000.
Over the past few months there's been a steady stream of support from
shareholders keen to support our plans for the coming year and we're now very
well advanced in raising the funds we need to operate for the next 12 months.
Thank you for your continued support and your faith in the company's
prospects.
Our funds position will also be aided by tapping into some capital associated
with the merger with Antipodes Gold, which we're doing in order to list on
the Canadian TSX-V market. Antipodes is also listed in New Zealand so
shareholders will enjoy the best of both worlds in terms of increasing
liquidity of our shares and having access to a broader investor base.
As an aside, the annual shareholder meeting approved the conversion of "out
of the money" options to shares. This conversion, which has now taken place
tidies up the register, was a good outcome for option holders and will result
in lower listing fees both on NZAX and the TSX.V
Plenty of upside
The present share price of 0.8 cents values Chatham at $3.2 million or an
enterprise value of $2.5 million net of cash. That's $1 million less than
our market capitalisation in 2010, when we had no management team, no
contracts with Boskalis, no 20-year mining permit, no legislation for
applying for a marine consent, significantly less knowledge about the
deposit, no direct involvement or expertise in the phosphate market, and only
$250,000 in the bank. Even without the environmental consent, or the
certainly of gaining it, CRP's market value topped $40 million for most of
the two and a half years to February.
It's our view that buying at current levels represents great value; the
shares are already priced near an all-time low on the assumption Chatham will
either not get the environmental permit or will go broke.
Due to recent substantial investment, our directors and other associated
interests are now Chatham's biggest shareholder group. Together with hundreds
of others, including farmers, New Zealanders own more than half the company.
So what's the game plan?
To recap, it involves these key planks:
1. Focusing on the areas of the consenting process that need fixing, before
we make a final decision to resubmit, while
2. Diversifying both our portfolio of interests and our access to capital
markets.
Chatham Rise project still key
While we did not succeed with our initial consent application, much has been
learned by both Chatham as an applicant and by the Environmental Protection
Authority. We are confident that this experience will valuably be translated
into improved and hopefully streamlined application and hearing processes.
Once we're confident with the process, we'll be able to resubmit an even
better environmental permit application. Chatham was turned down on limited,
unexpected and relatively minor issues. We are confident that these issues
can be dealt with robustly on resubmission.
We continue to believe the Chatham Rise project remains hugely valuable for
all the same reasons:
1. Security of fertiliser supply for the agricultural sector in New Zealand.
2. Environmental benefits such as a much lower run off impact on lakes and
rivers, much lower cadmium and much lower carbon footprint.
3. It's an ethical option, given that the current main source of phosphate
from North Africa is from a disputed territory.
4. It's highly profitable given its adjacent location (meaning we have no
incoming freight costs) and low mining costs.
5. Our estimated mining costs are roughly equivalent to the cost of shipping
competing product from the other side of the world. This means the world rock
phosphate price has to collapse to near zero before we can't compete.
6. Our annual forecast earnings before royalties and tax are presently
estimated at approximately $90 million.
7. We'll pay $34 million in annual taxes and royalties, plus millions in port
charges and create many high value and knowledge-based jobs in the port, on
the mining ship, undertaking environmental monitoring and broader scientific
research, in the agriculture and hospitality sectors and on the Chatham
Islands.
8. The economics are also hugely favourable when compared to fish bottom
trawling. The revenue earned by extracting phosphate would be $9,700,000 per
km2 (we'll be covering 30km2 a year) compared with only $9,000 per km2
annually from trawling.
9. Our project could enable New Zealand to become a world leader in marine
technology and expertise potentially worth billions of dollars.
10. Our work at sea enhances the understanding and knowledge base of our
marine environment to help identify marine areas most deserving of
conservation.
11. The EPA's decision concluded mining would have no significant impact on
fishing yields or fishing industry profitability, marine mammals or seabirds.
Spreading the risk
We're confident we will get environmental approval next time, but we want to
broaden our investor appeal by becoming a more diversified operation so not
all our eggs are in one basket.
As well as the five marine applications in Namibia, we are developing
relationships with other players in the market, maintaining our relationship
with Boskalis, looking at other projects and entering the phosphate trading
market.
Farmer focus
It's important to continue to build support from a range of stakeholders
including farmers, as well as others, such as relevant government agencies.
Not surprisingly in the current circumstances, targeting the farmer market
for capital has had limited success in dollar terms but we decided, given
they're such an important target audience, we need to keep building our
stakeholder relationships.
We continue to remind farmers, many of whom are currently under siege
financially, our product is both a green option and one that could save them
money, bearing in mind Chatham Rise phosphate requires less-frequent
application and has high liming characteristics.
We remain puzzled by the view of environmental groups who fail to see the
irony of their opposition to our Chatham project. We don't understand how
they can condone New Zealand's importation of all our phosphate requirements
and we think it's hypocritical to support exporting our environmental
footprint to countries mining phosphate where it involves severe social and
environmental distress. And, of course, though environmental groups
conveniently ignore it, trawling affects 50,000 km2 a year, and yet requires
no environmental approvals.
Updated presentation
We've updated our investor presentation and it's on the front page of the
website. Go here
Regards
Chris Castle, Managing Director
[email protected] or +64 21 55 81 82
End CA:00268518 For:CRP Type:GENERAL Time:2015-08-17 12:29:59
