phosphate australia annual financial report

makes an interesting read...

REVIEW OF OPERATIONS

Since our 2008 Operations Report, Phosphate Australia has continued with an intense level of technical work in order to advance the Highland Plains phosphate project as rapidly as possible. The key achievement was the completion of two highly successful drilling programs from September to December in 2008 and from April to May in 2009. The historic mineralisation tonnage estimate on
which the company floated was based on 36 holes for 1049 m drilled in 1968 (for full details please refer to the 2008 prospectus). The company's drilling programs have added an additional 130 reverse circulation and air core holes to the deposit data base for 3721 m as well as 17 cored holes for a further 343 m.

The 2008 drilling allowed the company's resource consultants to calculate an initial JORC-compliant
inferred resource of 56 Mt at 16% P2O5. More importantly, Cube Consulting also identified a shallower, higher grade subset of the deposit of 7 Mt at 23% P2O5 referred to as the "Western Mine Target Zone" (WMTZ). This part of the deposit contains the thickest, shallowest and highest grade
intersections, for example, HAC001 (9 m at 27.1% P2O5 from 1m) and HRC063 (12 m at 31.1% P2O5 from 9 m). As at mid-August 2009, the company was still awaiting the last of the assay results from the second round of drilling. Once these results are in Cube Consulting will refine the resource model which will allow the company to commence work on mining concept selection studies.

Of equal importance to the assay data derived from the drill samples, has been the commencement of metallurgical studies. Based on extensive discussions the company has had with fertiliser industry participants an early decision was made to target a high-grade, beneficiated rock phosphate product for sale from the Highland Plains project. Georgina Basin phosphorites generally have a much lower CaO:P2O5 ratio than the typical Middle-East rock phosphate product. This means that sulphuric acid consumption is lower when using the rock to produce phosphoric acid (a precursor to the manufacture of phosphate fertilisers). Counterbalancing this, silica levels are relatively higher. Less than 6 to 8 % SiO2 is considered ideal for the manufacture of phosphoric acid.

In order to achieve this level of silica in a Highland Plains rock phosphate product it will be necessary to beneficiate (enrich) the ore. This is regularly achieved in other established rock phosphate mining operations but each deposit has its own combination of unique characteristics . The company had early encouragement from the receipt of QEMSCAN scan data which is a mineralogical study utilising a scanning electron microscope. QEMSCAN data from Highland Plains suggests that the size and structure of the fluorapatite (phosphate mineral) and quartz grains should make them amenable to
separation by froth floatation. Core samples from the second round of drilling are currently being metallurgically tested in Adelaide and the company hopes to have some reportable results by the end of October.

In conjunction with the resource calculations, mine planning and metallurgical studies, the company has commenced logistics studies in order to select the most efficient means of moving rock phosphate product to market. Early results of these studies indicate that a barging operation where the phosphate is loaded at a dedicated, fit-for-purpose, facility operated by the company and then transferred 30 to 40 km offshore in the Gulf of Carpentaria to an ocean going vessel, is the most likely solution to provide the project with the optimum combination of CAPEX and OPEX for the early mine life.

Planning is also underway for hydrographic and hydro-geological investigations which, along with the data above, will allow the company to produce a scoping study by the start of 2010. This document will then allow the company to put together a final "road-map" of the technical work that will need to be finalised to allow a mine construction commitment at Highland Plains. Key components of this next round of technical work would be pilot-scale metallurgical testing, mine and processing plant design and complete logistics design along with final construction cost estimates for these elements.

The company is well funded, the fundamentals of the world phosphate market continue to work in our favour and we look forward to the exciting opportunities ahead over the next 12 months.


straight forward and no BS...