Back in January I wrote an article, Arianne Resources on Big Fertilizers Radar, that discussed the potential of an exciting development stage mining company in the phosphate market. The article discussed why it might be a viable takeover candidate going forward and potential catalysts to look for. On Thursday it distributed a press release, Arianne Resources/Lac a Paul Project: The Measured and Indicated Resources for the Paul Zone Increase to 590 Million Metric Tons, that described one of those catalysts and that being an update of resources. This release in conjunction with a 43-101 report provides detailed information not only on the amount of resources but also the improved quality of the resources.
Chart courtesy of Stockcharts
Arianne Resources (OTCPK:DRRSF) announcement last week was based on a new 43-101 and included 105 new drill holes on just the Paul Zone. This is significant because previous mineral estimates had included drill results from two separate deposits on the claims and this total resource now is only based on just the Paul Zone which indicates that there is significantly more total resources than are now being considered.
The highlights from the press release:
- For this disclosure of resources, a cut-off grade of 4.0% P2O5, instead of 2.43% P2O5 in 2011, was used.
- Although the cut-off grade is higher, the measured and indicated resources of the Paul Zone have increased by 221% compared to the last estimate released in 2011.
- The measured and indicated mineral resources (M+I) of the Paul Zone amount to 590.24 Mt at 7.13% P2O5.
- The mineral resource estimate was calculated according to NI 43-101.
|Comparison of the Paul Zone''s Mineral Resources|
|(March 2013 versus November 2011 resources estimates)|
(cut-off grade: 4.0% P2O5)
(cut-off grade: 2.43% P2O5)
|% P2O5||% P2O5|
|Update of mineral resources effective: March 7, 2013|
|Mineral resources that are not mineral reserves have no demonstrated economic viability.|
These results are significant for the following reasons:
1) The original bank prefeasibility study considered two mining sites on the Arianne property that would both need to be developed in order to meet a 17 year mine life. The updated drilling results indicate that the Paul Zone by itself should be able to reach 17 years and given that the original Paul Zone was estimated at 9 years it could be extrapolated out and with the trebling of resources it should have a mine life of 27 years. In the original 43-101 the Manouanne Zone was estimated to have a mine life of 8 years giving both resources a mine life of 17 years. Bottom line - this significantly increases potential mine life and there is still considerable undrilled property.
2) The current grade cut-off was increased from 2.43% to 4%. This will be important when modeling or estimating future milling costs. The higher the grade material the less it will eventually cost to process.
3) With the ability to mine only from one site the future capex costs that will be in the Bank Feasibility study should decrease. Not having to develop two sites along with the increased grade should make the economics of this project even more lucrative for a potential acquirer.
As mentioned in the original article Arianne is a development stage mining company that is quickly reducing risks and improving the likelihood of being acquired. Companies like Mosaic (MOS), Agrium (AGU), CF Industries (CF) and Potash (POT) all have yearly cash flows over $2B and are looking for ways to put it to future use and increase shareholder value. Running out of future resources is not an option and finding the best properties is high on each of their lists. As Arianne continues to move forward and reduces risks for a future acquirer the value of the property will surely increase. Some of the key catalysts going forward will be the Cegertec WorleyParsons Feasibility Study with a planned completion date of Q3 2013. Processing tests of ore from the Paul Zone being carried out by Jacobs Engineering, Florida, and COREM, Québec and the Environmental and Social Impact Assessment being prepared by Genivar should also be filed in Q3 2013.