CROPS

Near-Term Phosphate Production in Northern Peru

This profile is part of a paid investor education campaign.*

Overview

CROPS Inc (TSXV:COPS) is a pre-production mining company focused on developing its flagship Bayovar 12 sedimentary phosphate project located in Northwestern Peru.  The Bayovar 12 project is located in the Sechura Basin which has one of the world’s largest fertilizer companies producing Rock Phosphate for the off-shore market.  The Miski Mayo mine is only 15 kilometers from CROPS’ deposit and Bayovar 12 sits only 40 kilometers from the nearest sea port, positioning CROPS favorably for export to international markets.

From the updated prefeasibility study (PFS) released in May 2016, the Bayovar 12 project hosts a proven and probable reserve of 58.8 million dry tonnes of ore at an average grade of 12.94 percent P₂O₅.  These reserves have a minimum 20-year mine life, delivering 1 million tonnes of 24 percent to 28 percent P₂O₅ annually.  The PFS also outlined an after-tax IRR of 26.3 percent and an NPV (7.5 percent) of $458 million.

That study however was completed using phosphate rock prices of $150 per tonne for 28 percent P2O5, while the average price from 2016 to 2018 was $100 per tonne, rendering the project somewhat marginal.  Despite this, as Simon Ridgway the CEO of CROPS knows well, world class mineral deposits such as the one hosted at Bayovar 12 are hard to come by, and endurance during periods of deflated prices is the key to success.

The next important step for CROPS is to find that strategic partner to support the completion of a bankable feasibility study (BFS), which will further refine the economics of the project, reduce the capital expenditure needed, and potentially further decrease its operational costs.

Phosphate rock concentrate from Bayovar 12 is exceptional in its reactivity and can be produced without chemical additives and used directly as an application nutrient, particularly on acidic soil profiles in tropical regions.  Also, the low impurity levels of the Bayovar deposit make it suitable for industrial use, a niche market in the phosphate rock world but one that is growing with strong returns on investment.  Taking advantage of the deposit’s strategic position on the West Coast of the Americas, CROPS has the opportunity to become a key supplier of reactive phosphate rock for the fertilizer market and for the production of P4 to serve the industrial phosphate industry.  Other potential markets include the life science and cannabis industries.  CROPS is currently exploring the potential end-use opportunities for its product.

In March 2018, the company announced a change in name to CROPS Inc from Focus Ventures, in order to reflect its ongoing activities of advancing and marketing the Bayovar 12 Project.  The company also completed a consolidation of its issued common shares on the basis of one new share for every four existing shares.

CROPS is led by a management team with notable experience in project development and in the fertilizer space. This includes CEO Simon Ridgway, who has raised over $400 million for exploration and development projects since 2003.  The management is also significantly invested in the company, holding over 10 percent of shares.  They are supported by strategic investors, Sprott Toronto, who own an additional 12.6 percent of shares and holds a convertible debenture in the Company.

Investment Highlights

  • Flagship project located in highly rated jurisdiction for mining investment: Peru
  • Bayovar 12 project within 15 kilometers of currently producing mine
  • 2016 prefeasibility study of 26.3 percent after-tax IRR, NPV (7.5 percent) of $458 million
  • Proven and probable reserves of 58.8 million tonnes of ROM ore capable of extending mine life for at least 20 years
  • Two thirds of the property remain unexplored to date
  • Deposit sits at surface and amenable to open pit free digging
  • Variety of product end-uses in various industry segments including fertilizers, elemental phosphorus and life science applications

Flagship Project: Bayovar 12 Property

The 12,575-hectare Bayovar 12 phosphate project is located in Peru’s Sechura District, 70 kilometers south of the city of Piura and 40 kilometers away from the export terminal of Bayovar, owned by CROPS’ joint venture partner.  The project sits in close proximity to the Miski Mayo phosphate (Mitsui-Mosaic) mine, which has been in production since 2010 at a rate of 3.8 million tonnes per year.  Bayovar 12 has little vegetation, is easily access by nearby paved roads and has year-round access to the electrical power grid.

Reactive phosphate rock

The Bayovar 12 project hosts naturally-occurring, free-digging and highly reactive phosphate rock. Having been tested on many crop types across the world, this phosphate rock is one of the most reactive and can easily be upgraded to a concentrate by washing and flotation.  It is particularly effective in releasing phosphorus to the soil over a longer period than other manufactured fertilizers. Its main consumer base is oil palm plantations.

Mineral resource

The Bayovar 12 project has seen 62 holes of drilling across an 8-kilometer by 3.6-kilometer area—only a third of the total property.  Results from this drilling initiative outlined a near surface diatomite sequence containing 13 flat sedimentary phosphate beds measuring 34 square kilometers and easily beneficiated through washing.  A review of this geology indicated a measured resource of 17.7 million (dry) tonnes at 13.16 percent phosphorus pentoxide (P₂O₅), an indicated 209.5 million tonnes at 13.04 percent P₂O₅ and an inferred 102.2 million tonnes at 13.11 percent P₂O₅.  Additionally, the deposit also has proven and probable reserves of 14.4 million tonnes at 12.74 percent P₂O₅ and 44.4 million tonnes at 13.00 percent P₂O₅, respectively.

Prefeasibility study (PFS)

In 2016, CROPS released a PFS outlining the economic viability of an open-pit development for the Bayovar 12 project.  The PFS examines the production of 24 percent P₂O₅ and 28 percent P₂O₅ phosphate rock fertilizer products.

Highlights from this report are associated with the proven and probable reserves of 58.8 million tonnes of ROM ore and are outlined below:

  • After-tax IRR of 26.3 percent
  • After-tax NPV (7.5 percent discount) of $458.3 million
  • Payback period of 3.9 years
  • Production of 1 million tonnes per year
  • Initial mine life of 20 years
  • Initial Capex of $167 million (significantly lower than for nearby phosphate mines)

Recommendations from the PFS included bulk sampling and pilot plant metallurgical studies to further improve the beneficiation flow sheet; additional drilling across the property so as to outline further reserves; assessments of tools for overburden stripping; and review of cost sharing opportunities with neighboring projects.

Mining plan

Ideally suited for an open-pit development, the Bayovar 12 phosphate deposit hosts a 40-meter thick near-surface mineralized zone overlain by 30 meters of overburden.  Due to the structure of the mineralization, mining will not require drilling or blasting and will be executed in 13 work modules.  Each of these phases will sequence overburden stripping and ore mining, delivering consistent ore volumes of 8,000 tonnes a day to the property’s process plant.

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Due to the type of mineralization found on the property, the beneficiation process is simple, requiring only drum washing with seawater and recycled process water, size classification, attrition scrubbing, hydraulic classification, filtering and rotary drying.  This process will help produce the direct application phosphate rock products at concentration rates of both 24 percent P₂O₅ and 28 percent P₂O₅.  As no chemicals will be used in the process, the reactive phosphate rock also should be certifiable as organic.

Over the first 20 years of mine life, the open-pit project will produce 58.8 tonnes of ore to be process and 424 tonnes of waste.  Of the latter, 111 million tonnes will be placed in surface storage and the remainder will be used as in-pit backfill and as construction material for embankments.

Gypsum mining

The Bayovar 12 mine is currently licensed for the mining and export of gypsum.  Using the facilities that will later be implemented in the mining of phosphate, the company has engaged contractors to oversee the process of mining and crushing the gypsum on the property and transporting it to the nearby port for distribution to the cement industries in Northern Peru and Southern Ecuador.  As such, the company is developing good mining practices for the properties as well as strong local relationships with the government and communities.

Moving forward

Heading towards the production of the property’s 13 sedimentary layers, CROPS’ next step is to align with a strategic partner that can help fund the development of a bankable feasibility study (BFS) for the project.  Talks are ongoing and announcement to this end is expected in the first quarter of 2019.

Opportunities in a Variety of Markets

The company is evaluating potential entry points into various industries that could make use of its highly reactive phosphate rock products.  The company sees the following potential applications for its product: fertilizers, elemental phosphorus and as an input for added-value phosphorus products in the life sciences industry.

Fertilizer

The Bayovar 12 project has the potential to produce organic direct application fertilizer, a product highly sought after in various regions of the world.  This fertilizer can service the growing oil palm markets in Colombia, Ecuador and South-East Asia, and the agricultural industries in Argentina, Brazil and within Peru itself.  CROPS is looking to displace the sales of the mainstream phosphate fertilizer in South and Central America with a cheaper but more effective product.

To date, CROPS has entered into two non-binding memorandums of understanding (MOU) for offtake with established, globally-reaching fertilizer trading companies Indagro and Keytrade.  The company also has the opportunity to vertically integrate and produce finished phosphate fertilizers alongside a strategic partner from the industry.

Elemental phosphorus (P4)

Elemental phosphorus, also known as P4, is an industrial material that is used in flame and fire retardant chemicals and engine oil additives.  Elemental phosphorus is produced for off-shore export only in Kazakhstan and Northern Vietnam, providing an opportunity for developing an additional source of supply in Peru.  CROPS is currently in discussions with significant end user groups in Europe and North America.  The company is conducting technical due diligence on potentially developing a production unit on the Bayovar 12 property.

Life Sciences

Within the life sciences sector, the rock phosphate produced at the Bayovar 12 project could be used along with polymer coatings to enhance nutrients released into different soil profiles.  In February 2018, CROPS entered into a research and new product development program with an American company, Verdesian Life Sciences.  The program includes the creation of soil profiles and the execution of crop trials that combine Verdesian’s AVAIL® phosphorus fertilizer enhancer with highly reactive phosphate rock from the Bayovar 12 property.

Management

Simon T. Ridgway—Chairman and CEO

Simon Ridgway is a prospector, a mining financier and a Casey Research Explorer’s League inductee.  Grass roots exploration has provided him with a successful career as a prospector since starting out in the Yukon Territory in the late 70s.  Simon and the exploration teams under his guidance have discovered gold deposits in Honduras, Guatemala and Nicaragua and continue that success globally.  Companies operating under the Gold Group banner have raised over $400 million for exploration and development projects since 2003.  Simon is a founder and the Chairman of Fortuna Silver Mines, and founder and CEO of Radius Gold, Medgold Resources and CROPS.

Gordon Tainton—President and Director

Gordon Tainton has over 25 years of experience at senior management levels in various sectors of the fertilizer industry, including inspection and testing services across all nutrients, distribution, port/terminal development, trading, shipping, off-take agreements, and project finance.  Within management teams, he has financed and developed port/terminal projects for bulk liquid and solid products in the Americas, Asia and Oceania.  He spent eight years with Sumitomo Corp. of Tokyo sourcing, purchasing and delivering key intermediate bulk and bagged products to the phosphate production industry.  In 1992, he participated in a management led acquisition of Inspectorate plc, one of the world’s largest independent control services groups, which was subsequently sold to British Standards Institute in 1998.  Since 2010 he has held various executive and non-executive Board positions in both public and private companies.

Kevin Bales—CFO

Kevin Bales has over 15 years of financial reporting experience in mining and information technology industries.  He currently serves as CFO for several public junior exploration companies with operations in Canada, the U.S., Latin America, and Europe.  He holds a Bachelor of Management degree with a major in accounting.

David Class—Director

David Cass is a geologist with over 25 years’ international experience in mineral exploration and mining for precious and base metals.  Fifteen years of his career were spent with major mining company Anglo American plc, where he held positions of increasing responsibility in jurisdictions such as Turkey, Iran, Eastern Europe and the Americas, including 4 years as Senior Geologist in Peru, and 6 years as Exploration Manager for North America where he was responsible for Anglo’s exploration programs throughout Canada, Central America, Mexico, mainland USA and Alaska.  Since 2006, he has worked for junior exploration companies exploring in Canada, Mexico, Central America and Peru.

He holds a Master’s of Science degree in Mineral Exploration and Mining Geology from the University of Leicester, UK (1990) and a Bachelor of Science degree in Geology from London Metropolitan University.  He is a practicing member (P.Geo) of the Association of Professional Engineers and Geoscientists of British Columbia.

Mario Szotlender—Director

Mario Szotlender holds a degree in international relations and is fluent in several languages.  He has successfully directed Latin American affairs for numerous private and public companies over the past 20 years, specializing in developing new business opportunities and establishing relations within the investment community.

Ralph Rushton—Director

Ralph Rushton holds a B.Sc. in geology from Portsmouth University in the UK, a Master’s degree in economic geology from the University of Alberta, and a Certificate in Business Communications from Simon Fraser University.  He has over 25 years’ experience in mining and exploration, much of which was gained working as a geologist in Southern Africa, the Middle East and Eastern Europe.  For the last 11 years he has worked in business development and investor relations for a number of junior companies and currently serves as a director on the boards of Medgold Resources as well as CROPS.

Tim Osler—Director

Tim Osler earned a B.Sc. in marine biology from the University of British Columbia. He owns and operates a mining consulting and retail mining equipment business, and has developed a gold mining placer property in the Yukon Territory which is currently in production.  He has been a director of a number of junior resource companies.


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