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On Tuesday, Great Quest Fertilizer released the results of an updated PEA for its Tilemsi phosphate project in Mali. It now includes a pilot plant as part of a new phased development plan for the project.
Following a positive engineering study on the company’s proposed pilot plant for Tilemsi last month, Great Quest updated its 2013 PEA for the project to include the new pilot plant as part of a new phased development plan for the project.
The pilot plant will be located in Dogofry, 1,024 kilometers southwest of Tilemsi, and Phase I development will include the mining and processing of 40,000 tonnes of phosphate rock per year for 12 years. Phase II operations will be located in Bourem, 95 kilometers from Tilemsi, and will begin following successful Phase I results after a full year of operation.
“This multi-phased plan demonstrates the inherent value of our high quality resource located in this rapidly growing agricultural region,” said Great Quest CEO Jed Richardson in a statement. “The inclusion of the pilot plant mitigates market, technical and geo-political risks associated with the project. This allows for a streamlined large-scale operation when the construction decision is made, and is an attainable entry into commercial fertilizer production.”
Indeed, while the net present value (NPV) for Phase II of the project has decreased from US$522.5 million to US$432.1 million, and capital expenditures will remain the same, the internal rate of return (IRR) has increased from 35 percent to 55 percent and the payback period has shortened from 3.5 years to 2.5 years. Certainly, that’s a welcome change for investors looking at the project.
For Phase I including the pilot plant, there’s capex of US$16.3 million for a US$17.3-million NPV and a 29.5 percent IRR. Since the first phase of production will mean a “steeper production profile at the initiation of Phase II,” the mine life for the Tilemsi project has been shortened from 20 years to 17 years.
Still, it’s good to see the company taking steps to optimize its project. In any case, Great Quest states that Tilemsi will be “the only local source of high quality fertilizer in Mali,” which it cites as a “major cost advantage” since all fertilizers imported to the region must undergo costly transportation over 1,100 to 1,500 kilometers from Senegal or Cote d’Ivoire.
Certainly, product from Tilemsi already seems to be in demand, as Great Quest secured an offtake agreement for the bulk of its projected annual production from the project with Mali’s Société Africaine de Développement Agricole SA (SADA) back in September. Furthermore, SADA ended up signing on as financing and operating partner for the project the following month.
Although Great Quest’s share price has tumbled about 70 percent over the past year, the company got a bit of a bump on the back of today’s news. As of 2:19 p.m. EST, shares of Great Quest were up 3.45 percent, trading at $0.45.
Securities Disclosure: I, Teresa Matich, hold no direct investment in any of the companies mentioned in this article.