Vancouver – MagIndustries (MAA-V, MAAFF-O) has lined up a $100-million brokered financing for subsidiary MagMinerals that is earmarked for planned development of its Kouilou potash mine project in the Republic of Congo.
Subsequent to the planned private placement of equity in MagMinerals, MagIndustries also plans to spin out its subsidiary as a public company through a possible initial public offering or a reverse takeover.
Besides funding the initial phase of development at the Kouilou potash mine, part of the offering proceeds will be used by MagMinerals for repayment of approximately 15 million in existing project related debt.
Located in the Republic of the Congo’s Kouilou province, the Kouilou project recently saw completion of a positive feasibility study proposing development of a 600,000-tonne-per-year potash operation roughly 16 km east of the port city of Pointe-Noire.
The study projects estimated capital costs of US$723 million for the operation that will produce granular K60 grade potash with direct and indirect operating costs (including contingency) estimated at US$83 per tonne. Based on a net realized potash price of about US$500 per tonne the initial phase of the project yields an internal rate of return of 26% and a net present value of US$450 million (using a 12% discount rate). The Government of Congo retains a 10% free carried interest in the operation.
The project has proven and probable reserves of 21 million tonnes of KCl (potassium chloride) within a 25-sq. km section of the permit area. At its planned annual production rate of 600,000 tonnes current reserves are sufficient for roughly 34 years of operation. A late-2007 technical study also reviewed an inferred resource of 1.07 tonnes of carnallite (a magnesium-potassium-chloride salt) that represents about 185.9 million tonnes of KCl.
The feasibility study models solution mining on carnallite beds that underlie most of the company’s 2,265-sq. km Makola license. The process extracts potash-rich brine that, under the proposed plan, would be treated in a crystallization plant to produce granular grade potash fertilizers for export.
The company says one of the primary inputs for this process is natural gas that is locally available as essentially a waste product from the area’s significant oil production wells. Plans also call for the contracted gas supply to supply a 26-megawatt onsite gas-fired power plant.
Shares of MagIndustries rallied 19% on strong volume following the financing news closing up 39 to $2.50 apiece in March 5th trading.
MagIndustries has three other subsidiary companies (MagEnergy, MagForestry and MagMetals) involved in natural resource ventures in the Democratic Republic of Congo and the Republic of Congo
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