American Pacific Borate And Lithium Expediting Preparations To Commence Construction At Fort Cady Borate Project

American Pacific Borate And Lithium Expediting Preparations To Commence Construction At Fort Cady Borate Project

American Pacific Borate and Lithium Limited (ASX: ABR), based in Perth, Australia, provides minerals mining services and also develops and mines lithium resources. The company has operations in Australia and the United States.

  • Fort Cady Borate Project – Currently, American Pacific is concentrated on progressing the development of its flagship asset, the Fort Cady Borate Project situated in Southern California, USA.     

       

  Source: Company’s Corporate Presentation – 121 Mining Conference New York 

Fort Cady is an exceptionally rare and massive colemanite deposit and has the largest known contained borate occurrence worldwide that is not owned by the two major global borate producers Rio Tinto Limited (ASX: RIO) and Turkey’s Eti Maden. The JORC compliant Mineral Resource Estimate and Reserve are given in the table below. It comprises 13.93 Mt of contained boric acid, which is quite noteworthy.

Source: ASX announcement dated 4 July 2019

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As per the latest figures reported, the company has spent more than USD 60 million at this project,  including resource drilling, metallurgical test works, well injection tests, permitting activities and other important small-scale commercial operations and test works.

A Definitive Feasibility Study (DFS) for Fort Cady was completed and published in Dec’18. The DFS demonstrated some enthralling financial metrics such as a steady state production target of 410 ktpa of boric acid and 110 ktpa of SOP, an unlevered post tax NPV10 of USD 1.25 billion (NPV8 : USD 1.59 billion) and ~41% unlevered post tax IRR. In addition, the DFS also outlined construction to be taken under three phases.

 

Summary of Capex by Phase Compared to Initial DFS

Later in January 2019, the DFS was enhanced to include a low capex starter project achieved by splitting Phase One into Phase I A and Phase I B, with a total estimated capex of only USD 36.8 million.

This starter project is expected to deliver an EBITDA in the first year of operation of USD 26.7 million and preserves the pathway to an EBITDA of over USD 340 million in the first year of full production for the broader project. The construction of Phase I is scheduled to begin by Q4 CY2019 tentatively, subject to completed permits, appropriate financing and other requisites met.

The company also hosted Chinese-based Strategic Partners Sinomach at Fort Cady site in January 2019 to explore equipment and financing options for mine development. In 2018, American Pacific had reached a non-binding strategic cooperation agreement with China National Chemical Fiber Corp., a wholly-owned subsidiary of Chinese state-owned enterprise China National Machinery Industry Corporation (Sinomach), a Global Fortune 500 company and an international, diversified, comprehensive equipment industrial group.

Latest Update Recently on 4 July 2019, the company released an update on various initiatives associated with the Fort Cady Borate Project, stating that funds from the May 2019’s placement (AUD 3.1 million) had been deployed to progress construction related engineering activities. The basic engineering, being undertaken by Utah based Millcreek Engineering, is expected to be completed by August 2019, with detailed engineering to follow to meet the construction timelines.

Meanwhile, informal financing discussions are ongoing to gauge market interest for the development of Phase I A. As for the marketing initiatives, the Company recently presented at New York’s 121 Mining Conference as well as Mining Journal Select Conference in London in June 2019.

United States Investor Relations Strategy The company has also developed a strategy to gradually increase its interaction with potential investors in the United States. In line with that, the Company plans to gain assistance from US-based investor relations’ professionals. Implementation of such a strategy in the US is also expected to see the company with a dual listing on New York exchange in 1H CY2020, along with the current listing on ASX.

Process Optimisation Works to Deliver High Purity Boric Acid- In April 2019, the company announced that it had completed process optimisation works which had delivered a high-purity +99.9% pure boric acid crystal with minimal contamination. The works were carried out to ensure that there is an unceasing delivery of technical-grade quality boric acid crystal from the project in the future.

  • Salt Wells Borate and Lithium ProjectIn addition to its flagship project, ABR also has the option to acquire a 100% interest in the Salt Wells North and Salt Wells South Projects situated in Nevada, USA through an earn-in agreement, upon incurrence of project expenditure worth USD 3 million.       

       

Source: Company’s announcement dated 4 July 2019

The project spans across 36 km2 and the surface salt samples received and assayed in April 2018 from the Salt Wells North project area demonstrated high levels of both lithium and boron with several results of over 500 ppm lithium and over 1% boron.

AUD 3.1-million Placement May 2019: On 2 May 2019, the company announced to the market that it had completed a placement of AUD 3.1 million via the issue of 17,222,222 shares to institutional and sophisticated investors at 18 cents per share, representing an 11.3% discount to the 10-day VWAP of 20.3 cents. It also included one unlisted option, designed to provide working capital during construction, for every two ordinary shares with a strike price of 25 cents and an expiry of 10 August 2020.

The funds raised have been indicated to be directed towards progressing construction related engineering activities with the company’s preferred contractor which were scheduled to commence in May 2019, as discussed above.

Sydney-based Peloton Capital acted as the lead manager to the placement.

During the March 2019 quarter, the company spent around AUD 1.22 million in operating activities (exploration, evaluation, staff costs, other corporate costs) and the cash balance was AUD 1.225 million as of 31 March 2019.

Global Borate Market: Over 80% of global supply for the commodity comes from borate salt operations in California and Turkey.

Source: Corporate Presentation – 121 Mining Conference New York

Borates find applications in the following:-

 Source: Corporate Presentation – 121 Mining Conference New York

Besides, Borates, gypsum and SOP are all used in local North American agricultural and fertilizer markets. Borate demand for agricultural purposes is predicted to grow at 9% CAGR from 2017 and 2022 and Fort Cady is ideally placed in California to take advantage of the same.

  Source: Corporate Presentation – 121 Mining Conference New York 

Stock Performance: American Pacific Borate & Lithium limited has a market cap of around AUD 50.03 million with approximately 208.44 million shares outstanding. On 10 July 2019, The ABR stock closed the trade at AUD 0.230. In addition, ABR has delivered impressive return yields of 77.78% for the last six months.


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