Arianne Phosphate rallies on Chinese MOU

Working on the Lac à Paul phosphate project in Quebec. Source: Arianne Phosphate Inc.

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Arianne Phosphate Inc. [TSXV-DAN; DRRSF-OTC] shares rallied Wednesday June 5 after the company said it has entered into a Memorandum of Understanding with China Machinery Instruction Construction Group (SINOCONST), a large Chinese state-owned enterprise.

Founded in 1997 Arianne is focused on the development of a Quebec phosphate project that it has described as one of the world’s largest greenfield phosphate projects. Phosphate is a key ingredient used in the production of fertilizers.

Under the terms of the MOU, Arianne and SINOCONST have agreed to work towards a final binding agreement related to the development of Arianne’s Lac à Paul phosphate project, which would include full project financing.

On a parallel track, efforts to secure offtake are expected to be undertaken by SINOCONST in support of the financing package discussed under the MOU. Participation in the development of Lac à Paul on the part of SINOCONST is tied to finalized project financing commitments, Arianne said in a June 4, 2019 press release that announced the MOU.

On Wednesday, Arianne shares jumped 31.8% or 14 cents to 58 cents. The 52-week range is currently 35 cents and 61 cents.

Arianne is developing the Lac à Paul phosphate deposits which are located approximately 200 km north of the Saguenay/Lac St. Jean area of Quebec. These deposits will produce a high quality igneous apatite concentrate grading 39% P2O5 with little or no contaminants, the company has said.

With proven and probable reserves currently stand at 472.1 million tonnes at an average grade of 6.9% P2O5 phosphorous pentoxide, Arianne’s Lac à Paul Project is expected to produce three million tonnes of phosphate annually.

According to a 2013 feasibility study, the project is expected to cost $1.2 billion to develop.

Phosphate rock is the raw material for all phosphate projects, with roughly 95% being converted to phosphoric acid. Demand for the commodity is driven by food consumption and crop yield improvements.

The majority of global phosphate rock reserves are located in Morocco, including the Western Sahara. Other major holders of phosphate rock reserves (ranked according to size of their reserves, from large to small) are Iraq, China, Algeria, Syria, Jordan, South Africa, the US and Russia.

Phosphate rock deposits can be differentiated by their grade and quality. Phosphate fertilizer uses the chemical phosphorus pentoxide (P2O5). The grade of phosphate rock refers to the P2O5 concentration of the rock. To make fertilizer, phosphate rock must contain at least 28% P2O5 otherwise it must undergo further processing to increase its concentration. The quality of phosphate rock is determined by both the grade and level of impurities.

Arianne said that although no assurances can be made as to a final agreement being reached, it said conversations surrounding the MOU have been ongoing for some time and both sides have indicated a strong willingness to progress to a final binding agreement in as quick a timeframe as possible.

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