CRP seeks more capital to rebuild

CRP seeks more capital to rebuild

Chatham Rock Phosphate is embarking on a new round of capital-raising for the shortfall of its earlier share issue.

CRP is seeking to raise $766,000. The shares are being marketed among wholesale investors, particularly within the farming community.

“This is an opportunity to invest in a green local phosphate source,” according to CRP managing director Chris Castle.

“CRP is now fund-raising as part of re-applying for an environmental consent. Assuming we receive this consent, we will quickly move towards production.” Mr Castle noted CRP has a 20-year mining permit.

Following the latest capital-raising among existing shareholders, interests associated with the directors and management are now CRP’s largest shareholders, with New Zealand farmers and hundreds of other Kiwis owning more than half the company.

Mr Castle said the offer is being marketed as an opportunity to own part of an independent local source of low cadmium, low carbon footprint rock phosphate.

“The money currently sought allows CRP to rebuild the company over the next 12 months. A lot can happen in a year, the history of this company makes that very evident.”
CRP has undertaken an assessment of its current market value and notes there is little downside because CRP shares are already priced on the market’s assumption that CRP will either not get the marine consent on the second attempt or not be able to raise the funding to reapply.

The market capitalisation post the consent decline settled at $3.7 million but has since drifted to $2.45 million (despite raising $713,000).

Mr Castle said entry into CRP at 0.6 cents a share values the company (post placement) at $2.76 million or an enterprise value of $1.4 million net of cash.

“That’s $2 million less than our market capitalisation in April 2010, when we had no management team as such, no contracts with Boskalis, no 20-year mining permit, no legislation for applying for a marine consent, significantly less knowledge about the deposit, no direct involvement or expertise in the phosphate market, and only $250,000 in the bank.

“Even without the environmental consent, or the certainly of gaining it, CRP’s market value has exceeded $40 million for almost all of the period September 2012 to February 2015.

Mr Castle said he is confident of a successful outcome for the environmental permitting process next time, due to:
• An expected improvement in the Marine Consent procedure, including interpretation of the EEZ Act
• CRP was turned down on limited and unexpected grounds that we consider erroneous and can be dealt with more robustly on resubmission, (high-profile fishing industry and Iwi concerns were mutually agreed to be groundless)
• CRP is confident of much wider and tangibly expressed support from relevant government agencies, the farming sector, and other stakeholders
• The company more fully understands the rules of the game and expects the Environmental Protection Authority to have learned from the CRP and earlier Trans-Tasman Resources applications.

Mr Castle said CRP’s core attributes enabling it to make such significant progress since being granted a prospecting permit in early 2010 include CRP’s:
• proven ability to fund the company from its inception ($33.5 million in five years starting from a zero base)
• obtaining a 20-year mining permit
• building an internationally recognised project team
• developing unique intellectual property
• on-going partnership with Boskalis Offshore B.V.

He noted CRP has diversified with five marine applications offshore Namibia, a developing relationship with other key players (including locals) in that market, and is undertaking due diligence on other phosphate assets in multiple offshore locations. Qualifying projects would be acquired using equity and executing such acquisitions will be a focus later in 2015.
CRP is also entering the phosphate trading market aimed at using the existing management team and industry contacts to generate cash flows prior to production from the Chatham Rise.

Finally CRP is proceeding with a listing on the TSX.V through a reverse takeover of Antipodes Gold, which will appeal to existing North American shareholders, and which will facilitate fundraising in Canada, the largest mineral-resources focused marketplace. A secondary listing in New Zealand would remain for local shareholders.

Profitability and Value

On 23 October 2014 we made a detailed market announcement regarding our anticipated project economics and cost structures, including detailing our underlying assumptions. This was updated in a further market announcement on 27 January 2015. Readers are referred to those announcements for more details and copies can be provided on request. While the assumptions remain applicable (and critically the assumption that we will obtain a marine consent) those economics are significantly influenced by prevailing foreign exchange rates. In particular, costs are largely expected to be incurred in Euros and income is largely expected to be earned in US dollars.

Based on current exchange rates and the aforementioned assumptions, CRP’s annual profit before royalties and taxation would exceed $96 million. New Zealand would benefit from CRP paying $34 million in annual taxes and royalties, plus millions in port charges. Jobs - many high value and knowledge-based - would be created in the port, on the mining ship, undertaking environmental monitoring and broader scientific research, in the agriculture and hospitality sectors and on the Chatham Islands.

ENDS

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