SOURCE: VantageWire.com — There are no substitutes for phosphates, when it comes to agriculture. As global phosphate reserves are in decline, the irreplaceable fertilizer ingredient's value increases.
This fact is especially highlighted within Latin America. The Spanish-speaking region produces 11% of the world's food, consumes 12% of the world's phosphate to do so, and only produces 2% of the global phosphate supply on its own.
Hence, the search for more domestic supplies within Latin America has been encouraged among many countries. Brazilian giant Vale S.A. [NYSE: VALE], is among the groups clamoring for production control as potential saviors in the race to find fertilizer stock.
Outside of its home base of Brazil, one of Vale's phosphate operations is the Bayovar Phosphate Mine in northwestern Peru. Shared with Canadian-based Mosaic [NYSE: MOS], and Japanese giant Mitsui, Bayovar started production in 2010 with reserves of 239 million tonnes and is expected to yield 3.9 million tonnes of phosphate concentrates in 2014.
Neighboring the Bayovar Mine to the north is an even larger reserve of phosphate held by a conglomerate of cement giant Hochschild, Mitsubishi and Zuari. At more than 500 million tons, the deposit known as Fosfatos del Pacifico is almost twice that of Vale's.
Each property lays within the large Sechura phosphate basin. The basin consists of multiple phosphate beds stretching horizontally and semi-horizontally. Much like many other typical phosphate deposits, these units run for many kilometers.
Within the same phosphate trend, a newer operation is beginning with a junior mining company at the helm. Vancouver-based Focus Ventures [TSXV: FCV] this week announced its latest acquisition, the Bayovar-12 claim to the east of both the Bayovar Mine and Fosfatos del Pacifico.
Originally utilized for the mining of gypsum, Bayovar-12's previous owners shipped their gypsum to Ecuador via their own port in the town of Bayovar located next door to Vale's facilities. It wasn't until the owners decided to drill 8 scout holes for phosphates on the 12,500-hectare property.
The result was a hit.
Phosphates were found in the majority of holes from depths as shallow as 8m below surface. Of particular note were five widely spaced holes drilled 1.5 km apart in the western part of the claim which intersected multiple phosphate units with grades between 10% and 22% P205.
Now Focus plans to perform some grid drilling, with the intention to turnaround a resource estimate quite quickly. The area is an arid desert plain covered by sand dunes, which make drilling a much easier operation as a program is developed.
BAYOVAR-12 INFRASTRUCTURE
A somewhat turnkey operation, Focus' new project has all necessary infrastructure to move forward including a paved highway with coastal access through the property. Production from Bayovar-12 would most likely utilize the owner's port and pier facilities located 40km from the concession in Bayovar town.
The remote desert location provides a buffer zone between the property and local residents. There are no nearby communities to be found living near the property. Less residents means quicker permitting.
Trucking phosphates to the coast has been the method of choice for the Vale operation at Bayovar. It's essentially a truck and shovel operation, with ore and overburden so soft that they do not require blasting.
The Sechura Basin provides what is called pelletal or granular phosphate. This natural formation of phosphates, derived from the remains of fossil marine organisms called ooliths, makes treatment of the ore an easy process, which requires no use of chemicals and is therefore friendly to the environment. The phosphate rock is simply screened and gravity-separated using sea water to make a concentrate, which is then dried and loaded onto ships for export to Asia, North America and Brazil for use in the production of fertilizers.
In the areas already drilled on Focus Ventures' Bayovar-12 property, pelletal phosphate was encountered, which geologically speaking is the same as the material Vale is mining.
THE BOTTOM LINE
The Bayovar-12 acquisition marks the fifth phosphate property for Focus Ventures. The company has an option to earn 70% of the property, which Focus intends to earn through drilling out its grid pattern.
Spanning out the grid will take time, but should progress smoothly thanks to the terrain, easy logistics and permitting. As well, the pelletal form of the phosphate deposits on the property should provide a much easier shovel-to-truck production game plan with a low environmental impact, and simple processing.
So now that Focus has its foot in the door, the first drilling program will consist of 20 holes covering approximately 50km2 on a 2km grid. A quick back-of-the-envelope estimate of what Focus might find with this program predicts a 350-400 million tonne resource.
Additional drilling will be more detailed and will expand the grid for an area of approximately 65km2. It has been projected that if phosphates are drilled over this area it could reach a conceptual 450-500 million tonnes, thus putting it in the same size and category of the Hochschild deposit.
Keep in mind; this is only involving the western half of the property, while the eastern portion has delivered through trenching results a phosphate resource potential grading at around 10% that outcrops at surface.
The current owners of Bayovar-12, with whom Focus is earning their interest, are also the owners of the JPQ port and pier. They'll want to see this project move forward in order to have their coastal facilities in full use.
Focus has other projects that are very much worthy of an article on their own - in particular its Mantaro phosphate deposit. Like Bayovar-12, Mantaro is also in Peru, and has the potential to be a massive producer of phosphate and fertilizer products domestically and internationally.
With two flagships within Peru, Focus is capitalizing on the drive by the Peruvian government to address the fertilizer situation. Each project is of national importance, with great benefit to the surrounding areas.
Due diligence is already underway on Mantaro, which consists of three parallel strikes with lengths over 30km and widths of more than 5km. At 22,000 hectares, the Mantaro is gigantic, and has great potential for the company going forward.
By adding Bayovar-12, Focus has potentially added up to another 500 million tons of phosphate, and further solidified its presence in Peru. At a relatively low amount of 40.1 million shares issued, Focus has the time and space to grow into a producer in order to help the feedstocks of Latin America, and the world.
G. Joel Chury